The Samsung Family's $10.6 Billion Inheritance Tax Challenge

The billionaire family that owns Samsung is facing an absolutely stunning inheritance tax bill. This tax bill is one of the largest estate-tax bills in world history. When family scion (and South Korea's richest citizen) Lee Kun-hee died in October 2020, it triggered an enormous tax obligation that became both inevitable and unavoidable. The Lee family has until the end of April 2021 to reveal how they plan to pay off this astounding $10.6 BILLION inheritance tax bill. To put this into perspective, that amount is three times the total estate taxes collected by South Korea in 2020.

One viable strategy to tackle this bill is to liquidate the family's incredible art collection. However, there’s a catch! Due to South Korean laws, the Lee family might only be able to sell works by foreign artists to satisfy this debt. Works by South Korean artists may be un-sellable as they are designated national treasures.

Lee Kun-hee was the richest person in South Korea at the time of his passing. His $20 billion net worth was primarily composed of Samsung shares, an extensive art collection, and a vast real estate portfolio. Given South Korea's 50% estate tax rate, it’s clear how the tax bill has reached such staggering heights.

The Richest Family In South Korea

Lee Kun-hee held the title of the richest person in South Korea when he passed away in October 2020. His wealth, estimated at $20 billion, was largely derived from his substantial holdings in Samsung, a robust art collection, and a diverse real estate portfolio. With South Korea imposing a 50% estate tax, this translates directly to the enormous $10.6 billion tax obligation that his heirs now face.

In 2014, Lee Kun-hee's son, Lee Jae-Yong, took over leadership at Samsung following his father's heart attack. Jae-Yong's tenure has not been without controversy. He was arrested for bribery in February 2017 and served a full year in prison for allegedly facilitating around $40 million in bribes to former President Park Geun-hye. Although he was initially sentenced to five years, the prosecutors sought a longer term, which could have resulted in a more severe sentence.

Unfortunately, matters worsened for Jae-Yong. In January 2021, he was sentenced to an additional 30 months in prison. At the time of his re-arrest, he was still the wealthiest individual in South Korea, and he is expected to be released in July 2022.

Billion Dollar Art Collection

The Lee family's impressive art collection spans several decades and can be traced back to Lee Kun-hee’s father, Lee Byung-chull, the founder of Samsung. As his wealth grew, Byung-chull began to amass an extensive collection of ancient Korean artworks. In the 1980s, he donated his collection to a museum that bears his name.

Lee Kun-hee had an expansive vision for art collecting, opting for a 'bigger is better' approach. He established the Leeum museum to display his remarkable collection, which includes notable pieces like Jean-Michel Basquiat's "Untitled (Black Figure)" and Gerhard Richter's "Two Candles."

Today, the Lee family's private art collection boasts over 20,000 works from renowned artists like Andy Warhol, Salvador Dali, and South Korean artist Park Soo-keun. They also own masterpieces such as Pablo Picasso's "Dora Maar" and one of Claude Monet's famous water lilies paintings. The entire collection is estimated to be worth around $2.7 billion.

While this amount is not quite $10 billion, it certainly could make a significant impact on the tax bill. However, there is a significant limitation: all works by Korean artists are designated as national treasures and cannot be sold. Nevertheless, the family is likely to move forward with the sale of pieces like the Monet, Basquiat, and Picasso.

Once the Lee family submits and gets approval for a payment plan, they will have a five-year window to settle their massive inheritance tax.

Key Takeaways