[Exclusive] Koo Kwang-mo Submits Response to Court... Will LG Family 'Inheritance Lawsuit' Intensify?

The lawsuit among the LG Group family members over the inheritance left by the late former chairman Koo Bon-moo, who passed away in May 2018, is showing signs of intensifying.

At the first anniversary memorial service of the late Koo Bon-moo, former chairman of LG Group, in 2019, Koo Kwang-mo, chairman of LG Group, is seen offering flowers.

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On the 15th, according to reports from the business and legal sectors, Koo Kwang-mo, chairman of LG Group, recently submitted a response to the Seoul Western District Court's 11th Civil Division regarding the court's order to prepare explanations in the ongoing inheritance recovery lawsuit filed by the family members. The order to prepare explanations is a procedure where the court requests the plaintiff or defendant to explain certain specific matters before the trial date or to prepare to explain them during the trial. Chairman Koo is reported to have reiterated in his response that his inheritance share was legitimate.

The court's order to prepare explanations drew attention as it was issued after an interview with the late chairman Koo's wife, Kim Young-sik, and their two daughters, Koo Yeon-kyung, head of the LG Welfare Foundation, and Koo Yeon-su, was published last month by The New York Times (NYT) in the United States.

Previously, in the interview with the NYT, the three women stated that Chairman Koo agreed to bear the inheritance tax alone in exchange for receiving a larger portion of the inheritance, including 8.76% of LG shares. They also submitted a petition to the court requesting measures to allow the submission of documents verifying the inheritance tax payments made by Chairman Koo over five years. This included the submission of LG Group tax information from the Seoul National Tax Service and related fact inquiries from the Financial Supervisory Service. After reviewing this, the court postponed the preparatory hearing ex officio and subsequently issued the order to prepare explanations to Chairman Koo's side. The postponed trial is scheduled for the 23rd of this month.

LG explained that according to an agreement among the heirs at the end of 2018, each party was to pay inheritance tax based on the property they inherited. In fact, the three women also paid the inheritance tax four times from the end of 2018 to the end of 2021. It is known that since the lawsuit was filed, the three women have not paid inheritance tax, and Chairman Koo has paid it on their behalf.

Legal circles anticipate that both sides will strongly clash over the distribution of inheritance shares at the trial on the 23rd. However, since this day is a preparatory hearing rather than a formal trial, Chairman Koo and the three women are not expected to attend.

Depending on the lawsuit's outcome, Chairman Koo's inheritance share may be maintained or altered. Chairman Koo inherited 8.76% of LG shares out of the 11.28% left by the late chairman Koo. He agreed to bear 720 billion KRW out of the 920 billion KRW inheritance tax, calculated at the highest tax rate (60% of the inherited property), and reportedly completed full payment last year using the installment payment system. The inheritance received by the three women, including the remaining shares and assets, amounts to approximately 500 billion KRW.

In the business community, there is analysis that the burdensome high inheritance tax rate has triggered the lawsuit between Chairman Koo and the three women. Under Korean tax law, the highest inheritance tax rate is 60% of the total inheritance, mainly applied to large conglomerate owner families with substantial assets. The government is considering an 'inheritance acquisition tax,' where inheritance tax is paid on the property each individual inherits.

Kim Min-ho, a tax accountant at Ivy Tax Accounting, said, "It is difficult to feel how much the highest inheritance tax rate contributes to wealth redistribution, and it may rather harm the overall economy by stifling corporate management activities and succession. The inheritance acquisition tax aligns with tax equity principles and could reduce taxpayers' resistance to taxation, making it a good alternative."

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