[Week 9] Those Who Count, Those Who Disappear—A Record of Challenging the FP Level 1 Exam with 5 Hours a Week #010

This week was a tough one; I had a colonoscopy, a polyp was found and removed in an emergency, and the bleeding wouldn't stop the next day. I'm settled now, but since I'm in a recovery period, I'm having a hard time not being able to drink alcohol.

This week's theme: Statutory Heirs and Statutory Shares of Inheritance

Starting from Week 9, I've entered Phase 2, the theoretical phase. The first theme is "Statutory Heirs and Statutory Shares of Inheritance."

Up until now, it was all about calculating inheritance tax and income tax—a world where you could get the answer just by hitting the calculator. The theoretical phase isn't like that. It's a game of accurately remembering and applying Civil Code rules: who becomes an heir, what the inheritance share is, and how far representation extends.

Since I had gotten into a rhythm with calculations, I was a bit confused at first. It's not about moving your hands to get an answer, but about the task of accurately pinning down the "definitions" one by one.

The "Twist" between Civil Law and Tax Law

Civil law determines "who is an heir and how much they inherit." On the other hand, the "number of statutory heirs" used by the Inheritance Tax Law is a figure for calculating the basic deduction (30 million + 6 million x number of people) and the tax-exempt limit for life insurance (5 million x number of people). Even though they are the same "heirs," the purpose is different, so the way they are counted is also different.

And that counting method is twisted in two places.

One is inheritance renunciation. Under civil law, a person who renounces is treated as "not having been an heir from the beginning," so to speak, they disappear. However, under inheritance tax law, even if there is a renunciation, they are counted as if they hadn't renounced. They disappear in civil law, but are counted in tax law.

The other is adoption. Under civil law, no matter how many adopted children there are, they can all become heirs. But under inheritance tax law, they are only counted as up to one person if there are biological children, and up to two people if there are no biological children.

At first, I thought, "Why go out of your way to do the opposite?" But I thought about the reason and understood. The tax law limits the number of adopted children to prevent blatant tax avoidance, where people would increase the number of adopted children to inflate the basic deduction and tax-exempt limits. When you understand the "why" of a system, mere memorization starts to make sense.

The "Renunciation Does Not Lead to Representation" Trap I Almost Fell Into

I got tripped up once on a practice problem this week.

It was a case study involving an eldest son who died before the decedent and a second son who renounced his inheritance. The eldest son's child inherits by representation. That much is fine. The problem was the second son.

I reflexively thought that the second son's child would also inherit by representation. But I was wrong.

There are only three causes for representation: "death, disqualification, and disinheritance." Renunciation is not a cause for representation. A person who renounces is deemed not to have been an heir from the beginning, so their child does not step in as a substitute. The child of the eldest son (deceased) inherits by representation, but the child of the second son (renunciation) does not.

If you get pulled in by the image that "the child of someone who doesn't inherit inherits by representation," you might mistakenly think renunciation is the same. But even though death and renunciation look the same in that they "disappear," their legal treatment is completely different. This was a total trap.

Digression: Behind the system, there are families

When I'm studying inheritance, there are moments when I suddenly stop.

Renunciation, representation, adoption, disinheritance. The words in the articles are inorganic, but behind each one, there are probably real family circumstances. It is representation that connects the right of inheritance to a grandchild who lost a parent early, and the provision for stepchild adoption treats a stepchild from a remarriage the same as a biological child.

While tax law limits the number of adopted children, special adoptions, stepchild adoptions, and heirs by representation are counted the same as biological children. It attempts to properly distinguish between 'adoptions for the sake of numbers' and 'adoptions as true family.' The system may look inorganic, but it surprisingly reflects the nuances of human relationships. When you think of it that way, memorization becomes more than just a chore.

Thoughts on this week

For calculation-based problems, I could reach the answer by working through the steps. For theory-based problems, if I don't accurately remember where the line for a definition is drawn, I can't even get into the ring. I struggled a bit with that transition this week.

However, when I think about why civil law and tax law intentionally draw different lines, the scattered memorization items start to connect through the 'why.' There is a clear purpose behind counting those who renounce their inheritance and limiting the number of adopted children. It gets confusing if you try to memorize everything by rote, but if you start with the reasons, you surprisingly don't forget them. It was a week where I realized that theory-based problems have their own way of being tackled.

Next week's plan

Week 10 will cover 'Inheritance Division.' I will enter into topics on how to divide assets, such as the bringing back of special benefits, the portion of contribution, as well as compensatory division and division by liquidation. It seems this is another area where civil law and tax law are intricately intertwined. I have a feeling that the 'twist between civil law and tax law' I learned this week will show its face again.