Estate-tax avoidance, consequences II

Written by Atty. Angelo M. Cabrera / Thy Will Be Done Tuesday, 28 August 2012 19:43

IN my last column, I discussed one of the possible consequences of prematurely transferring property during one’s lifetime as a way of avoiding estate taxes and that is, the loss of control, possession and enjoyment of one’s property when circumstances suddenly change. There are other instances when a change in circumstance could have adverse consequences on the property holdings of the family.

Take the case of a couple who, as part of their plan to start distributing their estate during their lifetime, transferred by deed of sale their real-property holdings to their children, with each getting a piece of property.  Although technically a donation, they made it appear that their children bought the property from them.   The plan looked good.  Av oid estate taxes by transferring now and avoid donor’s taxes by effecting the transfer through a sale.   In so doing, they paid the required capital-gains tax instead of either donors or estate taxes, which are much higher compared with the former.

After a few years, the circumstance of their married daughter changed.  The marriage broke down and was eventually annulled.   What is the effect of the annulment of the marriage on the property that was earlier transferred to her by her parents?

Since the daughter and her ex-husband were married under the Family Code and with no pre-nuptial agreement, upon transfer of the property by sale, the same became part of the community property of the daughter and her husband, which means that it was now jointly owned by the couple.

Article 93 of the Family Code provides that property acquired during the marriage is presumed to belong to the community, unless it is proved that it is one of those excluded therefrom.  One of the exclusions is when a property is received by one of the spouses by way of inheritance or donation.   In such a case, such property shall be considered as exclusively owned by the heir or donee-spouse.


  A last will and testament can be changed.  This means that the estate owner can properly respond to changes in circumstances because he still retains control of his property or pieces of property while he remains alive. The son’s marriage broke down.  This is the downside. 2/4 . which made it part of the commonly owned property of the spouses. “married to. Now compare this horror story with this case. thereby allowing him to fully control his property and respond to changes in circumstances accordingly. A father told his son to use one of his residences when the son got married. 28 August 2012 19:43 This means that since the transfer was made by deed of sale.  It did not matter that the property originally belonged to the parents of the girl or that it was titled only under her name followed by the phrase. Cabrera / Thy Will Be Done Tuesday. such property is considered as an acquisition during the marriage. amended or revoked anytime while the testator is alive. transfers take effect only at the precise moment of death of the testator and not a second earlier. Of course. because in a last will and testament. consequences II Written by Atty. the daughter had no choice but to share with her ex-husband the proceeds of the property that was originally intended by her parents as her share in the inheritance. he wrote a will stating that he was bequeathing the house to his son. Angelo M. In the end. when the community-property regime was dissolved by virtue of the annulment.   Instead.Estate-tax avoidance.  An annulment of the marriage eventually ensued.” the father told him but did not transfer the title of the house to his son.  Question: Did the father lose any piece of that property to his daughter-in-law? No.”   That phrase is simply a description of the status of the name indicated therein and does not necessarily bar ownership by the other spouse.  “Use it as if it were your own. the price to pay for this is that the full impact of estate taxes shall bear upon the heirs when the time comes.

therefore. 28 August 2012 19:43 It is. Cabrera / Thy Will Be Done Tuesday.           3/4 . a source of funding for the payment of estate Angelo Secretary Jesse. Farewell. I join the nation in mourning for his untimely demise. More on this next week.   The death of a hero can only produce more heroes as the seeds of change and national transformation are sowed in grounds made fertile by the tears of a grieving and grateful nation.Estate-tax avoidance. e-mail us at it has to be complemented with a liquidity plan. For comments or questions. You may also like us at facebook. essential that when a last will and testament is used as an estate-planning tool. *** As Secretary Jesse Robredo is laid to rest. consequences II Written by Atty.

Estate-tax avoidance. 28 August 2012 19:43   4/4 . Angelo M. Cabrera / Thy Will Be Done Tuesday. consequences II Written by Atty.

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