Atlas Legal has published an in-depth analysis of Korean Supreme Court rulings on the relationship between testamentary substitute trusts and forced heirship (yuryubun) claims, addressing critical issues under the Trust Act Article 36.
Analysis Overview
This comprehensive analysis examines a hypothetical case involving six apartments transferred to a specific heir through various methods, including testamentary bequests, trusts where the trustee is also the beneficiary, and trusts using third-party trust companies. The analysis determines forced heirship applicability for each of the six transfer types.
Supreme Court Case 2022Da307294
The Korean Supreme Court ruled that testamentary substitute trusts designating the trustee as the sole post-death beneficiary violate the prohibition on trustee benefit under Trust Act Article 36 and are therefore void. However, the inter vivos self-benefit trust portion may remain valid separately, with residual asset distribution issues arising upon the settlor’s death.
Forced Heirship Calculation and Return Methods
Testamentary substitute trust assets are substantially equivalent to gifts and are therefore included in the base assets for forced heirship calculation. Return in kind is the principle for forced heirship claims, and contractual provisions for monetary return in trust agreements do not bind forced heirship claimants.
Trust Design Considerations
When designing testamentary substitute trusts, the trustee and beneficiary should be separate parties, or the trustee should be one of multiple co-beneficiaries. Asset distribution should be planned within the scope that does not infringe on other heirs’ forced heirship rights, and residual beneficiary designation issues must be reviewed in advance.
Legal Expertise
Atlas Legal has accumulated substantial experience in complex trust and inheritance matters. The firm provides comprehensive legal services including validity assessment of testamentary substitute trusts, forced heirship calculation and return claims, and trust design advisory for both domestic and international clients.