Successful Defense Against Inheritance Advance Payment Claim

Among inheritance disputes, those involving company operations generally have complex structures. Where the deceased was the representative or a major shareholder of a company during their lifetime, if money withdrawn from the company while alive was recorded as a temporary advance payment, the inheritance side may face a collection claim. In this case, the temporary advance payment claim was about 1 billion won in scale, and our side achieved a result where the claim was rejected in full. I view the most important task in this case to be disputing what kind of funds the temporary advance payment items actually were, and I organize the typical practical points obtained in that process.

A temporary advance payment, in accounting, has the following character.

• Funds the company paid temporarily to officers, employees, or related parties, with the purpose of expenditure to be settled later
• If left unsettled for a long period, generally subject to collection
• From the tax perspective, accumulating temporary advance payments generally creates follow-on burdens such as imputed interest and corporate tax

The problem is that just because the accounting books record temporary advance payment does not mean all of those funds are claims requiring collection. In reality, items that should have been expensed, items that constitute proper remuneration of the representative, and items that were expenditures for the company are often recorded as temporary advance payments for accounting convenience. If this point is not made clearly in an inheritance case, there is a risk that the appearance of the accounting books is transferred as a burden to the inheritance side as is.

The inheritance side claimed collection based on the accounting record that the deceased had about 1 billion won in remaining temporary advance payments. Our side disputed the following.

• Whether the temporary advance payment was actually funds the deceased withdrew for personal use
• Whether it was expenditure for company business, or amounted to proper remuneration or expense reimbursement
• Whether the legal basis for the collection claim was sufficient
• How the statute of limitations and extinguishment grounds stand

To dispute the temporary advance payment items, the following typical materials are needed.

• Receipts and transfer records that confirm the use of funds at the time of withdrawal
• Schedules and contract materials connecting business activities (entertainment, travel, purchasing, etc.)
• Officer remuneration rules, minutes of shareholders and board meetings
• The follow-on settlement flow of accounting treatment

These materials are bundled by point in time to prove why this item is not a collectible claim but expense or remuneration, or why a claim cannot easily arise. This work typically gains far stronger persuasive power when combined with opinion from an outside expert such as an accounting firm.

The court accepted our arguments and materials and fully rejected the temporary advance payment claim of about 1 billion won. This means the following.

• The claim itself was not recognized, so the inheritance side cannot collect that amount
• The fund flow that arose in the course of the deceased company operations was evaluated as falling within the scope of typical legitimate business activity

• Demonstrates the typical flow of not concluding everything from the temporary advance payment record in the accounting books alone
• The actual character of funds can be redrawn through multi-layered materials such as receipts, contracts, and minutes
• Inheritance cases entangled with corporate disputes generally require an integrated perspective across family, civil, and corporate law

• If you receive a temporary advance payment claim, do not look only at the accounting books; secure the full set of company materials from that point in time
• If company materials are well organized from before the deceased lifetime, defense is typically much smoother
• Disputes entangling family and company are best discussed early on with counsel who can handle family, civil, and corporate law perspectives together

To reduce disputes such as temporary advance payment and director liability after the death of someone who ran a family business, organizing the following materials during their lifetime is generally recommended.

• Officer remuneration rules and minutes determining remuneration
• Accounting rules and practical manuals for expense treatment
• Consistent settlement procedures for expenses such as entertainment and travel
• Principle of separation between company funds and the representative personal funds
• Storage of regular tax and accounting advisory opinions

With such materials organized, the intensity of any temporary advance payment collection claim or pursuit of officer liability that may arise at the inheritance stage can typically be significantly reduced.

• Inheritance side: position of collecting company assets to expand the estate
• Company side (directors, other shareholders): position of preserving traces of legitimate company operations
• Between these positions, how the deceased fund flow is interpreted is decisive

Recognizing this divergence in advance and setting case strategy accordingly is typically the most effective.

Q. If a temporary advance payment is on the books, must it be collected unconditionally? A. An accounting item does not in itself mean a collectible claim. The actual use and character of the funds must be confirmed again through the facts, and this point typically becomes the core of the dispute.

Q. The company materials are not sufficient — how can the dispute be conducted? A. Even when the company own materials are insufficient, the character of funds can be reconstructed through counterparties, financial institutions, tax materials, and statements of related parties. The strategy for securing materials is best designed with counsel at the early stage.

Q. How can the statute of limitations be disputed in similar cases? A. The statute of limitations on a temporary advance payment collection claim is generally disputed under the doctrines of extinctive prescription for general civil claims. If the temporary advance payment was in fact already settled, the non-existence of the claim itself is examined; if not, the typical flow is to examine the running of the statute together.

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This case shows that, rather than concluding based on the appearance of accounting records, the actual character of funds was redrawn through materials, resulting in full rejection of the claim. If you have received a similar temporary advance payment claim, please organize the materials available at the early stage.

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Written by the Family and Inheritance Team of Jonjae Law Firm (Attorneys Kim Deok-hwan and Yoon Ji-sang) · Reviewed on 2026-05-30

Disclaimer: This article organizes the general flow and implications of a concluded case and does not guarantee the outcome of identical or similar cases. Facts and conclusions can vary from case to case, so please consult directly with an attorney for specific matters.