Estate planning for families with permanent residents and citizens
Even Korean families who have lived in the U.S. for a long time often have assets remaining in Korea. A single apartment in Seoul, time deposits in Korean banks, a share in rural land inherited from parents, along with a house in the U.S. and a 401(k) retirement account, and life insurance, are all held within a single family. While seemingly problem-free in normal times, these assets will each face different country's courts, registry offices, and tax authorities after death.
Estate planning, especially when one spouse is a U.S. citizen and the other is a permanent resident, is more than just a matter of paperwork. It affects who receives which assets and through what process, which country's taxes are calculated first, and how much money the surviving spouse can immediately access. With the U.S. federal tax reform, commonly known as the ‘One, Big, Beautiful Bill (OBBB),’ signed on July 4, 2025, the U.S. estate and gift tax exemption limit will increase to $15 million per person starting in 2026, and the long-standing risk of sunset (automatic reduction) will be eliminated. The Korean government has also announced plans to reform its inheritance tax system, but related content was omitted from the tax law revision bill at the end of 2025. This is a perfect time to review your family's estate planning, as both countries' systems are moving in tandem.
◆ Why You Need Two Wills — Korean and U.S. Procedures Are Separate
“The problem isn't the format of creating two wills. The key is to pre-emptively separate the paths so that Korean assets are handled through Korean procedures and U.S. assets are handled through U.S. procedures.”
Korea and the United States have different ways of creating wills and different legal effects. In the U.S., each state has its own laws, so New York State requires the testator's signature and the signatures of two witnesses. The two witnesses can sign the will within 30 days, either by personally witnessing the testator's signature, by witnessing the testator acknowledge their signature, or by signing at the testator's request. Korean Civil Law recognizes five types of wills: holographic wills, nuncupative wills, notarized wills, secret wills, and oral wills (Articles 1066-1070 of the Civil Code). Due to these differences in form, a will made in the U.S. is not automatically enforceable in a Korean court.
A distinction needs to be made here. The ‘governing law‘ applicable to inheritance is, in principle, the law of the deceased person's domicile, meaning Korean law for a Korean national. If the will specifies that the law of the country where they reside should apply, that can also be applied. However, in the stages of registering, transferring, and disposing of real estate, the procedures of the country where the real estate is located strongly come into play. This means that while a will made in the US can, to some extent, determine the "law" regarding Korean real estate, to proceed with the transfer registration at a Korean registry office, Korean-required documents and their translations will ultimately be necessary.
Therefore, in practice, we usually recommend ‘two wills." Separate wills are made for Korean assets and U.S. assets, each with the help of a lawyer in that country. To ensure the two wills do not conflict, a clause is included in one will that explicitly excludes assets from the other country. A notarized will prepared in Korea (drafted by a notary public) has the least room for dispute, but it must be handled directly in Korea. A holographic will, which is written by hand, is convenient, but it is important to note that if any part of the address, name, date, or seal is missing, the entire will can be invalidated. This seemingly cumbersome dual design is actually the most straightforward way to conclude matters.
US Probate and Living Trusts
In the United States, a will only becomes effective after undergoing a probate process in the state court after the testator's death. In New York, the Surrogate's Court handles this, while in New Jersey, it's managed by county-level Surrogate's Courts. This process can take anywhere from six months to nearly two years, depending on the size of the estate, and incurs court fees and attorney's fees. If the deceased owned real estate in multiple states, each state requires a separate probate process, increasing the overall cost. New York State regulations stipulate that if the deceased's personal property exceeds $50,000 or if there is real estate solely in the deceased's name, a formal probate process is required. Smaller estates below these thresholds can be handled through a simplified procedure.
The most common tool to avoid or reduce this probate process is a ‘Revocable Living Trust.’ During your lifetime, you serve as the trust creator, beneficiary, and trustee, transferring your assets into the trust. Upon your death, a designated successor trustee distributes the assets to your heirs. This avoids going through the court, saving time and money, and protecting privacy as trust documents are not made public.
A common oversight in Korean households is the actual act of transferring assets to a trust. If only a trust document is created without changing the ownership of real estate or bank accounts, those assets will ultimately revert to probate. To remedy this, a ‘Pour-Over Will‘ is created alongside the trust. This is a will that automatically directs any assets not transferred to the trust during one's lifetime into the trust after death. Retirement accounts like 401(k)s and IRAs, life insurance policies, and bank accounts with a Payable-on-Death (POD) designation are transferred directly to the designated beneficiary separately from the trust, so it's crucial to regularly verify that beneficiary information is up-to-date. Korean real estate ultimately follows Korean procedures. Therefore, it's important to clarify from the outset that living trusts are effective for protecting U.S. assets, while Korean assets require separate planning.
◆ Spouses of Citizens vs. Spouses of Permanent Residents: How Nationality Changes the Tax Landscape
Starting in 2026, the U.S. federal estate and gift tax exemption will operate at approximately $15 million per person (OBBB, signed July 2025). While the sunset clause has been removed, eliminating concerns about automatic reductions at the end of 2025 as in the past, it is more accurate to understand this as a situation where the risk of sunset has disappeared, rather than as ‘set in stone,‘ as Congress can change it at any time with new tax legislation. Spouses can utilize up to $30 million in combined exemptions through the ’portability‘ system, where the surviving spouse inherits the unused exemption of the deceased spouse, and portions exceeding the limit will be subject to a tax rate of up to 40%.
When transferring assets to a spouse, citizenship plays a crucial role. If your spouse is a U.S. citizen, an ‘unlimited marital deduction‘ applies, allowing you to pass assets directly to your surviving spouse tax-free. However, if your spouse is not a U.S. citizen (i.e., a green card holder), this deduction does not automatically apply. Instead, you can establish a ’Qualified Domestic Trust‘ (QDOT) and place the assets within it. This allows you to defer estate tax settlement until the surviving spouse's death. This trust must have at least one trustee who is a U.S. citizen or a U.S. corporation, must grant the trustee the authority to withhold taxes when principal is distributed, and becomes effective only when the "QDOT election" is made on the estate tax return (Form 706) after death.
The gift tax exclusion for spouses also varies by citizenship. As of 2026, there is no limit for gifts to a citizen spouse, while non-citizen spouses can receive approximately $194,000 per year tax-free. For children or grandchildren, the limit is $19,000 per recipient per year, or $38,000 if given by both spouses. Gifting directly to grandchildren incurs an additional Generation-Skipping Transfer (GST) tax, so caution is advised. If a non-citizen spouse later obtains citizenship, it opens up the possibility of settling deferred estate taxes on assets held within a QDOT. Families who have considered naturalization timing and estate planning together will recognize the value of this option early on.
◆ Korean Real Estate and Reporting Deadlines — Why is 6 months after death so important?
Korean inheritance tax application varies significantly depending on whether the deceased was a Korean resident or not. If the deceased had a domicile in Korea or stayed in Korea for 183 days or more in a year, with their center of life such as family and assets in Korea, they are considered a resident. In this case, all assets worldwide become subject to Korean inheritance tax. This includes U.S. real estate, 401(k)s, U.S. securities accounts, and U.S. corporate stocks. Conversely, if classified as a non-resident, only assets located in Korea are subject to taxation. While it is highly likely that someone who has lived in the U.S. for decades will be recognized as a non-resident, if they have had extended stays in Korea in recent years, the actual determination will require individual verification by the Korean tax authorities.
상속세율은 과세표준 1억원 이하 10%부터 30억원 초과 50%까지 누진으로 적용됩니다. 현행 제도는 사망한 분의 전체 자산에 한꺼번에 세금을 매기는 방식입니다. 배우자가 받는 부분은 5억원에서 최대 30억원까지 공제, 그 외 일괄공제 5억원, 금융재산 공제와 동거주택 공제 같은 항목이 추가됩니다. 한국 정부는 자녀가 받는 몫만큼 각자 세금을 내는 ‘유산취득세’ 방식으로 2028년에 바꾸겠다고 추진해 왔지만, 2025년 말 세법개정안 처리 과정에서 상속세 부분은 빠졌고 유산취득세 전환도 합의에 이르지 못한 것으로 알려졌습니다. 국회 통과 여부는 여전히 유동적입니다.
The deadlines for filing inheritance tax and acquisition tax in Korea differ. As a general rule, inheritance tax must be filed and paid within 6 months from the last day of the month in which the death occurred. This period is extended to 9 months if the deceased person or the heir resides abroad. The calculation for acquisition tax starts on a different date: it is generally due within 6 months from the date of death. If the heir resides abroad, the period is extended to 9 months. Failure to meet these deadlines will result in penalties for non-filing and delayed payment. If an heir residing in the United States needs to complete inheritance registration in Korea, they must obtain an Apostille for their Family Relationship Certificate, Marriage Certificate, and Death Certificate, along with an English translation and notarization from the US. It is important to note that while there is a double taxation prevention treaty for income tax between Korea and the United States, there is no treaty for inheritance or gift tax. Koreans cannot receive the protection of inheritance tax treaties that the US has with some other countries. The mitigation of double taxation relies solely on each country's domestic laws regarding foreign tax credits (a system that allows for a partial deduction of taxes already paid in a foreign country). Since this often only provides partial relief, it can lead to situations where taxes are effectively paid twice.
Closing remarks
Estate planning for immigrant families ultimately involves organizing a ‘life lived across two countries." The principles recommended in practice are simple. First, create separate wills for Korean assets and U.S. assets to define asset scope without overlap. Second, if one spouse is not a citizen, pre-consider a QDOT trust. Third, for U.S. assets, minimize probate proceedings by utilizing living trusts and beneficiary designations together. Fourth, for Korean real estate, regularly check the residency/non-residency determination and the six-month/nine-month reporting deadlines. Fifth, pre-organize a list of documents the family will need after death (family relations certificate, proof of removal from family register, apostilled death certificate, English translations, and notarized U.S. copies).
Before a will is a legal document after your death, it is the most practical letter to those left behind. The longer you postpone it, the sooner your family will find themselves before unfamiliar courts and tax offices. Conversely, an orderly will and trust leave room for your family to avoid blaming each other, even after an unexpected event. The U.S. has raised and stabilized estate tax deductions with OBBB, while South Korea's inheritance tax reform has been postponed once. At this juncture when the systems of both countries are moving in tandem, we recommend organizing your assets, family composition, nationalities, and future residency plans into a single table. That one table will be the most tangible gift passed down to the next generation and a quiet culmination of a life that spanned two countries.
Disclaimer: This column is for informational purposes only and does not constitute legal or tax advice for any specific situation. Inheritance, wills, trusts, and tax matters that span both the United States and Korea can vary in outcome depending on family composition, nationality, residency, and asset location. Therefore, please consult with a qualified attorney and tax professional in the relevant jurisdiction for personalized advice.
Law Offices of Jin Dong Cho
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