MADELYN JANE M.

IGNACIO, CPA
Business Tax – tax
corresponding the
Onerous Transfer of real or personal property transfer made in the
 Monetary consideration normal course of

Transfer Taxes
 Object business
  VAT
Transfer  % Tax
 Excise Tax
Gratuitous Transfer of real or personal property
 No require consideration
 Object

Transaction
fee
WHEN?
Transfer inter vivos
WHAT?
 Transfer of right, property, and obligations
 Donor’s Tax – tax imposed on the
takes effect while the donor and the donee is
gratuitous transfer of right, property, and
both still living.
obligations of the donor to the donee
Transfer mortis causa
 Estate (Inheritance) Tax – tax imposed on
 Transfer of right, property, and obligations
the gratuitous transfer of right, property,
takes effect from the moment of death of the
and obligations of the predecessor to the
predecessor.
successor.

Acquired Succession is the act or process of

first from Tax Return Deadlines
inheriting a right, property, and  Prior to 2018. Estate Tax Return
the date obligation.
of death Postpone must be made within six (6)
ment of months from the date of death
actual  2018. Estate Tax Return must be
possession made within one (1) year from the
Limits date of death
the value
up to the Basis: Classification of
extent of Succession
aggregate 1) Testamentary/Testate
value of Succession – will take effect Order of Intestate Succession
R&P based on predecessor’s will 1) Legitimate Children or descendants
2) Legal/Intestate Succession – 2) Legitimate Parents or Ascendants
will take effect based on 3) Illegitimate Children or descendants
operations of law 4) Surviving Spouse
3) Mixed Succession – partly 5) Brothers and sisters, nephews and nieces
by will and partly by law 6) Other collateral relatives within the 5th degree
7) State

Succession
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Defined as a mode of acquisition by virtue of which the property, rights and obligations to the
extent of the value of the inheritance, of a person are transmitted through his death to another or others
either by will (testate) or by operation of law (intestate) – (Article 774, CCP)

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MADELYN JANE M. IGNACIO, CPA

Basis: Family Relation (principle of natural law), Implicit Ownership (heirs assumed ownership of
property left by decedent), Socio-economic (wealth left by decedent should be actively used to provide
economic benefit to the community).

Elements of Succession
1. Decedent – is the general term applied to the person whose property is transmitted through
succession, whether or not he left a will.

Persons authorized to take charge of the Estate

a. Executor – person or trust company named in the will by testator

b. Administrator – person or trust company appointed by the court

2. Inheritance or Estate – include all property, rights, and obligations of a person which are not
extinguished by death and all which have accrued thereto since the opening of succession. Personal
rights are not transmissible for they are extinguished by death.

Ernie owes Bert £1,000. Ernie is under an obligation to make payment to Bert. He has a debt.
However, the law of obligations involves two perspectives. While Ernie has a debt of £1,000, an
obligation to pay £1,000; Bert has a right to receive payment. Bert’s right to payment is a personal
right – enforceable only against Ernie. Bert’s right is correlative to Ernie’s obligation.

3. Successor – is a person who is called to the succession either by provision of a will or by operation of
law.
Devisee – is a person to whom gifts of real property are respectively given by virtue of a will
Legatee – is a person to whom gifts of personal property are respectively given by virtue of a will

Wills

 is a legal document containing instructions as to what should be done with one’s estate after one’s
death
 person who executed the will is called testator
 General rule: Every person is of sound mind and may make a will
 except for those below 18 years old and not of sound mind at the time of will’s execution
 Testate Proceedings – process by which a will of a person is going to be examine by the court
 Probate of a will – is a court procedure by which a will is proved to be valid or invalid
 Probate – is the process of proving and registering in the Supreme Court the last Will of a
deceased person. When a person dies, somebody has to deal with their estate. It is usually the
executor of their Will who administers the estate and handles the disposal of their assets and
debts.
 If did not exercise the probate of a will and the will is invalid, the burden is on the person who
opposes the court procedure
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 When the person execute the will with of sound mind, then later known to be insane, it is still a
valid will

Earnst & Young. | SGV 1 & 2 Building, 6760 Ayala Ave, Legazpi Village, Makati, Metro Manila
MADELYN JANE M. IGNACIO, CPA

 Note: supervening (occur later than a specified or implied event or action) incapacity does not
invalidate an effective will
 May be revoked by the testator at any time before his death
 Any waiver of this right is void

Kinds of Wills

1. Ordinary/Notarial/Attested Will – is a will which is executed in accordance with the formalities

prescribed by Art. 804 to 808 of the New Civil Code

 In writing and in language or dialect known to the testator

 Must subscribed (affix a signature) by the testator or fiduciary
 Must subscribed (affix a signature) by three or more credible witnesses (trustworthiness
witnesses)
 Credible witnesses should be a resident of the Philippines
 And should not yet convicted of falsification (forgery; imposter)
 Otherwise, disqualified

2. Holographic Will – is a written will which must be entirely written, dated and signed by the testator.
 In writing and in language or dialect known to the testator
 Must subscribed (affix a signature) by the testator not fiduciary
 Codicil – is a fancy legal word that means amendment or change to a will
 You don’t have to rewrite the whole will
 In case of any insertion, cancellation, erasure etc., full signature of testator shall be made
 Intestate Proceedings – process in the absence of the last will and testament

Foreign Will

 Making a will is highly recommended, particularly if a person has substantial assets. The main
reason is to ensure that, on death, the person’s assets are received by, or held for the benefit of,
the person or persons that are intended by the deceased. If there is no will, the assets will be
distributed in accordance with the laws of the country where they are situated.

Institution of an heir – is an act by which the testator designates in his will the person or persons who are
to succeed him in his estate

Heirs are classified under the law as follows:

1. Compulsory heirs – those who succeed by force of law to some portion of the estate, in an
amount predetermined by law, known as legitimes.

Legitime – is a part of testator’s estate which he cannot dispose because the law has reserved it
for certain heirs.
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Rules on Legitime

Earnst & Young. | SGV 1 & 2 Building, 6760 Ayala Ave, Legazpi Village, Makati, Metro Manila
MADELYN JANE M. IGNACIO, CPA

½ Legitimate children or Descendants

If defaulted:
½ Legitimate parents or Ascendants
½ Illegitimate Parent

¼ Surviving Spouse 1 LC
Equal to 1 LC 2 LC
No
1/8 Surviving Spouse w/ LPA
LC
Surviving Spouse w/out No
1/3
LPA LC

½ Of 1 Legitimate Child
If no Legitimate Child
¼ Illegitimate Child w/ LPA
Illegitimate Child w/out
1/3
LPA

Consanguinity – is the relation of persons descending from the same stock or ancestors

Lineal consanguinity – which may be descending or ascending, is that which subsists between persons of
whom one is descended in a direct line from the other.

Parent Great grandparent

Son Grandparent
Grandchild Parent

Collateral consanguinity – is that which subsists between persons who have the same ancestors, but who
not descend (or ascend) one from the other.

Kinds of compulsory heirs:

 Primary heirs – those who have precedence (the condition of being considered more
important than someone or something else; priority in importance, order, or rank) and
exclude other compulsory heirs
I.e. legitimate children and descendants (grandchild, great grandchild etc.)

Right of representation – is a right created by fiction of law where the representative is

raised to the place and degree of the person represented, and acquires the rights which the
latter would have if he were living or could have inherited. 5

Note that after children of decedent, there is a descendant whether a son or daughter for
who acquires the right to represent his/her parent (children of decedent)

Earnst & Young. | SGV 1 & 2 Building, 6760 Ayala Ave, Legazpi Village, Makati, Metro Manila
MADELYN JANE M. IGNACIO, CPA

What if no descendants?
Children or descendants of his/her legitimate siblings

Representation may arise because of

1. Death
2. Incapacity
3. Disinheritance

 Secondary heirs – those who succeed only in the absence or default of the primary
compulsory heirs
I.e. legitimate parents and ascendants (Grandparents, great grandparents etc.)
 Concurring heirs – those who succeed together with the primary or secondary
compulsory heirs
I.e. illegitimate parent, surviving spouse, illegitimate children and descendants whether
legitimate or illegitimate

Disinheritance – is a testamentary disposition by which a compulsory heir is deprived of, or

excluded from the inheritance to which he has a right.

Common cause for disinheritance of legitimate children and Parents

 They attempt against the life of the testator, their descendants or ascendants;
 They accused the testator of a crime for which prescribes imprisonment of six (6) years
or more;
 Refusal without justifiable reason or cause
 The testator change the will due to fraud, violence, intimidation or undue influence
causes made by heir;

Peculiar causes for disinheritance

1. Children or Descendants
 May leads to dishonorable or disgraceful life
 Maltreatment (cruel or violent treatment) by word or deed on the testator;
 Convicted of adultery or concubinage (sexual intercourse) with the spouse of the testator;
 Convicted of a crime which carries a penalty of civil interdiction
2. Parents or Ascendants
 Loss of parental authority
 Abandoned their children
 Convicted of adultery or concubinage (sexual intercourse) with the spouse of the testator;
 Attempts against the life of others, unless there has been reconciliation between them
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3. Spouse (Concurring heir)
 Loss of parental authority
 File a legal separation

Earnst & Young. | SGV 1 & 2 Building, 6760 Ayala Ave, Legazpi Village, Makati, Metro Manila
MADELYN JANE M. IGNACIO, CPA

Earnst & Young. | SGV 1 & 2 Building, 6760 Ayala Ave, Legazpi Village, Makati, Metro Manila