Lee is a legendary figure in South Korea as the man who turned Samsung Electronics into a powerful conglomerate. He is also the country’s richest man with an estimated net worth of US$11.4 billion. Under Korean inheritance law, an heir will have to pay 50 percent in tax when inheriting such wealth, indicating an inheritance tax bill of some US$6 billion.
Estate problems are on the horizon for Samsung Chairman Lee Kun Hee’s heirs. Hee suffered a major heart attack three months ago and has been in the hospital ever since. It does not appear he will live for much longer. Hee’s estate is believed to be worth approximately $12 billion. As China Topixpoints out, in an article titled “Samsung Heirs Could Pay a Massive US $6 Billion Inheritance Tax,” under South Korean law the estate will have to give half of the estate to the government. The family could avoid some of this tax burden by placing the money in a foundation, but that would mean giving up some control of the assets.
It is unclear whether Hee could have avoided this through estate planning before his heart attack. It is possible that South Korea has laws and vehicles that could be used to more effectively keep wealth in the family as opposed to giving it to the government. In the United States, if a wealthy person does nothing, then their family might not be much better off than Hee’s. The government will not necessarily take half of the wealth, but a significant portion of the estate will be lost, as much as 40% in some cases.
Of course, in the United States there are ways to avoid the estate tax or at least to minimize the burden it can cause families. However, it requires being proactive. You cannot expect to wait until you are sick in the hospital if you hope to avoid the fate of Hee’s heirs for your heirs.
Contact your estate planning attorney sooner, rather than later.
Reference: China Topix (July 23, 2014) “Samsung Heirs Could Pay a Massive US $6 Billion Inheritance Tax”