'Parent chance': Inherited privilege sparks outcry

South Korean politics is once again in an uproar following recent revelations of wealth transfers from several high-level government officials to their children.

These officials, nominated for high-ranking positions requiring National Assembly confirmation, have reignited fierce debates about elite privilege, inheritance schemes and the ethical obligations of public servants in the last few weeks. In a society that demands strict financial integrity and transparency from its leaders, these incidents have intensified scrutiny and faced public outcry.

Supreme Court Justice nominee Lee Sook-yeon has been at the center of controversy after her two children were found to have gained substantial profit from unlisted stocks in a business owned by her husband's brother.

The shares, initially bought by Lee's husband for their children when they were of preschool age, reportedly appreciated by as much as 63 times their original value by the time Lee's daughter sold them back to her father.

Public ire swelled upon revelations that Lee's daughter had used the proceeds from selling the shares to purchase an apartment in Seoul's Yongsan-gu. Local media outlets were quick to label this complicated intergenerational wealth transfer as a case of "parent chance" – a Konglish term to describe the unfair accumulation of wealth through the privilege of having an elite or wealthy parent.

The transaction may seem ethically questionable but was not technically illegal.

Lee's husband transferred his wealth to his children within the confines of Korea's Inheritance Tax and Gift Tax Act, which permits tax-free gifts of up to 20 million won ($14,535), to children under 20. The subsequent appreciation in value, though substantial in this case, does not affect the tax status of the original gift.

The outcry abated only slightly when Lee then donated 3.7 billion won worth of unlisted stocks owned by her family to multiple local charities on July 27. Lee, unlike the other two supreme court justice nominees, initially failed to secure parliamentary approval in the Special Committee on Confirmation Hearings on July 26. She was later given a pass on Tuesday in the committee and plenary session, and President Yoon Suk Yeol officially appointed her the following day.

In a similar vein, police chief nominee Cho Ji-ho faced scrutiny at his confirmation hearing because his wife had transferred 150 million won to their son to help him buy an officetel unit in Seoul's Songpa-gu.

The dispute centered around whether this sum should have been categorized as a "loan" or a "gift."

Korea's gift tax act permits parent-child transfers up to 217.4 million won to be classified as interest-free loans -- exempt from taxes -- as long as they have a 4.6 percent minimum interest rate to avoid being classified as taxable gifts. This 4.6 percent interest rate is waived if the annual interest for the loan stands at 10 million won per year or less.

But without proper documentation, these same transfers may be deemed taxable gifts, subject to one of the world's strictest gift tax regimes that can reach as high as 50 percent.

Cho's hearing fueled controversy over the legitimacy of his debt acknowledgment form, which he presented to the parliament as proof of the transaction. Cho claimed that his wife had voluntarily charged a 2 percent interest rate and provided records of his son's monthly 250,000-won payments to her account, amounting to a total of 3 million won per year.

Despite Cho's efforts to validate the transfer, lawmakers remained skeptical. They noted that the submitted document lacked details about the loan's interest rate and repayment deadline. Critics also pointed out that Cho's wife had not paid income tax on the interest that her son paid. Some called for a comprehensive tax audit.

The nomination was eventually approved after Cho promised promptly to pay the outstanding income tax.

Broken trust

These recurring controversies raise larger, more fundamental questions beyond legal technicalities. Such issues point to broader ethical questions about elite privilege in South Korea and the erosion of trust between the citizens and their leaders, experts say.

The deep-seated distrust and skepticism many South Koreans hold toward elites has historical roots, Lee Byoung-hoon, a professor emeritus of sociology at Chung-Ang University, told The Korea Herald.

"In a truly developed society, the elite proactively fulfill their social responsibilities and serve as role models," Lee said. "But throughout much of Korea's rapid modernization and even today, our privileged class has often prioritized accumulating wealth and passing it to their children, often through unjust means, rather than setting an ethical standard for others."

Wealthy Koreans often exploit legal loopholes in South Korea's restrictive tax code to transfer wealth while minimizing tax liabilities. Parents here can gift only 20 million won tax-free to minor children and 50 million won per decade for adult children. Parents in the US, by contrast, could potentially gift $180,000 tax-free per parent to each child over a decade — nearly ten times the amount permitted for adult children in South Korea.

The issue of inherited privilege often goes beyond material wealth to encompass social and cultural capital, such as preferential treatment in college admissions and job placements.

While this has long been a fact of life through the country's rapid ascent to affluence, recent high-profile incidents have thrust the issue into the national spotlight, fueling widespread disillusionment, particularly among the younger generations.

Lee points to two watershed moments that inflamed this sentiment. Former President Park Geun-hye's impeachment in 2016 was triggered by allegations that her close confidante had leveraged her political connections to secure her daughter’s admission to a top university despite dubious credentials.

The scandal deepened after it was revealed that she received bribes from Samsung, South Korea's largest conglomerate, to fund her daughter’s equestrian career.

Just two years later, then-President Moon Jae-in's left-leaning administration, which had campaigned on creating "a world without foul play or privilege" in the wake of Park’s impeachment, faced its own crisis.

Cho Kuk, Moon's close aide and then-justice minister, was accused of using his position as a Seoul National University law professor to influence the college admissions process for his children, reigniting outrage over elite favoritism in Korea.

Against the backdrop of limited job prospects and rising costs of living, these back-to-back scandals have undermined public trust in the country's leadership. Many Koreans are now convinced that corruption and favoritism are intractably entrenched among the country's elite, regardless of political affiliation, according to experts.

"We've reached a point where many view our society as a caste system," Lee said. "For the average citizen, the intergenerational transfer of wealth and privilege among elites can be so vast as to be almost incomprehensible. This stark disparity has pushed public resentment to such a critical level."