[Contribution] The First Major Overhaul of the Statutory Reserve of Inheritance in 45 Years... What Is the Key to the Changing Design of Estate Planning?

Major change in the 2026 inheritance tax reform... Full abolition of siblings' statutory reserve of inheritance
A far-reaching change... How to weigh the relationship between contributory portion and statutory reserve
Companies preparing for business succession... Must build meticulous tax strategy and asset succession design
New issues... Proving contribution to corporate growth and establishing grounds for loss of inheritance rights are the key

Can I leave my property entirely to the person I want? In April 2024, the Constitutional Court's decision on the statutory reserve of inheritance (2020Heon-Ga4, etc.) offered a different answer to this long-standing question than before. The statutory reserve system, maintained for 45 years since its implementation in 1979, reached a major turning point. The core of that decision was not a denial of the statutory reserve system itself, but a rebalancing of three values—'family protection,' 'individual property rights,' and 'freedom of testament'—in line with changing times.

This judgment by the Constitutional Court led to institutional change when amendments to the Civil Act concerning the declaration of loss of inheritance rights, division of inherited property, and the statutory reserve passed the National Assembly this February. The biggest change is the full abolition of the siblings' statutory reserve. Since the provision on siblings' statutory reserve (Article 1112, Item 4 of the Civil Act) lost its effect as unconstitutional by the Constitutional Court's decision, in cases filed after the decision of unconstitutionality, siblings' claims for the statutory reserve lose their legal basis and are dismissed. However, the handling of individual cases and the outcome of litigation already in progress may vary depending on the stage of litigation and transitional provisions. This Constitutional Court decision reflects the judgment that, unlike in the agrarian society of the past, in modern society siblings form an independent economic community, and there is little justification for restricting the decedent's freedom to dispose of property rights by recognizing a statutory reserve even for them.

In practice, this brings considerable change to the asset succession strategies of single-person and unmarried households. For example, if a businessperson who lived single all his life and raised a nephew like his own child wishes to leave all his property to that nephew, in the past siblings with whom he had long had no contact could claim the statutory reserve; now it has become possible to fully pass on the property according to one's own intent.

Another key change is the newly established grounds for loss of the statutory reserve. This reflects the judgment that it is unreasonable to guarantee a statutory reserve even to an heir who has long neglected support obligations or committed continuous abuse, abandonment, or serious criminal acts. In practice, however, how far the grounds for loss of inheritance rights extend, and who must prove them with what evidence, are expected to become new issues. Merely a poor family relationship is insufficient; it is important to secure objective and concrete evidence in advance, such as the decedent's care facility admission and discharge records, medical diagnoses, and text messages and recordings capturing the heir's verbal abuse or circumstances of abandonment.

In addition, one of the most far-reaching changes is the relationship between the contributory portion and the statutory reserve. Under prior practice, even if an eldest daughter who cared for her parents alone for 20 years received property as compensation, an unreachable younger sibling could claim the statutory reserve, creating the unreasonable situation of having to return part of it. Accordingly, the Constitutional Court declared a decision of nonconformity to the Constitution with respect to the provision not reflecting the contributory portion in calculating the statutory reserve (Article 1118 of the Civil Act) and the provisions not stipulating grounds for loss of the statutory reserve (Article 1112, Items 1–3 of the Civil Act). This amendment provides that gifts and bequests made as compensation for specially supporting the decedent or specially contributing to the maintenance or increase of the decedent's property are not treated as special benefits (newly established proviso to Article 1008 of the Civil Act), reorganizing matters so that contribution is more robustly reflected in the division of inherited property and the calculation of the statutory reserve.

The scope of recognition for the contributory portion is not limited to caring for parents. Participation in the management of a family company, management of inherited property, and business expansion through the injection of personal funds may also allow recognition of a contributory portion. In practice, however, a subjective claim of having "taken good care of my parents" alone makes it difficult to have a contributory portion recognized. One must have ample materials that can objectively prove the degree of contribution, such as salary records, business fund transfer records, and caregiving expense receipts.

These changes carry significant meaning for companies preparing for business succession as well. When shares are concentrated and passed on to a particular child who has long participated in corporate management and contributed to the growth of the family business, the possibility has grown that this may be recognized in civil law not as a simple gratuitous gift but as legitimate 'compensation' for contribution, expanding the legal basis for defending management rights against other heirs' claims for return of the statutory reserve. However, even if excluded from the scope of civil-law statutory reserve return, the possibility that gift and inheritance taxes on share transfers under tax law will still be levied cannot be entirely ruled out, so the necessity of conducting a tax review and a thorough tax-saving strategy in advance is growing.

The overhaul of the statutory reserve system is not merely a change in inheritance law. It affects tax strategy and asset succession design as a whole. With the abolition of siblings' statutory reserve, asset transfers using lifetime gifts and testamentary substitute trusts have become far more flexible. However, the burden of gift and inheritance taxes is not directly linked to the statutory reserve reform but is determined separately under existing tax provisions such as the Inheritance Tax and Gift Tax Act. Therefore, since concentrating assets on a particular heir or a third party may increase the gift and inheritance tax burden, tax-saving strategies such as securing tax payment funds and the family business inheritance deduction must be reviewed together.

This legal amendment is more likely to change the nature of inheritance disputes than to reduce them. Beyond the era of uniform statutory inheritance, an era of customized estate planning that better respects the decedent's intent is opening. Going forward, how to prove the contributory portion and what evidence proves the grounds for loss of inheritance rights—rather than the statutory reserve ratio itself—will become the new central issues of inheritance disputes.

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