18 September, 2012


Legal News & Analysis – Asia Pacific – Korea – Dispute Resolution


1 Is a Will a public document in your jurisdiction?
No. Even a probated Will is not a public document and will only be disclosed to the interested parties.
2 What are the principal formal requirements for a valid Will or other testamentary disposition in your jurisdiction? Please include in your answerany special requirements relating to execution.
The formal requirements for a valid Will are set by the Korean Civil Code (the “Civil Code”). These are interpreted strictly and any Will that is not made in accordance with them is treated as being invalid and/ or ineffective. 
The Civil Code (Articles 1066 and 1070) provides that a Will can be made in five different ways. These are:
(i) Holograph document;
(ii) Notarial document;
(iii) Secret document;
(iv) Sound recording; and
(v) Instrument of dictation.
The two most commonly used methods are the holograph and the notarial document. The requirements for a holograph are that the testator must personally write the text, provide his/her address, date, sign and affix his/her seal to the document. The requirements for a notarial document are that the testator must read out his/her Will before a notary in the presence of two witnesses and the testator and witnesses must sign and seal the document after acknowledging that the document is true and correct.
3 In what circumstances will a court in your jurisdiction regard a Will as duly executed even though it does not fulfil these formal requirements (for example, because it fulfils the requirements for the execution of a Will in another jurisdiction)?
Article 1060 of the Civil Code states that any Will that is not made in accordance with the Civil Code’s formal requirements will be considered invalid and/or ineffective.
The only notable exception relates to Wills made by foreign nationals. A Will may be regarded as valid and duly executed, even if it fails to meet the formal requirements under the Civil Code, if it is in compliance with one of the
following laws:
(i) The law of the country of the testator’s nationality at the date the Will is made or the death of the testator;
(ii) The law of the habitual residence of the testator at the date the Will is made or the death of the testator;
(iii) The lex loci actus (law of the place where the Will was made); or
(iv) The lex situs (the law of the place where the assets are located), which applies in respect of immoveable assets.
See Article 50.3 of the Korean Private International Act (the “PIA”) for more details.
4 How can a Will be amended or revoked, and what is the effect of marriage and divorce in this regard?
Amendments to the text of a Will after execution are generally not valid. However, the same effect can be achieved by writing a new valid Will after revoking the initial Will.
If a testator makes two Wills at a different time and a prior Will is inconsistent with a subsequent Will, the prior Will shall be deemed to have been revoked with respect to the inconsistent parts (irrespective of what form the original and subsequent Wills take). The same applies to an act inter vivos which is conducted after a Will has been made and is inconsistent with the Will (Article 1109, Civil Code).
A testator may revoke his Will, wholly or partially, at any time (Article 1073.1, Civil Code). The revocation can be conducted either by creating another Will or by an act inter vivos (Article 1108, Civil Code). If a testator intentionally destroys the testamentary document, s/he shall be deemed to have revoked the Will with respect to such parts as have been destroyed (Article 1110, Civil Code). Neither marriage nor divorce revokes a Will.
Where a foreign law applies to the Will (see section three above), that Will can be amended or revoked in accordance with the laws of that foreign country (Article 50.2, PIA). 
See Part 5 “Inheritance”, Chapter 2 “Wills”, Section 5 “Withdrawal of Wills” of the Civil Code for further details.
5 Can an overseas Will govern movable and immovable assets in your jurisdiction?
The PIA provides that a Will shall be governed by the law of the country of the testator’s nationality on the date the Will was made (Article 50.1, PIA). If the testator has dual nationality, the law of the country which is most closely connected to the testator shall be the relevant law of nationality. This rule does not apply if one of the nationalities is South Korean, in which case South Korean law shall apply. If a Will of a foreign national meets the formal requirements of the applicable foreign law it will govern the distribution of moveable assets. However, pursuant to Articles 19.1 and 19.2 of the PIA, the devolution of ownership rights over real estate shall be governed by the lex situs of the subject matter. South Korean law would therefore govern the distribution of immoveable assets located in South Korea. 
A valid Will by a South Korean national governs movable and immovable assets in South Korea regardless of where the Will was made.
6 Would an executor or administrator appointed in another jurisdiction be recognised in your jurisdiction as having the power to collect in assets?
There are no special requirements for designating an executor under South Korean law, except for the requirement that an executor must be competent and not declared bankrupt (Article 1098, Civil Code).
Although the Civil Code is not explicit on this point, it seems that if those requirements are met, an executor designated by a testator under a Will made in accordance with the applicable laws of that foreign country would likely be recognised in Korea.
Under the Civil Code, no procedural steps are required for the  executor/administrator to collect assets in South Korea (unless the executor/administrator was appointed by the South Korean court). As such there are also no formal procedures required under South Korean law for the  executor/administrator appointed in another jurisdiction to have authority to deal with the estate assets in South Korea.
7 Are there forced heirship rules in your jurisdiction?
Yes, certain indefeasible portions are reserved, subject to the forced heir making a claim within one year of learning that s/he is not adequately provided for in the Will and within 10 years of the death of the testator. Pursuant to Article 1112 of the Civil Code, the reserved portion of the estate is calculated as follows:
(i) Lineal descendants of the deceased, one-half of the inheritance due under intestacy rules;
(ii) The spouse of the deceased, one-half of the inheritance due under intestacy rules;
(iii) The lineal ascendants of the deceased, one-third of the inheritance due under intestacy rules; and
(iv) Brothers and sisters of the deceased, one-third of the inheritance due under intestacy rules.
See Part 5 “Inheritance”, Chapter 3 “Legal Reserve of Inheritance” of the Civil Code for further details which sets out how the legal reserve is to be calculated, added to and recovered.
8 In what circumstances can an executor, administrator or equivalent be removed?
An executor may be removed by the South Korean court if they neglect their duties, or if there is any other unfavourable reason, upon an application filed by the beneficiary or any other interested persons (Article 1106, Civil Code). An example of an “unfavourable reason” would be where the executor worsens an existing dispute between the various beneficiaries.
If an executor loses capacity or is declared bankrupt, he will be a removed from the office by the court. 
9 Other than the failure to observe the formal requirements, how else can a Will be challenged? 
An interested party may bring a suit to seek a confirmation from the court that the Will is invalid. A Will is invalid if the testator: 
(i) Does not have the requisite mental capacity to make such a Will; or
(ii) Is under the age of 17.
The mental capacity required to make a Will is not the same as the capacity required to make a contract. A person who lacks the capacity to make a contract can nevertheless make a valid Will: s/he needs only an understanding of his/her own intentions.
A Will made for the benefit of a person who is ineligible for inheritance is also invalid (Articles 1064 and 1004, Civil Code). Article 1004 of the Civil Code provides that the following are ineligible:
(i) A person who has killed or attempted to kill his/her lineal ascendant, the inheritee, or the spouse of thereof, or person with priority under the intestacy rules;
(ii) A person who has intentionally caused injury which resulted in the death of his/her lineal ascendant, the inheritee or the spouse thereof;
(iii) A person who by fraud or duress interferes with the making or cancelling of a Will or forces the testator to make a Will; and
(iv) A person who forges, alters or conceals a Will.
Further, pursuant to the general rules of the Civil Code, if a Will is contrary to any mandatory provisions or against public policy it will be wholly or partially invalid (Article 103, Civil Code). One common example of a Will being against public policy is if the condition upon which the gift is given requires a beneficiary to commit a crime. Also, under the South Korean Civil Code, fraud, forgery and undue influence would normally constitute grounds for the (retroactive) cancellation of a declaration of intention (Article 110, Civil Code), and therefore a Will may be challenged for these reasons.
10 If someone dies intestate, how are the assets administered and distributed?
Wills are rarely used in South Korea and in the majority of cases assets are administered pursuant to the intestacy rules under the Civil Code. This provides that when someone dies intestate, persons become beneficiaries in the following
(i) Lineal descendants of the deceased;
(ii) Lineal ascendants of the deceased;
(iii) Brothers and sisters of the deceased; and
(iv) Collateral blood relatives within the fourth degree of the deceased (e.g. brothers and sisters of the deceased’s parents) (Article 1000.1, Civil Code).
If there are lineal descendants or lineal ascendants of the deceased, the surviving spouse of the deceased becomes a co-beneficiary with the same priority as the other beneficiaries. The spouse will always inherit one-and-a-half times the total of any of the other beneficiaries (Article 1009.2, Civil Code). So, if the deceased had two children and a spouse, the spouse would inherit three-sevenths of the estate, while the children would each get two-sevenths.
If there are no lineal descendants or ascendants, the surviving spouse becomes the sole beneficiary (Article 1003.i, Civil Code). 
If there is a sole beneficiary, such a person shall administer the estate. Where there is more than one beneficiary, the court shall, upon the request of each beneficiary or interested person, appoint an administrator from among the co-beneficiaries. The administrator appointed by the court shall have the right and duty to perform all acts relating to the management of the property of the deceased and to perform all obligations on behalf of the co-beneficiaries (Articles 1022 and 1040.1, Civil Code).
11 If a Will is valid, can someone who feels they have been inadequately provided for bring a claim?
The position in relation to a claim for maintenance by someone who is not a forced heir is unclear in South Korean Law and the Korean Courts have yet to arrive at a definitive position on this point. If a forced heir inherits less than the percentage of the estate stipulated in section seven, s/he has a right to bring a claim. If that shortage arises due to:
(i) Gifts made by the deceased within the period of one year preceding the date of death; or
(ii) Gifts that have been given where both parties recognised that this would cause loss to the person with the right of legal reserve of inheritance, such amounts can be recovered from the beneficiary of those gifts (Articles 1114 and 1115.1, Civil Code).
12 Is there inheritance tax (or equivalent such as stamp duty) in your jurisdiction?
Yes, Korean residents are liable to inheritance tax. Inheritance tax rates are imposed at progressive rates of between 10 and 50 per cent (please see http://www.globalpropertyguide.com/Asia/South-Korea/Inheritance for further details).
13 Does your jurisdiction recognise trusts or other separation of legal and beneficial ownership?
14 Is your jurisdiction a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition?
15 Does a professional executor or trustee (or equivalent) in your jurisdiction require a licence?
No licence is required for executors or non-professional trustees; they must simply be competent and not declared bankrupt. However, a professional trustee with a certain business size (i.e. a trust company) must be licensed by the Financial Services Commission (“FSC”) (according to Article 12 of the Financial Investment Services and Capital Markets Act, the “Capital Markets Act”).


16 What are the duties of a trustee (or equivalent) in your jurisdiction?
The general duties of a trustee are set out in various provisions of the Trust Act and the Capital Markets Act. Not all of these duties are mandatory and some may be disregarded or amended in the trust deed or instrument creating the
trust itself.
Some of the general duties in the Trust Act include:
(i) Duty of care (Article 32);
(ii) Duty of loyalty (Articles 33, 34, 36);
(iii) Duty to act impartially between beneficiaries (Article 35);
(iv) Duty to segregate and identify assets (Article 37);
(v) Duty to keep accounts and supply information (Articles 39 and 40);
(vi) Duty to remedy (Article 43); and
(vii) Duty to deliver property according to the terms of the trust (Article 38). For professional trustees that are licenced by the FSC, the following provisions of the Capital Markets Act would also be relevant:
(i) Fiduciary duty of due care and duty of good faith (Article 102);
(ii) Separation of trust property from proprietary property (Article 104);
(iii) Duty to manage property in accordance with restricted methods (Articles 105 and 106); and
(iv) Duty to account according to the accounting standards reviewed by the  Securities and Futures Commission and publicly announced by the FSC (Article 114).
17 In what circumstances can a trustee (or equivalent) be removed?
In addition to any express provision for the removal of a trustee in the trust deed, statutory provisions in the Trust Act stipulate that a trustee will be removed:
(i) If the trustee has passed away or is declared bankrupt, incompetent or semi-incompetent, or if a trust company is dissolved for reasons other than for merger (Article 12, Civil Code). Article 9 of the Civil Code states that a feeble minded person or a spendthrift who may bring poverty upon himself or his family shall be adjudged a quasiincompetent (or semi-incompetent) person by the court upon application by the person himself, his spouse, any relative within the fourth degree of relationship (meaning cousins and other relations up to that degree), guardian or a public prosecutor. Article 12 of the Civil Code states that a person in a habitual condition of mental unsoundness may be adjudged incompetent by a court on the application of any of the persons mentioned in Article 9 of the Civil Code.
(ii) When the removal conditions set out in the trust deed are fulfilled or the trustee loses any of the qualifications required by the trust deed (Article 13, Civil Code).
(iii) When the settlor and beneficiary jointly dismiss the trustee (Article 16.1, Civil Code) (if the trustee is dismissed unfairly and to their disadvantage their loss or damage shall be compensated (Article 16.2, Civil Code)).
(iv) When the court dismisses the trustee at the request of the settlor or beneficiary due to a trustee’s breach of his/her duties or other material reasons (Article 16.3, Civil Code).
A trustee may also resign with consent from the settlor and the beneficiary or if there are justifiable reasons, with permission from the court (Article 14, Civil Code).


The Capital Markets Act does not contain any specific provisions relating to the removal of trustees other than that a trust deed must include provisions regarding termination of the trust deed (Article 109, Civil Code). 
18 To what extent can a trustee limit its liability in a trust deed?
Pursuant to Article 32 of the Trust Act, the trust deed can exclude liability for certain acts but it cannot exempt a trustee from a breach of trust committed by wilful misconduct or reckless indifference (see Commentaries for Trust Act issued by the Ministry of Justice). 
In relation to general trusts, trustees have an unlimited liability to third parties. This can only be limited by way of a special agreement and only on a transaction by transaction basis.
However, pursuant to a recent amendment of the Trust Act, a form of limited liability trust has been introduced which takes effect upon registration at the Public Registry (Article 114, Trust Act). When the trustee registers an exemption clause it thereafter exempts trustees from their joint liability to third parties but for the exceptions set out in Article 118 of the Trust Act:
(i) A breach of duty arising from a trustee’s wilful misconduct or reckless act in the course of doing their job;
(ii) Illegal acts of wilful misconduct or negligence;
(iii) False description or representation of material fact(s) that are included or should be included in a balance sheet or other accounting materials; and
(iv) False registration or announcement.
For the latter two exceptions, a trustee may still be relieved of liability if the trustee proves there was no negligence on his/her part.
19 How can a trustee protect itself if it needs to bring or defend proceedings?
A trustee is entitled to be indemnified out of the trust fund for necessary expenses (including any interest which would have accrued thereon) and for debts and liabilities incurred carrying out the provisions of the trust deed but for a trustee’s wilful misconduct or negligence (Article 46, Trust Act). However, it is worth noting that this is not a mandatory requirement and can be set aside by the parties in the trust deed.
20 What regime is there in your jurisdiction if someone loses capacity e.g. a Guardianship Board?
A guardian must be designated if someone loses capacity to manage their own affairs (e.g. due to disease, disability or old age) (Article 929, Civil Code).
The law in respect of guardians is due to be updated on 1 July 2013. Currently there is a default rule which provides how the guardian of that person, usually a close relative, will be determined (Articles 933 to 935, Civil Code). Failing that, the court will appoint the guardian, although there are some basic restrictions as to those who cannot be appointed to be a guardian including, for example, those who are bankrupt or minors (Articles 936 to 937, Civil Code). 
The Civil Code also provides that the guardian once appointed has a duty to produce an inventory and investigate the relevant property before managing it (Articles 941 and 949, Civil Code).
The proposed amendment to the Civil Code is such that in the future the court will appoint all guardians without a presumption that a close relative will be appointed. Moreover, there will no longer be any restriction on the number of guardians an adult can have.


For further information, please contact:
Young Seok Lee, Partner, Yulchon
Sae Youn Kim, Partner, Yulchon


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