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TAX - Sep 4, 2018 (1 Hour) turn over to the heirs of the decedent.

It does not
dictate to whom the insurance proceeds will go.
Transfer for insufficient consideration (with
GPA) But in estate taxation, it dictates to whom the
proceeds will go. So if we talk about the proceed,
Donor donated a house and lot (not capital asset) to we follow the insurance law.
the donee under GPA. The property becomes as if
the property of the donee. The donee eventually Not subject to estate tax:
sold the property to a buyer for a very minimal 1. Accident insurance
value which is 1 M (FMV is 10M). The (donee) 2. Insurance policy taken by company for its
seller dies and so it forms part of his estate? There employees
is a diffence between the selling price and FMV of 3. Proceeds issued by the GSIS and SSS
9M. 4. Benefits received from the Phil and US
governments from the damages suffered
A: Yes, the difference shall form part of the gross during last war
estate of the donee, hence, subject to estate tax.
Otherwise, subject to donor’s tax Q: For insurance proceeds, how do we determine if
it is exclusive or common property?
(Note: The GPA has to be stated in a deed or in a
will) A: We take into consideration what is the property
relations and when the policy was taken (before or
In sale with revocable transfer, it is a conditional after marriage). If taken before marriage,
sale because there is no absolute transfer of presumptions is that the payment is taken from the
ownership. exclusive property of the other spouse.
Complication comes in when payment is made
Proceeds of Insurance before and payment is continued even after
marriage and if marriage is under conjugal
Example: partnership.

Gerald (husband) If the policy is taken during the marriage,


— assued/policy holder and also insured premiums are paid through common property.
Then we consider the beneficiary. If the
Marla (friend) beneficiary is the estate, executor administrator,
— even if no insurable interest and if designation then it will form part of the common property.
is revocable: included in the gross estate
—if irrevocable: excluded in the gross estate If third person other than estate, administrator or
executor — payment of the proceeds goes to that
Q: What if Gerald, the assured or the owner of the beneficiary even if the premiums are payed from
policy, took out a life insurance for the life of the conjugal funds.
marla, his wife?
Prior Interest
Marla (wife)
— insured — those 3 scenarios (See definition provided in the
— if she will die, proceeds will go to Gerald being tax code) may still be included even if the passage
the benefiacry regardless of the designation was made prior to 1997
whether revocable or irrevocable because he is the
holder of the policy. Capital of the Surviving Spouse

Under Insurance Code, the proceeds in a life — common properties form part of the estate
insurance proceeds exclusively belongs to the — But 1/2 share of the deceased spouse is not part
beneficiary (anyone) and the latter is not obliged to of the gross estate
Claims agains Insolvent (CAI)

— not necessarily bankrupt


— liability is higher than the asset
— total receivables shall form part of the gross
estate before you can claim deduction
— formal declaration of insolvency is not required

Example: The debts is 500k. Debtor payed 200k.


The 300k may de claimed as deduction but the total
amount of debt shall form part of the gross estate.