[Opinion] Modern Reinterpretation of the Yuryubun System and Market Evolution

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The system of statutory reserved portions, enacted through the 1977 revision of the Civil Code and implemented from 1979, is once again becoming a subject of controversy after 45 years. The statutory reserved portion system guarantees heirs a certain amount of the legal inheritance share, and the right to claim the return of the reserved portion aims to prevent vulnerable family members from being excluded during the inheritance process and to promote their livelihood stability. The law sets a minimum inheritance share, which takes precedence over the deceased’s will.

The utilization of property rights through inheritance is not merely a simple transfer of wealth but serves as motivation for accumulating assets through the active economic activities of the living economic agents. Realistically speaking, it also acts as an incentive for children to provide care for their parents, thus serving as a safety net for old age. Ultimately, because the statutory reserved portion system limits the effect of testamentary inheritance, it may infringe on the property rights of individuals guaranteed by the Constitution. There is ongoing debate both inside and outside the legal community that this system is outdated and unreasonable in today’s context.

Putting aside legal debates, the side effects of the statutory reserved portion system are numerous. Since the law does not explicitly define the causes for forfeiture of the reserved portion rights, the testator’s intention for inheritance is often undermined. Moreover, family members who had no prior contact with the deceased may appear after their death, and children who have committed acts close to filial impiety use this system as a basis to continue legal battles against other family members, frequently causing family disputes that can ultimately lead to family breakdown. If the deceased were to come back to life, they would be heartbroken by such situations. From a social cost perspective, inheritance, which should be clearly determined by the will, becomes a legal dispute under the reserved portion system, causing mental distress to defendants and unnecessary legal service expenses. Half-jokingly, it is said that the only ones opposing the abolition of the statutory reserved portion system are lawyers.

In fact, there have already been three constitutional court rulings upholding the system’s constitutionality, but in May of last year, the Constitutional Court began reviewing it again. Notably, unlike before, the court chose to hold public hearings. This reflects how the existence of the statutory reserved portion system faces difficult debates amid changing times. With increased individual life expectancy and the rapid rise of single-person households due to non-marriage and childlessness, voices demanding freedom over one’s property disposition have grown louder.

There is a famous economic principle that necessity creates supply, and the statutory reserved portion system is no exception. The creativity of the market always surprises us. In this regard, a product called ‘Will Substitute Trust’ stands out. Inheritance management through trusts became possible with the introduction of Article 59 ‘Will Substitute Trust’ and Article 60 ‘Successive Beneficiary Trust’ in the revised Trust Act of 2012. The Will Substitute Trust allows beneficiaries to pre-designate heirs after death through financial institutions for assets such as real estate and stocks. During their lifetime, the trust protects the settlor, and after death, it guarantees specific heirs. According to 2023 statistics, the cumulative trust amount of Will Substitute Trusts at the five major domestic banks has reached a staggering 3.02 trillion won. This figure far surpasses the previously estimated scale of about 2 trillion won and is growing rapidly. A 2020 court ruling established the legal basis that Will Substitute Trusts held for more than one year by financial institutions are not subject to the statutory reserved portion. The market has thus identified a legal loophole that the statutory reserved portion does not apply to assets gifted to third parties such as financial institutions more than one year before the deceased’s death.

The law is a written record, but its interpretation and application can change with the times, as it is a living entity. Considering the demands for change according to the times and the fundamental democratic constitutional protection of individual property rights, the statutory reserved portion system must be reconsidered. It is necessary to remember the lesson that the powerful market forces driven by demand sometimes render laws obsolete when they fail to reflect changes in a timely manner.

Kim Gyu-il, Professor at Michigan State University

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