Forced Heirship and Trust Assets in South Korea

“My father transferred all of his Korean real estate into a bank trust before he passed away. The title is already in the bank’s name — does that mean I have no inheritance claim at all?” This question comes up more and more often in inheritance consultations in South Korea (hypothetical example).

Will-substitute trusts (a trust under Article 59 of the Korean Trust Act that designates who receives the trust property upon the settlor’s death) have become a popular estate-planning tool in South Korea — along with the belief that they can defeat forced heirship claims. Korean law, however, has moved decisively in the opposite direction. Two Supreme Court decisions in 2024 clarified how trust assets are treated, and on March 17, 2026, an amendment to the Korean Civil Act converted forced heirship relief from in-kind return to monetary compensation. Whether you are planning your estate with a trust or believe your reserved share has been infringed, these rules now frame every dispute.

Why do trust assets trigger forced heirship disputes in South Korea?

The core issue is timing of the title transfer. Forced heirship (yuryubun, comparable to the legitime in civil-law systems) guarantees certain heirs a minimum share of the estate regardless of the deceased’s wishes. But when property is placed in a will-substitute trust, ownership passes to the trustee before death — so the property is not in the deceased’s name when succession commences, and recipients argue it should fall outside the calculation entirely.

In a typical will-substitute trust, the settlor enjoys the trust benefits during his or her lifetime and designates a post-death beneficiary who acquires the benefit upon the settlor’s death. It functions like a will, but takes the form of a contract. For years, Korean lower courts were split on whether such trust property counts toward forced heirship; the Supreme Court of Korea provided the framework in 2024.

Are trust assets included in the forced heirship calculation?

Yes. In a case where the settlor agreed that the trust property would vest in the trustee upon the settlor’s death, the Supreme Court of Korea upheld the lower court’s ruling that the trust real estate counted as gifted property included in the forced heirship base, valued as of the commencement of succession minus the lease-deposit obligations attached to the property (Supreme Court of Korea, Decision 2019Da294466, July 11, 2024).

In that case, a father entrusted a multi-household building to one of his children as trustee, kept the right to live there and receive the trust income during his lifetime, and provided that the property would belong to that child upon his death. After his death, another child claimed forced heirship. The Supreme Court confirmed two points:

• The property enters the calculation base. Even though title had passed before death, the building was treated as gifted property included in the forced heirship base, valued as of the date of death net of lease-deposit liabilities.
• Under the old law, return is in kind. Absent circumstances making in-kind return impossible or seriously impracticable, the court orders transfer of a share of the property corresponding to the shortfall.

Subsequent lower-court case law applying these Supreme Court decisions refined the doctrine: trust property is not part of the deceased’s active estate at death, but the post-death beneficiary’s acquisition is a gratuitous acquisition analogous to a gift effective upon death (a donation mortis causa), so it counts as the beneficiary’s special benefit — regardless of whether the trust was set up more than one year before death or whether the parties intended to harm forced heirship claimants (Seoul High Court, Decision 2021Na2051264, January 9, 2025).

The takeaway: putting Korean real estate into a trust does not defeat forced heirship. Whatever the form — trust, gift, or bequest — a transfer that is gratuitous in substance remains within the reach of the reserved share.

Who must return the share — the trustee or the beneficiary?

The post-death beneficiary who substantively acquires the trust property. Korean courts hold that executing a will-substitute trust does not, by itself, amount to a gift to the trustee; the property remains functionally the settlor’s during his or her lifetime, and the person who gains it for nothing is the post-death beneficiary (Seoul High Court, Decision 2021Na2051264, January 9, 2025).

Trust property is segregated from the trustee’s own assets under the Korean Trust Act, the settlor generally retains the power to change beneficiaries, and the economic benefit and control typically stay with the settlor while alive. Treating the trust transfer as a completed gift to the trustee would let settlors evade forced heirship through third-party trustees — which the courts refuse to allow.

A common practical mistake is suing the bank or trust company simply because it appears on the title. The proper defendant is the post-death beneficiary. Misdirecting the claim wastes time against a short limitation period (one year from learning of the succession and the gift or bequest to be returned, Article 1117 of the Civil Act). Note the flip side as well: where the trustee is also the person designated to keep the property upon death — as in the 2019Da294466 case — that trustee is the substantive recipient and owes the return obligation.

The order of return is also settled. Because the beneficiary’s acquisition resembles a donation mortis causa, it is treated like a bequest, which must be returned before lifetime gifts are reached (Article 1116 of the Civil Act).

What if the trustee is named as the sole post-death beneficiary?

That part of the trust is void. The Supreme Court of Korea held that a trust in which the trustee is the sole beneficiary violates the Korean Trust Act’s prohibition on trustees enjoying trust benefits (Article 36), although the settlor’s lifetime self-benefit portion of the trust generally survives (Supreme Court of Korea, Decision 2022Da307294, April 16, 2024).

• The post-death portion is void. If the trustee would be the only beneficiary after the settlor’s death, the arrangement is in substance a gift to the trustee with no genuine trust function, and is void under Articles 36 and 5(2) of the Trust Act.
• The lifetime portion generally stands. Partial invalidity does not automatically void the whole contract; the lifetime self-benefit trust survives unless it is inseparable or keeping it clearly contradicts the settlor’s intent (Article 5(3) of the Trust Act).
• On death, the trust ends and the property may fall back into the estate. The surviving lifetime trust terminates upon the settlor’s death; if no residual-rights holder was designated, the remaining trust property reverts to the settlor’s side and is folded into the estate for all co-heirs.

For estate planners, this is a structure to avoid: naming the trustee as sole post-death beneficiary can unravel the plan entirely — before forced heirship even comes into play.

What did the Supreme Court of Korea add in 2025 and 2026?

Three developments matter. A July 2025 decision refined the method and valuation of forced heirship returns under the old law; a January 2025 appellate decision applied the trust doctrine in full; and two 2026 Supreme Court decisions clarified how the Constitutional Court’s 2024 ruling and the amended Civil Act apply to pending cases. No new Supreme Court decision squarely on trusts and forced heirship has issued, so Decision 2019Da294466 remains the leading case.

Method and valuation — Supreme Court Decision 2025Da210352 (July 3, 2025)

• Under the pre-amendment law, in-kind return remains the default method.
• Where one co-heir received multiple properties, the return shares must be apportioned across the properties in proportion to their values.
• Gifted property is valued as of the commencement of succession — but if the recipient increased the value at his or her own expense, the valuation is based on the property’s condition at the time of the gift.

Trusts in practice — Seoul High Court Decision 2021Na2051264 (January 9, 2025)

The appellate decision discussed above, ordering the post-death beneficiary of a will-substitute trust to transfer shares of the trust real estate. It shows how the 2024 Supreme Court framework operates in a live trust dispute.

Scope of the new law — Supreme Court Decisions 2024Da296374 (May 14, 2026) and 2025Da219693 (June 25, 2026)

The Supreme Court held that the Constitutional Court’s April 25, 2024 decision kept the basic forced heirship provisions in force only provisionally, while the unconstitutional gaps — no forfeiture grounds and no credit for heirs’ contributions — were suspended. Cases already pending in court at the time of that decision are therefore governed by the amended, constitutional provisions. Practically, even for successions that commenced before April 25, 2024, litigants in cases pending at that time can now invoke the new rules on contribution-based exclusions and disqualifying misconduct.

How did the 2026 amendment change forced heirship claims?

The remedy changed from in-kind return to monetary compensation. Amended Article 1115, Paragraph 1 of the Korean Civil Act (Act No. 21454, promulgated and effective March 17, 2026) entitles the claimant to demand payment of the monetary value of the shortfall, with interest accruing from the date of demand.

The reform originated in the Constitutional Court’s decision of April 25, 2024 (2020Hun-Ga4 et al.), which struck down siblings’ forced heirship outright, found the absence of forfeiture grounds and contribution credits unconstitutional, and observed that the in-kind return principle generated needlessly complex co-ownership disputes — recommending a legislative shift to monetary compensation. The National Assembly adopted that recommendation.

Timing is decisive. The monetary-compensation rule applies only where the deceased passed away on or after March 17, 2026. Earlier successions remain governed by the old in-kind regime, so many pending Korean inheritance cases will continue to be fought over property shares for years to come.

How is the monetary compensation calculated?

The claimant computes the forced heirship shortfall and demands that amount in cash. The base equals the active estate at death plus includable gifts minus debts; the reserved share is one half of the statutory share for lineal descendants and the spouse (one third for lineal ascendants); the claimant’s own special benefits and net inheritance are then deducted.

A hypothetical example: a father places an apartment worth KRW 1.2 billion (as of death) in a will-substitute trust naming his elder son as post-death beneficiary; the only heirs are two sons and there are no other assets or debts. The younger son’s claim is calculated as follows.

In practice, encumbrances such as lease-deposit obligations are deducted to reach a net value (Supreme Court of Korea, Decision 2019Da294466, July 11, 2024). If the succession commenced on or after March 17, 2026, the younger son claims KRW 300 million in cash — with interest from the date of demand — rather than a one-quarter share of the apartment. The dispute becomes simpler, but the recipient must fund a cash payment.

What does this mean for foreign residents and investors in South Korea?

Foreign nationals and expatriate families holding Korean real estate — including in the Incheon Free Economic Zone (IFEZ) covering Songdo International Business District, Cheongna International City, and Yeongjong International City — should treat forced heirship as a hard constraint on Korean estate planning, not a technicality a trust can bypass.

• If Korean inheritance law governs the succession, forced heirship applies to Korean assets even when they sit in a will-substitute trust. Planning should quantify each heir’s reserved share before allocating assets.
• The 2026 monetary-compensation rule is double-edged. Business owners can now keep real estate or company shares intact in one successor’s hands, but the successor needs liquidity — insurance proceeds, deposits, or financing — to satisfy cash claims from other heirs.
• Claimants abroad should act quickly. The one-year limitation period under Article 1117 runs from learning of the succession and the relevant gift or bequest; distance is no defense. Identifying the correct defendant (the post-death beneficiary, not the trust company) from the outset avoids fatal delays.

Atlas Legal advises Korean and international clients on inheritance disputes, forced heirship litigation, and trust-based estate planning under South Korean law, with English-language support from our offices in Songdo, Incheon.

Frequently Asked Questions (FAQ)

For advice on forced heirship claims involving trust assets, or on structuring a will-substitute trust under the amended Korean Civil Act, contact Atlas Legal at +82-32-864-8300 or info@atlaw.kr. Our team has handled numerous inheritance and trust disputes and provides full English-language legal services.

About the Author

Soyoung Park | Representative Attorney

Family Law, Inheritance, Construction & Real Estate Disputes

Judicial Research and Training Institute, 33rd Class

Korea University, Department of Law

Atlas Legal | Incheon Songdo, South Korea

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