Aging Korea looks to protect financial rights of older adults

Older adults spend time at Tapgol Park in Seoul, Tuesday. Yonhap

One in five Koreans is now over the age of 65, and that proportion is expected to rise sharply as the population continues to age.

The demographic shift brings urgent new challenges: When people grow old and lose the ability to make decisions or speak for themselves, what will happen to their money?

The debate intensified after a May study by the Presidential Committee on Ageing Society and Population Policy which estimated that older adults with dementia held 154 trillion won ($111.3 billion) in assets in 2023 — equivalent to 6.4 percent of Korea's gross domestic product (GDP).

The issue isn't just about vast amounts of idle assets — it is also a matter of dignity for older adults.

Even when older adults intend to use their wealth for essential needs such as medical care, cognitive decline caused by aging or illnesses like dementia can make it difficult for them to manage their finances.

The rapid shift toward digital financial services further exposes them to risks of unauthorized access or fraud by family members or third parties.

"One elderly student of mine couldn’t go to the bank for some time because he was sick, so he let his son and daughter-in-law manage his bank accounts," said Jung Hee-jung, who teaches digital finance to older adults. "Feeling better, he came to my class and found out that they had withdrawn a significant amount of money without telling him."

Family isn't always the best guardian

To address this loophole, the Lee Jae Myung administration is working to expand a state-managed public trust system. Currently, the system is operated on a limited basis for individuals with developmental disabilities.

The envisioned framework would allow older adults to create a financial management plan covering living expenses, medical costs and inheritance while they are still mentally capable, and entrust it to a public institution. That institution would then manage the assets according to the agreed terms.

Detailed plans are expected to be announced by the end of the year by the committee. Minister of Health and Welfare Jeong Eun-kyeong said the initiative will begin with a pilot program and gradually expand.

Korea has a trust system, but it has been limited to the private sector, where high fees have hindered widespread adoption.

A recent report by the Korea Institute of Finance shows that Korea's total trust assets as of 2024 amount to just 54 percent of its nominal GDP. That's far behind the U.S. at 124.7 percent and Japan at a striking 286.7 percent.

Most financial products are also geared toward inheritance planning for after death, with few designed specifically for older adults with cognitive decline, according to Korea Public Welfare Trust Institute Chairman Kwon Jong-ho.

"Institutional reforms and policy improvements are urgently needed to address these gaps," Kwon said.

Older adults gather at a dementia prevention center in Bonghwa, North Gyeongsang Province, in this undated photo. Courtesy of Bonghwa County

Several countries have already implemented public trust systems, offering potential models for Korea to follow, according to professor Je Cheol-ung of Hanyang University School of Law. In March 2024, Je and four other researchers submitted a commissioned report to the National Pension Service (NPS) on the topic.

In the U.S., nonprofit organizations, supported by state governments, help older adults and individuals with disabilities manage their finances safely. The country has one of the world’s most advanced public trust systems.

Countries like Singapore, Canada and Australia are also notable for running robust public trust systems. These nations have long operated public trustee offices to manage the assets of customers lacking legal capacity.

"A key reason people use public trusts in these countries is because the benefits are clear or it's legally required," Je said. "In Korea, where legal mandates are difficult, the system's advantages must be obvious and persuasive."

Experts stress that the introduction must take into account the country's unique financial landscape and cultural attitudes toward wealth.

They say public trust systems could be a harder sell here, because it's common for children to manage and eventually inherit their parents' assets as they age.

Kang Eun-kyung, an executive of Korea Association of Guardianship Social Workers, said a high level of public understanding will be essential for the introduction of trusts here.

"Many older adults and their families are either unfamiliar with or distrustful of the idea of trusts," Kang said. "There is also psychological resistance to transferring one's assets to the government, with some asking, 'Why should I hand over my property to the government?'"

Additionally, with a large share of older Koreans' assets tied up in real estate, expanding the program to include real estate trusts could be especially relevant. Some suggested that the government should consider training professionals in public trust services and creating a dedicated agency to oversee and manage the system.

"To ensure that older adults can use their assets in ways that reflect their rights, intentions, preferences and values, social services must function as a form of social security," Je said in the NPS report. "A key measure to achieve this is the implementation of a public trust system specifically designed for older adults."