[Practical Finance] Minor Asset Management... Use Installment Stock Gifts for Tax Tech

Up to 40 million KRW principal until age 20
Parents can gift tax-free to children
Choose installment stock gifting over lump-sum transfer

Interest in financial planning for children is growing steadily. Not only are stocks being invested under the names of minor children, but there is also a trend of gifting a fixed amount monthly through installment contributions to reduce tax burdens. Securities firms are launching various services targeting minors to attract such customers.

According to the Korea Securities Depository’s securities information portal, SaveRO, the proportion of minor shareholders in Samsung Electronics, a representative national stock, is increasing. As of the end of last year, the number of shareholders under 20 was 431,642, accounting for 7.42%. Compared to December 31, 2021, when the number of shareholders under 20 was 358,257 with a ratio of 7.07%, both the number and proportion of shareholders under 20 have risen. At the end of 2020, the number of shareholders under 20 was 115,083, with a ratio of 5.34%, indicating that stock investment by minors is gaining significant popularity. At the end of 2018 and 2019, the ratios were 1.97% and 3.21%, respectively. The number of minors holding shares in listed companies reached 755,000 at the end of last year, a surge of over 670% compared to 98,000 at the end of 2019.

As stock investment by minors increasingly attracts attention in the financial market, efforts to reduce tax burdens continue. When parents gift assets to their children, 20 million KRW every 10 years is exempt from taxation. Up to 40 million KRW can be gifted tax-free until the child turns 20. However, since this amount is based on the principal, rather than gifting a lump sum, many choose to gift stocks or other assets through installment contributions. If the value increases after gifting, it results in passing on a larger amount than the actual gifted principal.

While blue-chip stocks like Samsung Electronics have been popular gift targets, recently, with limited stock price growth, exchange-traded funds (ETFs) have gained attention. Index ETFs that track major indices and monthly dividend ETFs that pay dividends every month are also favored by parents. Target Date Funds (TDFs) are gaining traction as an option for asset allocation aligned with long-term plans. Mirae Asset Global Investments launched 'Woori Ai TDF' in June, the first domestic product considering the school-age cycle of minor children and the effects of long-term installment investments. Woori Ai TDF is a long-term investment product designed to prepare funds for children’s tuition and financial independence, managed based on an asset allocation curve corresponding to preschool, elementary, middle, and high school age cycles.

Securities firms are competing to offer financial products under the names of minor children. Previously, opening a securities account under a child’s name required visiting a branch in person, but after financial authorities allowed legal guardians (parents) to open accounts remotely via smartphones on behalf of their children, related services have been provided.

Daishin Securities launched the 'Minor Non-face-to-face Account Opening Service,' allowing securities accounts under minors’ names to be opened online through mobile trading systems (MTS). They also offer a 'Gift Stocks' service, enabling parents to gift stocks to their children. Earlier, Shinhan Investment Corp. targeted parents concerned about their children’s financial planning by offering a 20,000 KRW gift when opening a minor non-face-to-face account.

KB Securities became the first in the securities industry to launch 'Dundun Junior,' an automated investment (discretionary investment) service for minors, in partnership with Uprise Investment Advisory’s robo-advisor asset management service 'Dundun (DNDN).' The Dundun Junior service operates using Uprise Investment Advisory’s proprietary Aurora strategy, diversifying asset types in the portfolio according to market conditions. It is a long-term investment product that actively adjusts allocations through a dual momentum strategy.

This content was produced with the assistance of AI translation services.