Samsung Chairman’s Estate Sparks Tax Questions

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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”

If You Can Dream It, You Can Do It … Unless the Utah Trustee Says No

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Your plan is only as good as the people who implement it. When they aren’t competent, don’t pay attention to details, or decide to pursue their own interests, disaster can ensue. The latest case involves the Walt Disney estate.

“If you can dream it, you can do it.” Walt Disney shared great inspiration with the world, and no doubt with his own family. But ever since Disney passed away in 1966, problems with his estate plan have continued to mount.

At issue is a trust he left for his grandchildren. The trust itself is fairly standard in that trust principal was to be distributed to the grandchildren in stages. For one grandchild, everything went according to plan. However, for the other two, problems have arisen.

Investing Daily, in an article entitled “Key Estate Planning Mistakes You Need to Avoid,” locates the problem with a clause in the trust that states the principal could be withheld if the grandchildren lacked the “maturity and financial ability to manage and utilize such funds in a prudent and responsible manner.” The article points out that this is a standard clause in many trusts. The problem is that disagreements have arisen between the trustees and the grandchildren. The trustees say the grandchildren have learning disabilities and are unable to manage money. In addition, the trustees contend that the grandchildren are overly influenced by a stepfather. However, the grandchildren believe the trustees just do not want to lose their income from managing the trust and that the grandchildren are being punished for refusing to keep any distributed money at one of the trustee’s financial firms.

From the outside, it is impossible to know whether the trustees or the grandchildren are in the right. What we can say is that it appears that Walt Disney chose the wrong trustees. It is extremely important to choose a trustee who will be able to cooperate with your trust’s beneficiaries. Whenever litigation occurs between trustees and beneficiaries, that may indicate that wrong choice has been made.

Reference: Investing Daily (July 24, 2014) “Key Estate Planning Mistakes You Need to Avoid