Korean Divorce Law on Claims for Property Division: Dividing Retirement Allowance in Divorce

• Citation: Vol. 17
• Publication year: 2008

§ 17 Pac. Rim L. and Pol'y J. 649. KOREAN DIVORCE LAW ON CLAIMS FOR PROPERTY DIVISION: DIVIDING RETIREMENT ALLOWANCE IN DIVORCE

KOREAN DIVORCE LAW ON CLAIMS FOR PROPERTY DIVISION: DIVIDING RETIREMENT ALLOWANCE INDIVORCE

Faye Y. Park(fn*)

Abstract: As South Koreans divorce closer to the retirement age, the issue of whether retirement allowance should be divided upon divorce has become more prevalent. The applicable law in the division of the retirement allowance in a divorce is Article 8392 of the Civil Code. This article provides that property realized through the cooperation of both spouses shall be divided in divorce by agreement. The Korean courts have historically undervalued the contribution of spouses who provide housework by giving them less property in the division of acquired marital property. Retirement allowances pose problems because a spouse can contribute in acquiring them solely by providing housework, which is difficult to quantify. Furthermore, retirement allowances do not become realized property until the retired spouse receives the retirement allowance; thus the unemployed spouse may not receive a fair amount of property if they divorce before retirement. The Ministry of Justice proposed an amendment to Article 839-2 to include the language that property realized by cooperation shall be divided equally. Once the amendment comes into effect later this year, courts should divide the received retirement allowance equally, regardless of whether one or both parties were economic contributors. Courts, however, should retain the discretion to determine the amount of property each spouse receives to reflect different circumstances, such as the employed spouse's unreceived retirement allowances. Additional amendments to include property that will be realized in the near future are recommended.

I. Introduction

The divorce rate in South Korea(fn1) for people under forty-five years of age is decreasing, (fn2) but the divorce rate for those over forty-five is increasing.(fn3) Furthermore, the average age of divorce is increasing; men divorce at the age of 45, and women at the age of 39.3.(fn4) Overall, divorce at an older age, which Koreans refer to as hwang-hon(fn5) divorce, is becoming more prevalent.(fn6) With an increasing number of hwang-hon divorces occurring closer to the retirement age, a heated debate is emerging about the divisibility of retirement allowances.(fn7) Disputes over retirement allowances are prevalent. This is because they are lump-sum payments employees receive upon termination of their service with the employer based on the length of their service and rate of pay at the time of termination.(fn8) Unlike retirement pensions that a retiree receives every month, retirement allowances are one-time payments that make up for a large portion of property of the married couple at the time of divorce.

Article 839-2 of the Korean Civil Code governs the division of all property upon divorce by agreement.(fn9) The article provides that each spouse has a claim to property acquired during marriage through cooperation.(fn10) Under this statute, the court has the broad discretion to determine what property is divisible and to determine the method of division, taking into consideration how the property was originally acquired.

Application of Article 839-2 to retirement allowances raises many questions, particularly where only one spouse is employed while the other does mostly housework. The court must identify whether the housework-providing spouse "cooperated" in accumulating the property. Once the court determines that the spouse made a valuable contribution in accumulating the retirement allowance, however, the question still remains on whether unreceived retirement allowances should be part of the divisible property. Furthermore, the court must decide the most equitable division method of the retirement allowances by taking into account how much each spouse contributed to the property.

One of the most illustrative case rulings on the issue of whether yet-to-be received retirement allowances of employed spouses should be subject to division of property is the Korean Supreme Court(fn11) decision 2002S36.(fn12)

In that case the Korean Supreme Court held that a spouse's future retirement allowance is not subject to division upon divorce.(fn13)

In 2007, the Family Court ruled on the issue of retirement allowances that a spouse has already received prior to divorce. The court held that the non-retiring spouse is entitled to the other's retirement allowance. (fn14) Furthermore, the court held that the entire retirement allowance, and not only the amount that corresponds to the period that the wife and husband were married, is divisible under Article 839-2.(fn15)

These two cases provide that received retirement allowances are divisible anytime after their receipt. (fn16) They recognize that retirement allowances are property accumulated through the cooperation of both spouses, despite one spouse providing exclusively housework. (fn17) on the other hand, the courts disregard the housework-providing spouse's contribution in accumulating the retirement allowance, if the retirement allowance has not been received.(fn18) The current rule harbors an inequitable division of property where both parties contribute in accumulating retirement allowances-the allowances are not divisible despite such contribution if they are not received before divorce. Furthermore, the cases do not address the different circumstances that would impact the decision of providing the most equitable method in dividing the retirement allowances.

Legislation amending the claim of property, which will come into effect in 2008, may have an impact on future court decisions dealing with retirement allowances. The Ministry of Justice announced that the amendment on claims for property division in divorce by agreement will allow the equal division of property acquired through joint cooperation between wife and husband.(fn19) The Ministry of Justice suggested that the amended law will limit a party's discretion to dispose of domestic buildings, allow property division even during marriage, and equally divide the property that both wife and husband acquired through cooperation.(fn20) For the amendment to have any impact on the future decision of the retirement allowances, the courts must take action. They need to resolve the inequity of treating retirement allowances as accumulated property during marriage while not permitting their divisibility if the allowances were received after divorce.

This Comment argues that both received and unreceived retirement allowances should be divisible upon divorce. This Comment also discusses the possible impact of the proposed amendment that will require courts to divide acquired property equally on the division of retirement allowances. Part ii provides the background of Article 839-2 and discusses the language and the proposed amendment to Article 839-2. Part III analyzes Korean Supreme Court and Family Court decisions in light of how they address the problem of retirement allowances. Part IV provides an analysis on why unreceived retirement allowances should also be included as divisible property upon divorce. Finally, in light of the case analysis, Part V examines the impact of the amendment to Article 839-2 on dividing retirement allowances. Furthermore, this part recommends that courts should divide retirement allowances to achieve equity between the spouses, and suggests additional amendments the government should consider.

II. Korean Law Provides That Spouses Receive Property upon divorce in proportion to their contribution to its Accumulation

Article 839-2 went into effect on January 1991, giving a non-employed spouse the right upon divorce to claim the couple's property in proportion to his or her contribution to the accumulation of this property.(fn21) The purpose of this law was to provide women, who historically were lower earning spouses, with a fair property division. (fn22) Since its enactment, however, there have been disputes concerning what should be included as divisible property and how it should be divided.(fn23) The law provides broad discretion to courts in determining what should be acquired property and how the parties contributed in accumulating such property.(fn24) Classifying retirement allowances as acquired property during marriage, when only one spouse is employed while the other has provided housework, is problematic.

Contribution to accumulating retirement allowance through housework is difficult to quantify. The courts may have discrepancies on what proportion of the retirement allowance each spouse should receive. Notably, this discrepancy may be remedied through the Ministry of Justice's proposal to add language to Article 839-2, which focuses on dividing any property acquired during marriage equally between each spouse.(fn25)

A.Article 839-2 Protects Lower-Earning and Unemployed Spouses but Has Not Been Effective

As a result of three decades of intensive lobbying by women's rights advocates, in January 1991 a significant change to Korean family law went into effect.(fn26) The law gave women unprecedented rights in the areas of marriage, divorce, child custody, and property inheritance.(fn27) Article 839-2 was part of this larger overhaul.(fn28) The main purpose of Article 839-2 is to divide material property acquired during...