Pdf-apuli-transfer-and-business-taxation-reviewer compressOn Death and Taxes: Estate Tax under the TRAIN Law Law Firm in Metro Manila, Philippines | Corporate, Family, IP law, and Litigation Lawyers > PDF

Preview

Summary

CHAPTER 1CHAPTER 1INTRODUCTIONINTRODUCTION Property Property   – – embraces everything which is or may be the subject embraces everything which is or may be the subject of ownership ownership. OwnershipOwnership  – – the exclusive right of possessing, enj...

Description



CHAPTER 1

CHAPTER 2

INTRODUCTION INTRODUCTION

BASIC BASIC CONCEPTS CONCEPTS OF OF SUCCE SUCCE

Property–embraces –embraces everything which is or may be the subject of ownership. Ownership Ownership– – the exclusive right of possessing, enjoying and disposing of property.

SUCCESION  is is aa mode mode of of acquisition by virtue virtue of of rights and obligations to to the extent extent inheritance, of a person are transmitt to another or others either by his will o

MODES OF ACQUIRING OWNERSHIP *The effectiveness of the various modes of acquiring ownership and other real rights over property is premised on the existence of TITLE or JUDICIAL JUDICIAL JUSTIFICATION JUSTIFICATION. 1.Occupation Occupation–property –property seized is without a known owner 2.Intellectual Creation 3.Donation Donation – – an act of liberty whereby a person disposes gratuitously gratuitously of of aa thing thing or or right right in in favor favor of of another, another, who who accepts accepts it. 4.Succession Succession– – mode mode of of acquisition acquisition by by virtue virtue of of which which the the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through HIS DEATH to another. Prescription – – one ACQUIRES ownership and other real 5.Prescription rights through the lapse of time in the manner and under the PRESCRIPTION)) conditions laid down by law. (ACQUISITIVE ( ACQUISITIVE PRESCRIPTION  Rights and actions are LOST by prescription PRESCRIPTION)) (EXTINCTIVE PRESCRIPTION CONCEPT CONCEPT AND AND NATURE NATURE OF OF TRANSFER TRANSFER TAXES TAXES TRANSFER TAXES – taxes imposed upon the GRATUITOUS DISPOSITION of private property Gratuitous– Gratuitous –no consideration is transferred –consideration is received Onerous Onerous– EXCISE TAXES–are –are imposed upon the RIGHT OF A PERSON TO TO TRANSFER TRANSFER HIS HIS PROPERTY PROPERTY that that may may take take effect effect during during his his lifetime or upon his death. Estate – – encompasses encompasses the the totality totality of of assets assets and and liabilities liabilities aa decedent owns at the time of his DEATH. – (in succession) is levied on the  Estate Tax – TRANSMISSION TRANSMISSION OF PROPERTY from a prior decedent to his heirs.  Donor’s Tax– –(in donation) is imposed as ownership of the property passes from the donor to the done.  both are excise taxes  both are imposed upon the right of a person to transfer his his property property that that may may take take effect effect during during his his lifetime lifetime or or upon his death.

--





KINDS OF SUCCESSION testate–results –results from t 1. 1. Testamentary ortestate heir, made in a will executed in the form pres 2. Legal or intestate intestate–effected –effected by operati operat decedent did not execute a will. Mixed–effected –effected partly by will and partly b 3. Mixed ELEMENTS OF SUCCESSION 1. Death of decedent Decedent –person –person whose property Is succession, whether or not he left a will wil – – Testator or Testatix– Testatix–if he left a w 2. Inheritance - All the property, rights and obl accrued thereto(upon succe which are not extinguished by - Personal right cannot be inher - Devise–testamentary disposi - Legacy – gift or bequest property property 3. Successors aka. aka. Heirs – – a person called either by provision of a will (V (V or by AL - Devisees and Legatees– Legatees–per per real property and personal p virtue of a will will 4. Acceptance  Express Acceptance – – may be private document. document.  Tacit Acceptance – – resulting f intention to accept is necessarily i would have no right to do except in

-









EXECUTOR– EXECUTOR–a person appointed by a TES the directions and requests in his will, an property according to testamentary testamentary provis provib ADMINISTRATOR – –his person appointed administer the assets and liabilities of a dece

I. TESTAMENTARY SUCCESIONS WILLS Will – – act whereby a person is permit

prescribed by law, to control to a certain deg his his estate estate to to take take effect effect after after his his death. death. Codicil – an instrument that amends the pro



If someone who signs the instrument did not know what the instrument said at the time of signing, or signed it against his will, the instrument is not a will. will.  A married woman may make a will without the consent of her husband and without the authority of the court of the following: following:  All of her separate property property  Share of the conjugal partnership or absolute community property property 

CAPACITY CAPACITY TO TO SUCCEED SUCCEED BY BY WILL WILL OR OR INTESTACY INTESTACY  In order to be capacitated to inherit, the heir, devisee or legatee must be living at the moment the succession opens. opens.  A child already conceived at the time of death of the decedent is capable of succeeding provided it be born later. later.

FORMS OF WILLS 1.Must be in writing and and executed executed in in a language language or or dialect dialect known to the testator. testator. 2.Must Must be be subscribed subscribed by by the the testator testator himself himself or or by by the the testator’s testator’s name written by some other person in his presence presence 3.By his his express express direction, direction, attested attested and subscribed by three credible credible witnesses witnesses in in the the presence presence of of testator testator and and of of one one another. another. 4.Must be acknowledged before a notary notary public by the testator and witnesses. witnesses.

Holographic Will - is a will written, dated and signed entirely entirely by by the the testator testator with with his his own own hand hand and and not not witnessed witnessed or attested.  At least one witness who knows his handwriting  In case case contested, at least three three witnesses  The will of an alien who is abroad produces effect in the Philippines if made with the formalities by o the law of of the place in which he resides, or o according to the formalities observed in his country, or o  in in conformity conformity with with those those which which the the Civil Civil Code Code prescribes.



 A

will made in the Philippines by a citizen or subject to another another country, which which is is executed in accordance accordance with with the the law law of of the the country country of of which which he he is is aa citizen citizen or or subject, subject, and and which might be proved and allowed by the law of his own country, country, shall shall have have the the same same effect effect as as ifif executed executed according according to the laws of the Philippines.

Legitimate Legitimate Children/ Parents/ Descendants Ascendants

Surviving ving Spouse

a.

½

excluded

Same as the legitime of a legitimate child

b.

None

½

None

surviving c.

d.

e.

surviving

None surviving

½

¼

None

None

½

surviving

surviving

None

None

surviving

surviving

(1/3) 1/3

INSTITUTION OF AN HEIR HEIR - isis an an act act by by virtue virtue of of which which aa testa testa will the person or persons who are property and transmissible rights an

LEGITIME - is is that that part part of of the the testator’s testator’s prope prope dispose of because the law law has re heirs, called compulsory heirs. heirs. 1. Legitimate children and descendants, w legitimate parents and ascendants 2. In default of the foregoing, legitimate pare with respect to their legitimate children and 3. The widow or widower 4. Acknowledged natural children, and natu fiction 5. Other illegitimate children.

 Surviving spouse is always enti



depending on the existence of othe

REVOCATION REVOCATION DISPOSITIONS A ill b

OF OF

WILLS WILLS

AND AND

k d b th t t t

TESTAMENTARY TESTAMENTARY t

ti

b f

hi



The The Following Following Shall Shall Be Be Sufficient Sufficient Causes Causes For For The The Disinheritance Disinheritance Of: CHILDREN CHILDREN AND AND DESCENDANTS, DESCENDANTS, A SPOUSE LEGITIMATE LEGITIMATEAS ASWELL WELLAS ASILLEGITIMATE ILLEGITIMATE 1 when a child or descendant has beenfound found guilty guilty of of when when the the spouse spouse has has been beenconvicted convictedof ofan an an attempt the life of of the the testator, testator, his his or or her her spouse, spouse, the life of the testator, testator, his his or or her descenda descenda descendants or ascendants

and the accusation has been found found to be 3 when a child or descendant has been convicted of when the spouse hasgiven givencause causefor for legal lega adultery or concubinage with the spouse of the testator 4 when a child or descendant by fraud, violence, when the spouse by fraud, violence, intim intimidation or undue influence causes causes the the testator testator influence cause the testator to to make aa to make a will or to change one already made one already made 5

a refusal without justifiable cause to support the

Unjustifiable refusal to support the c

parent parent or or ascendant ascendant who who disinherits disinherits such such child child or or spouse. descendant 6

maltreatment of the testatorby word or deed deed by the the when the spouse has has given given grounds grounds parental authority authority child or descendant

7 when a child or descendant leads a dishonorable or disgraceful life 8

Conviction of a crime which carries with it the

penalty of civil interdiction.

LEGAL OR INTESTATE SUCCESSION Intestacy–if –if a person dies without leaving a will, the person is said to be died intestate.  In this this case, case, the government government provides a default default estate plan und under er which the decedent’s estate is disposed. disposed. 

Legal or intestate succession take place: 1. 1. IfIf a person person dies dies without without aa ill, ill, or or with a void will, will, or one which has subsequently lost its validity 2. When the will does not institute institute an an heir heir to, to, or or dispose dispose of of all the property belonging to the testator. In such case, legal legal succession succession shall shall take take place place only only with with respect respect to to the the property of which the testator has not disposed. 3. If the suspensive condition condition attached to the institution institution of heir does not happen or is not fulfilled, or if the heir dies before before the the testator, testator, or repudiates repudiates the the inheritance, inheritance, there there being no substitution, and no right of accretion takes pace 4.. When When the the heir heir instituted instituted is is incapable incapable of of succeeding, succeeding, except in cases provided in the Civil Code.

Consanguinity

Affinity– – the connection existing in conse between each of the married between e spouse and kindred of the other. Representation Representation – – isis aa right right created created by by fiction fiction of of law, law, by by representative is raised to the place and d represented and acquires the rights which th he were living or if he could have inherited. ItIt takes takes place in in the the direct descending descending l ascending.  In In the the collateral collateral line, line, itit takes takes place place oo children of brothers or sisters, whether blood. o Full Blood Relationship Relationship– – is th persons persons who who have have the the same same fa f mother –is th o Half Blood Relationship Relationship–is persons who have the same fath mother, mother, or or the the same same mother, mother, but but



-- is is the the relation of of persons persons descending descending from from the the same same stock stock or or common ancestor.

ORDER OF INTESTATE SUCCESSION



Brothers, Legitimate Children/ Descendants

Legitimate Parents/ Ascendants

Illegitimate Children/ Descendants

Surviving

Sisters

Spouse

/Nephews Nieces

b

c

1/2 if child

only

1/3 each if 2 children

none excluded surviving

Other Collateral Relatives w/in 5th degree

excluded

excluded

½

excluded

excluded

1/3 1/3

excluded

excluded

¼

excluded

excluded

none excluded surviving

½

1/4

excluded

entire entire

WHEN WHEN DISTRIBUTION DISTRIBUTION OF OF HEREDITARY HEREDITARY ESTATE ESTATE TAKES TAKES PLACE PLACE 

The The EXECUTOR EXECUTOR or or JUDICIAL JUDICIAL ADMINISTRATOR ADMINISTRATOR has has the the task task of of making making sure sure that that the the estate estate tax tax has has been been paid paid before he delivers a distributive share to any party interested in the estate.



In In estate estate taxation, taxation, the the gross gross estate estate of of citizens citizens and and residents include all their property wherever situated.

excluded



This gross estate is allowed deductions under under the tax law; the the difference difference called called the the next next taxable taxable estate is the the



CHAPTER 3 GROSS GROSS ESTATE ESTATE

REAL or IMMOVABLE PROP 2. REAL attached to the soil with permanence. 3. TAXABLE TRANSFERS TRANSFERS–inter –inter viv causa in substance

Estate Tax - isis the the tax tax on on the the RIGHT RIGHT TO TO TRANSMIT TRANSMIT PROPERTY PROPERTY at at death and on certain transfers which are made by law the equivalent equivalent of testamentary dispositions. - its its object object isis to to tax tax the the shifting shifting of of economic economic benefits benefits and and enjoyment of property from the dead to the living.

a.) Transfer in Contemplation Contemplation of Death Death Donation Mortis Causa Causa - is a transfer in contemplation of death. - it takes effect upon or after the donor’s

LAW LAW THAT THAT GOVERNS GOVERNS THE THE IMPOSITION IMPOSITION OF OF ESTATE ESTATE TAX TAX 1. Statute in in force force at the the time time of of death of decedent decedent

Factors to consider are the ff.:  Age Ageand and state of healthof healthof the dec the gift



2. tax to is istodistinct the obligation to the pay pa 3. Accrual Right Right of ofof state state tax tax the thefrom privilege privilege to to transmit transmit theyestate estate vests instantly upon death. death. 4. Tax Reform Act of 1997 1997 PURPOSES OF ESTATE TAX Benefit-Received Theory - it recognizes the role of the State State in the distribution distribution of of the the estate of a decedent to the the heirs heirs whether whether itit be be in in accordance with the decedent’s will or by operation of law. (collection for service) service) Privilege Theory orState State Partnership Theory - since inheritance is a privilege granted by the State and since estate acquired and accumulated is under the State’s State’s protection, protection, itit is is but but righteous righteous that that the the State State collect its share. (collection of share) share) Ability to Pay Theory - itit asserts asserts that that the the heirs because because of the the inheritance inheritance they they received are able and capable to pay the taxes due the State. (dahil may pambayad man daw) daw) Redistribution theory - it reduces the property received by the heirs through taxes hence there is a more equitable distribution of wealth in the society (share your blessings) blessings) GROSS ESTATE Decedent’s Estate- all property, wherever located, in which the

decedent owned beneficial interest at the time of death. - Deed of Absolute Sale (by purchase) Deed of Extrajudicial Settlement (inherited) Deed of Donation (by donation) 

Gross Gross Estate includes includes any right to income income that had accrued,

but had had not not yet been received received as as of the the date of the the decedent’s death. death.  It does not include include mere mere expectancy expectancy such such as an expected inheritance. 

Amounts withdrawn from the deposit accounts of a decedent subjected to the 6% final withholding tax, shall be excluded excluded from the gross estate estate for purposes of

 

Length of timebetween timebetween the gift and Execution of a willwithin  within a short ti the gift.

b.) Revocable Transfer -- is a transfer transfer by by trust trust or or otherwise wher whe revoke, revoke, alter, alter, amend amend or or terminate terminate the te te the property. Trust – – is the legal relationship created w as as the the TRUSTOR, TRUSTOR, transfers transfers property property with with the th be be managed managed by by a TRUSTEE for for the the benefit benefi or beneficiaries. Proceeds of Life Insurance – insura Insurance – described as an insurance policy, is a document. -upon Proceeds of insurance under policies upon his his life life shall shall constitute constitute part part of of taken the the beneficiary is: a. The estate of the decedent, administrator b. a third person person other than than the the esta est administrator and the designation revocable revocable..  Under Under the the Insurance Insurance Code, Code, aa designa design is revocable revocable unless unless stated stated expressly expressly c.)Transfer c.) Transfer Under A General Power Of Ap Power of appointment appointment– –is is the right to de who will succeed the property of a prior dece  General Power of Appointme authorizes the donee of the po personto personto possess or enjoy the prop  Limited or Special Special Power of of Ap which authorizes the donee of the p from among a designated class o other than himself. Donor of the power– – the person who c appointment. Donee of the power– – the person who exercise the power

computing the estate tax. tax. RESIDENT CITIZEN

NON RESIDENT RESIDENT CITIZEN

AND

Appointed property–the –the subject of the po p which is the property being transferred



Non-Resident Alien Decedent - only his property located in the Philippines shall form part of his gross estate. Gross estate shall include the ff.: 1. Franchisewhich Franchisewhich must be exercised in the Philippines 2. Shares, obligations or bonds issued by any corporation or sociedad anonima organized organized or or constituted constituted in in the the Philippinesin Philippinesin accordance with its laws 3. Share, obligations or bonds issued by any foreign corporation corporation85% of the businessof businessof which is located in the Philippines Philippines.. 4. Shares, obligations or bonds issued by any foreign corporation c...