The Financial Services Commission (“FSC”) has amended the Enforcement Decree of the Financial Investment Services and Capital Markets Act and the Financial Investment Business Regulations to allow for the establishment of insurance claim trusts for general death benefits.
Under an insurance claim trust arrangement, the designated beneficiary for an existing life insurance policy may be changed to a trust managed by a trustee company, with the policyholder’s spouse or lineal dependents being designated as the beneficiaries of such trust. From November 12, 2024, after consulting with the Ministry of Justice, the FSC allows for insurance claim trusts to be established for insurance policies that meet the following requirements:
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Eligible policies: Life insurance policies with general death benefits of KRW 30 million or more (excluding coverage for accidental death or death by illness)
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Policyholder requirements: Eligibility limited to insurance policies where the policyholder and the insured are the same person
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Beneficiaries requirements: Trust beneficiaries to be limited to the policyholder’s spouse or lineal dependents (i.e., grandparents, parents, children, and grandchildren)
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Loan restrictions: No policy loans possible after conversion to an insurance claim trust
Thus, policyholders can now appoint a trustee (including insurers with a trust business license) to manage insurance claim proceeds when the beneficiary is a minor, disabled or otherwise unable to effectively manage their assets.
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