TESTAMENTARY AND INTESTATE SUCCESSION

Succession is defined under the New Civil Code (NCC) 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
either by his will or by operations of law. Succession then may be classified as:

1. Testamentary or testate. The decedent executed a last will as prescribed by law, designating
a heir.
2. Legal or intestate. Since the decedent did not execute a will or the will executed by him is
void.
3. Mixed . a type of succession which is effected partly by "will" and partly by operation of law.

KINDS OF HEIRS

Heir is a person who inherits or has a right of inheritance in the property of another following the latter's
death. There are kinds of heirs as follows:
1. Compulsory heirs are those who inherit with or without a will, broken into two

 Primary compulsory heirs. They are the legitimate children and descendants,
illegitimate children and widow or widower
 Secondary compulsory heirs. They are those who succeed only in the absence of the
primary compulsory heirs
 Concurring compulsory heirs. They are those who succeed together with the primary or
secondary compulsory heirs. e.g. illegitimate children and descendants and surviving
spouse.

1. Voluntary heirs are those instituted by the testator in his will to succeed to the inheritance of
the (free) portion thereof of which the testator can freely dispose.
2. Legal or intestate heirs are those who succeed to the estate of the decedents by operation of
law.

CLASSIFICATION OF TAXPAYERS FOR ESTATE TAX

Section 85 of the Tax Code states that the value of the gross estate of the decedent must be determined
by including the value at the time of death of all property, real or personal, tangible or intangible
wherever situated. The composition of the estate tax may be summarized on the table below:

DECEDENT GROSS ESTATE

 Citizen  Property (real or personal) wherever situated
 Resident alien  Intangible personal property wherever situated.

 Real property situated in the Philippines

 Tangible personal property situated in the
Philippines
 Nonresident alien
 Intangible personal property with situs in the
Philippines, unless excluded on the basis of
reciprocity.
ORDER OF LEGAL AND INTESTATE SUCCESSION

As to the free portion of the estate, it shall be distributed to the following intestate heirs in the order of
priority:

1. Legitimate children
2. Legitimate parents
3. Illegitimate children
4. Spouse
5. Brothers or sisters
6. Relatives by consanguinity up to 5th civil degree
7. The State

COMPOSITION AND VALUATION OF GROSS ESTATE

The following rules shall apply in determining the correct valuation of then estate:

GROSS ESTATE VALUATION

 the fair market value (FMV) of property at the time of death.
1. In general

 the higher value between the FMV determined by the

Commissioner and the FMV shown by the provincial and city
2. Real property
assessors.

 FMV at the time of death

3. Personal property

 unlisted common shares (book value per share of issuing

corporation)
 unlisted preference share (par value per share)
4. Shares of stocks
 listed shares (the arithmetic mean between the highest and
lowest quotation at the date nearest the date of death)

5. Units of participation in any
association, recreation and
amusement club.
6. Right to usufruct, habitation
and annuity.
 the bid price nearest the date of death published in any
newspaper in general circulation.
 in accordance with the latest Basic Standard Mortality Table.

INCLUSIONS, EXCLUSION AND EXEMPTION FROM GROSS ESTATE

Gross estate consists of all properties and interest in properties of the decedent at the time of his death
as well as properties transferred during lifetime (only in form) but in substance was only transferred at
the time of death. The components of gross estate are properties existing at the time of death such as:

 real properties and other tangible personal properties

 decedents interest and intangibles
 properties transferred gratuitously during lifetime, but in substance, transferred upon death :

o transfer in contemplation of death

o transfer with retention or reservation of certain right
 o revocable transfer
o property passing under General Power of Appointment
o transfer for insufficient consideration
o proceeds from life insurance

EXEMPTIONS and EXCLUSIONS from GROSS ESTATE

o Under Section 85 and 86 of the National Internal Revenue Code (NIRC)

o Under Section 87 of the NIRC.
o Under special laws

DEDUCTIONS FROM GROSS ESTATE.

To compute the net estate of a deceased, the Tax Code (RR 122-2018) stated certain items that can
be deducted from the value of the gross estate. These are classified as ordinary and special deductions
as summarized below.

CITIZEN and RESIDENT DECEDENTS NONRESIDENT ALIEN DECEDENTS

I. Ordinary Deductions I. Ordinary Deductions

1. Expenses, Losses,
Indebtedness, Taxes
(LIT) 1. Proportionate deductions for LIT using the formula:

o Losses
o Indebtedness/claims against estate  Gross Estate Phils/Gross Estate World ×LIT
o Taxes
o Claims against insolvent person

2. Transfer for public use 2. Transfer for public use

3. Vanishing deductions 3. Vanishing deductions

II. Special Deductions II. Special Deductions

 Standard deduction of P500,000
1. Standard deductions

 NA
2. Family Home

 NA
3. RA 4917

III. Share of Surviving Spouse III. Share of the Surviving Spouse

FILING AND PAYMENT OF ESTATE TAX RETURN

The following filing and payment of the estate tax are stated as follows:
Place of filing

 In case of a resident decedent:

 o authorized agent bank (AABs)
o Revenue District Officer (RDOs)
o Collection Office
o duly authorized Treasurer of the city or municipality where the decedent was domiciled at
the time of death
 In case of a nonresident decedent:

o RDO where the executor or administrator is registered

o RDO having jurisdiction over the executor or administrator's legal residence, if either or
both are not registered.
o Office of the BIR Commissioner, RDO 39, if the estate does not have an executor or
administrator in the Philippines.

Payment of Estate Tax

 Estate tax shall be paid at the time the return is filed (Pay as you file system).
 When the Commissioner finds that the payment of the estate tax would impose undue hardship
upon the state or any heirs, he may extend the time of payment to either 2 or 5 years.

PROPERTY RELATIONSHIP BETWEEN SPOUSES.

The system of property relationship is only applicable to married individuals. It is used to distinguish a
conjugal or community property from an exclusive property of the spouses. The future spouses may, in
the marriage settlements, agree upon the following types of property relations (order of priority:
1. Based on Agreement

 Absolute Community of Property (ACoP)

o most common regime in marital property relations.

o when spouses do not have a valid marriage settlement, this regime applies.
o spouses become co-owners of all property they bring into marriage and acquired
by each or both

 Conjugal Partnership of Gains (CPG)

o husband and wife have a common fund for all incomes of their separate
properties.

 Complete separation

2. By Operations of Law (New Family Code)

 In the absence of an agreement, the marriage settlement will depend on the date of
marriage as provided under the New Family Code as follows:

o if marriage is before effectivity of NFC August 3, 1988, property relationship is

CPG.
o if marriage is on or after the effectivity of NFC (August 3, 1988), property
relationship is ACoP

3. By Customs or Traditions
CONJUGAL PARTNERSHIP OF GAINS (CPG)

 Exclusive properties;

o properties brought to the marriage as his or her own (before marriage)

o properties each spouse acquires during marriage by gratuitous title.
o properties acquired by right of redemption, barter or exchange with property belonging to
any one of the spouses
o properties purchased with exclusive money of the wife or the husband

 Conjugal properties

o properties acquired by onerous title during marriage at the expense of the common fund.
o properties obtained from labor, industry, work or profession of either or both spouses.
o the fruits received during marriage from common property as well as the net fruits from
the exclusive property of each spouse.
o the share of either spouse in the hidden treasure to the finder or owner of the property
where the treasure is found.
o those acquired by chance (winnings from gambling or betting) except for losses which
shall be borne exclusively by the loser-spouse.

ABSOLUTE COMMUNITY OF PROPERTY (ACoP)

 Community properties:

o all properties owned by the spouses at the time of celebration of marriage.

o properties acquired thereafter, unless proven otherwise, as well as the fruits or income
thereof.

 Exclusive properties

o property acquired during marriage by gratuitous title by spouse as well as the fruits or
income thereof.
o property for personal and exclusive use of either spouse, except:

 jewelry which form part of the community property

 property acquired before marriage by either spouse who has legitimate
descendants by the former marriage.

PROPERTY CLASSIFICATION - EXAMPLE

ITEM PROPERTY ACoP CPG

1 Property inherited or received as donation during marriage Exclusive Exclusive
2 Property acquired during marriage (other than inheritance/donation) Common Conjugal
3 Property acquired from labor, industry & profession of spouses Common Conjugal
Fruits or income due or derived during marriage coming from common
4 Common Conjugal
property
5 Personal property for exclusive use of either spouse (generally) Exclusive Exclusive
6 Property before the marriage or brought to the marriage Common Exclusive
DEFINITION, CHARACTERISTICS AND PURPOSE OF DONOR'S TAX

Donations is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of
another, who accepts it. A donor's tax or gift tax is a tax levied, assessed, collected and paid upon the
transfer by any person, resident or nonresident, of a property by gift.
The following are the purposes of the Donor's tax as follows:
1. To supplement the estate tax.
2. To prevent the avoidance of income tax.
The Donor's tax shall not apply unless and until there is a completed gift, meaning the tax shall take
effect only when the gift is perfected from the moment the donor knows of the acceptance by the donee
either actually or constructively. Characteristics of Donor's tax are the following:

1. Donor's tax is an excise tax and not a property tax since it is a tax imposed on the "right" or
"privilege" to transfer property by way of gift inter-vivos.
2. Donor's tax, being a contract does not apply unless and until there is completed gift.
3. The transfer is perfected from the moment the donor knows of the acceptance of the donee.
4. Donor's tax is a direct tax.
5. Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute
community after the dissolution of the marriage is subject to donor's tax.
6. General renunciation by an heir, including the surviving spouse in the share of hereditary estate
is not subject to tax.

REQUIREMENT S OF A VALID DONATION.

The elements/characteristics of a taxable donation are:

1. Capacity of the donor to transfer property or make donations.

2. Donative intent or intent to make a gift on the part of the donor.
3. Delivery
4. Acceptance of the gift by the donee.

On the other hand void donations consists of the following:

 those made between persons who were guilty of adultery or concubinage at the time of
donation.
 those made between persons found guilty of the same crinimal offense, in consideration thereof.
 those made to a public officer or his wife, descendants and ascendants, by reason of his office.
COMPOSITION AND VALUATION OF GROSS GIFT.

The composition of gross gift will depend on the citizenship and/or residence of the donor. The table
below illustrate this concept:

CITIZEN/RESIDENT ALIEN NONRESIDENT ALIEN

PROPERTY
DONOR DONOR

 Property within (real or personal) Included

Included

 Property without (real or personal) Excluded

Included

 Intangible property within Included **

Included

 Intangible property without Excluded

Included

**Intangible property is subject to reciprocity rule. This means that the rule on reciprocity applies to
donations by a nonresident alien when the properties are intangible properties which are located within
the Philippines. There is reciprocity when:

o The donor at time of donation was a citizen and resident of a foreign country which at that
time of donation did not impose a transfer tax on intangible personal property of the citizens
of the Philippines not residing in that foreign country
o the foreign country allows a similar exemption from transfer taxes for properties owned by
citizens of the Philippines not residing in that foreign country.

In valuing properties for donor's tax purposes, the principles in the valuation of properties discussed for
estate tax also applies. As a rule, donor's tax should be based on the fair market value (FMV) of the
property donated at the time the donation is perfected.

ESTATE TAX VS. DONOR'S TAX

PARTICULARS ESTATE TAX DONOR'S TAX

 Succession (donation mortis  Gift or donation (inter vivos)

 Concept
 Requisites
or Elements
 Accrual period
causa)
 Death of decedent
 donative intent of donor
 Heir or successor is alive and not
 capacity or authority of donor
disqualified to inherit
 delivery of donated property
o compulsory heir
 acceptance by the donee
o voluntary heir
 Inheritance/Estate
 time gift/donation is perfected
 Time of death of decedent

 6% of net gifts in excess of

 Tax rate  6% of net estate P250,000

 Within 30 days from donation

 Filing & payment  Within one (1) year from death
 No extension to file
  Extension to file is not more than  Pay-as-you-file
30 days  No extension for payment
 Pay-as-you-file policy
 Extension to pay is
o 2 years (extrajudicial)
o 5 years (if judicial)
 RC, NRC, RA - on gifts within
 RC, NRC, RA - on estate within
and without
 Scope and without
 NRA - on gifts within only
 NRA - on estate within only

TAXABLE NET GIFT AND DONOR'S TAX DUE - FORMULA.

The taxable net gift and the donor's tax due is better understood by showing the format of computing
them, as shown below:
GROSS GIFT

o Direct gifts - xxx

o Gift(s) through creation of trust - xxx
o Transfer for insufficient consideration - xxx
o Repudiation of inheritance - xxx
o Renunciation by the surviving spouse of her/his share - xxx
o Condonation of debt - xxx xxx

DEDUCTIONS

o Encumbrances - xxx
o Diminutions - xxx
o Government charitable/educational institutions - xxx
o Fixed Exempt gift (P250,000) - xxx xxx

TAXABLE NET GIFTS Pxxx

Starting January 1, 2018, upon effectivity of TRAIN Law (RA 10963) the following were the changes
made in the Donor's tax rates as follows:

 A fixed exempt gift of P250,000 is deducted from gross gift.

 Tax rate shall be at 6% in excess of P250,000 exempt gifts.

FILING AND PAYMENT OF DONOR'S TAX.

The administrative provisions of RR 12-2018 specifically on filing and payment of the Donor's tax states
that any individual who makes any transfer by gift shall, for the purpose of the said tax make a return
in duplicate.

 the return is filed and paid within 30 days after the date the gift is made or completed and the
tax due thereon shall be paid at the same time the return is filed "Pay-as-you-File system"
 the place of filing shall be the AABs, RDO or Revenue Collection Officer (RCO) haaving
jurisdiction over the place where the donor is domiciled at the time of transfer.
 7/25/2020

MISSION
1. Is committed to continue to empower the Filipino youth through
technological education of the highest standard, employing
outcomes -based education and state-of-the-artlaboratories.

2. To transform students into graduates with full competence in

their fields of study who possess:
and
 values of honesty, integrity, service to others
 positive work attitude, good communication skills,
proficiency in computers, initiative, openess to keep
learning to reinvent themselves
 global values of mindfulness, respect for cultural
diversity, care for the environment and contribute to
general welfare of society

COURSE
1. Seat Plan REQUIREMENTS
2. TIP Vision & Mission
Statements ACTIVITY WEIGHT FREQUENCY
3. Course Coverage
Assignment, Seatwork,
4. Course Requirements 25% At least 3x/ period
Boardwork
 Attendance
Recitation 15% Every meeting
 Classroom Attitude
 Commitment (to be a CPA) Attendance 10% Checked daily
Quiz 50% 2x per period
5. Syllabus – Acknowledgment
Receipt
6. Book Order Slip
7. Introduction/Overview

VISION
1. Succession, Transfer Tax and
1. A leading professional technological Estate Tax defined
institution in the Philippines
2. Kinds of Succession (be prepared
2. An institution whose graduates to illustrate each kind)
contribute to the welfare of society
3. Elements of Succession
4. Kinds of Successors/Heirs
5. Kinds of Wills, revoking a will
6. Institution of Heirs
7. Requisites for Disinheritance

1
 7/25/2020

Succession, Transfer Tax and Kinds of Succession

Estate Tax defined (be prepared to illustrate each kind)

SUCCESSION – mode of acquisition by TESTAMENTARY or

virtue of which, the property, rights and TESTATE
obligations to the extent of the value of
the inheritance of a person is  A type of succession that results
transmitted through his death to from the designation of an heir,
another by his will or by operation of made in a will executed in the
form prescribed by law
law.

Succession, Transfer Tax and Kinds of Succession

Estate Tax defined (be prepared to illustrate each kind)

TRANSFER TAXES – are taxes imposed LEGAL or INTESTATE

upon the gratuitous disposition of
private properties or rights.  A type of succession which is
effected by operations of law (as
provided by the Civil Code), since
Transfer that neither the decedent did not execute a
imposes burden nor will or the will executed is void.
requires consideration
from transferee or
receipient.

Succession, Transfer Tax and Kinds of Succession

Estate Tax defined (be prepared to illustrate each kind)

MIXED SUCCESSION

ESTATE TAX – is a tax levied on an heir’s  A type of succession which is

inherited portion of an estate if the value effected partly by “will” and
of the estate exceeds an exclusion limit partly by operation of law.
set by law.

2

Elements of Succession
DECEDENT
the general term applied to the
person whose property is transmitted
through succession whether there is a
will or none. Also called a testator.
Elements of Succession
INHERITANCE (Estate)
include all the property, rights and
obligations of a person which are not
extinguished by death. Rights which
are purely personal are not
transmissible, thus they are
extinguished by death.
Elements of Succession
SUCCESSORS
an heir or successor is a person who
is called to the succession either the
provision of a will or by operation of
law.
7/25/2020
Kinds of HEIRs
COMPULSORY HEIRS
those who suceed by force of law to
some portion of inheritance whether
the testator likes it or not.
they cannot be deprived by the
testator of their legitime except by
disinheritance.
Kinds of COMPULSORY HEIRs
PRIMARY
 Legitimate children and their
legitimate descendants
SECONDARY
 Legitimate parents and
legitimate ascendants
CONCURING
 Illegitimate children and
descendants and surviving
spouse
Kinds of HEIRs
VOLUNTARY HEIRS
those instituted by the testator in his
will to succeed to the inheritance of
the portion thereof of which the
testator can freely dispose.
3

Kinds of HEIRs
LEGAL or INTESTATE
HEIRS
those who succeed to the estate of
the decedent by operation of law.
ORDER of INTESTATE
SUCCESSION
1. Legitimate children or decendants
2. Legitimate parents or ascendants
3. Illegitimate children or descendants
4. Surviving spouse
5. Brothers and sisters, nephews and nieces
6. Other collateral relatives within the 5th
degree
7. State
KINDS of WILL
NOTARIAL/ORDINARY/ATTESTED WILL
 Is one executed in accordance with
the formalities prescribed by Art
804 to 808 of the New Civil Code.
HOLOGRAPHIC WILL
 Is a written will entirely written,
dated and signed by the hand of the
testator himself/herself..
7/25/2020
Institution of Heirs
It is an act by virtue of which a
testator designates in his will the person
or persons who are to succeed him in his
property and transmissible rights and
obligations.
Requisites for Disinheritance
Disinheritance is a testamentary
disposition by which a compulsory heir is
deprived of, or excluded from the
inheritance to which he has a right.
Disinheritance is not applicable to
voluntary heirs.
Requisites for Disinheritance
 Effected only through a valid will
 For a cause expressly stated by law
 Cause must be stated in the will itself
 Cause must be certain and true
 It is unconditional
 It is total disinheritance (not partial)
 The heir disinherited must be
designated in such a manner that
there can be no doubt as to his
identity
4
 7/25/2020

CAUSES FOR TRANSFER TAX

DISINHERITANCE
 When the heir has been found guilt of an Are taxes imposed upon the gratuitous
attempt against the life of the testator, his transfer or disposition of private properties
or rights.
descendants or ascendants and spouse.
What do you
 When the heir has accused the testator of a transfers that neither call transfer of
crime which the law prescribed imprisonment
of 6 years or more and the accusation has
imposes burden nor
requires consideration
properties or
rights with
?
from transferee or consideration
been found groundless.
recipient - FREE
 When the heir by fraud, violence, intimidation ONEROUS TRANSFERS
causes the testator to make a will of change
one already made.
 Refusal without justifiable cause to support
the testator

TRANSFER TAX

Gratuitous transfer or donation may take effect

as follows:

Donation Subject to
At time of death
mortis causa estate tax
of the donor

Subject to
During the Donation donor’s
lifetime of both inter vivos tax
SUCCESSION and TRANSFER TAXES
donor and donee

MODES OF ACQUIRING NATURE OF TRANSFER TAX

OWNERSHIP UNDER
PHILIPPINE LAWS
The subject matter of a transfer tax is
Under the new Civil Code (NCC), ownership
the privilege of the transferor, to transfer
may be acquired through the following:
property or rights.
 Occupation
Transfer tax is classified as excise tax or
 Intellectual creation
privilege tax imposed on the act of passing
 Law the ownership of property and not on the
 Donation value of the property or right.
 Tradition
 Contract
 Prescription
 Succession

5
 7/25/2020

SUCCESSION PEDRO suffered an unexpected heart attack causing his

death on November 1, 2018. His estate composed of the
C following:
Is a mode of acquisition by virtue of which, A Cash in Bank P 10,000,000
S Commercial building 15,000,000
the property, rights and obligations to the
E Cars 15,000,000
extent of the value of the inheritance, of a
House & Lot in Baguio 30,000,000
person are transmitted through his death to Juan is the only heir of the decedent. Pedro’s remains
another or others either by his will or by were cremated on November 8, 2018. The executor of
A
operation of law. (Art. 774 NCC) Pedro’s estate filed the estate tax return and paid the
N
A corresponding estate tax on January 15, 2019. The
Includes all the property, L properties left by the decedent were finally distributed to
rights and obligations of a Y Juan on February 14, 2019.
person which are not S
extinguished by his death I Give an illustration of each succession.
S

KINDS OF SUCCESSION CAUSES OF LEGAL

SUCCESSION OR
INTESTACY
Testamentary or Succession that results from the
designation of an heir, made in a
Testate Succession  If a person dies without a will, or with a void will,
“will” executed in the form
prescribed by law or one which has subsequently lost its validity.
 When the “Will” does not institute an heir.
Succession which is effected by
Legal or Intestate operation of law since the decedent  Partial institution of heir. In such case, intestacy
Succession did not execute a “will” or the last takes place as to the undisposed portion.
will and testament executed by
him is void.  When the heir instituted is incapable of
succeeding.
Mixed Succession which is effected partly
Succession by “will” and partly by operation of  Other causes.
law.

PEDRO suffered an unexpected heart attack causing his

death on November 1, 2018. His estate composed of the
OTHER CAUSES
C following:
A Cash in Bank P 10,000,000  Non-fulfillment of the suspensive condition
S Commercial building 15,000,000 attached to the institution of heeir.
E Cars 15,000,000
House & Lot in Baguio 30,000,000  Preterition – ommission in the testator’s will
Juan is the only heir of the decedent. Pedro’s remains of one, some or all of the compulsary heirs in
were cremated on November 8, 2018. The executor of the direct line effecting the annulment of the
A
N Pedro’s estate filed the estate tax return and paid the institution of heir.
A corresponding estate tax on January 15, 2019. The
 Fulfillment of resolutory condition
L properties left by the decedent were finally distributed to
Y Juan on February 14, 2019.  Expiration of term or period of institution
S  Non-compliance with the will
I 1. When will the transfer of ownership from the decedent
S to the heir take effect ?  Repudiation of the instituted heir
2. When should the estate tax accrue ?
1

11

ELEMENTS OF SUCCESSION
DECEDENT
A general term applied to a person whose
property is transmitted through succession,
whether or not he left a will. He is called a
testator, if he left a will.
EXECUTOR
A person designated in the last will and
testament to carry out the provisions of the
decedent’s will.
ELEMENTS OF SUCCESSION
ADMINISTRATOR
a person appointed by the court and
performs the same duty, in lieu of an
executor.
INHERITANCE
include all the property, rights and obligations
of a person which are not extinguished by death
and all which have accrued thereto since the
opening of succession. Rights which are purely
personal are extinguished by death.
ELEMENTS OF SUCCESSION
SUCCESSORS
an heir or successor is a person who is
called to the succession either the provision
of a will or by operation of law.
DEVISEE & LEGATEE
are persons to whom gifts of real and
personal property are respectively given by
virtue of a will.
7/25/2020
ELEMENTS OF SUCCESSION
COMPULSORY HEIR
those who succeed by force of law to some
portion of the inheritance, in an amount
predetermined by law, known as legitime.
Part of a testator’s property
which he cannot dispose
because the law reserves
them for certain heirs who
are called compulsory heirs.
ELEMENTS OF SUCCESSION
VOLUNTARY HEIRS
those instituted by the testator in his will
to succeed to the inheritance of the portion
thereof of which the testator can freely
dispose.
LEGAL OR INTESTATE HEIRS
those who succeed to the estate of the
decedent by operation of law (decedent died
without a valid will or his estate was not
entirely disposed of by will)
KINDS OF COMPULSORY HEIR
PRIMARY
Those who have precedence over and exclude
other compulsory heirs (legitimate children and
descendants)
SECONDARY
Those who succeed only in the absence of the
primary compulsory heirs (legitimate parents
and ascendants)
CONCURRING
Those who succeed together with the primary
or secondary compulsory heirs (illegitimate
children and descendants and surviving spouse.
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 7/25/2020

ORDER OF INTESTATE REQUISITES FOR

SUCCESSION DISINHERITANCE

 Effected only through a valid will

 Legitimate children or descendants
 For a cause expressly stated by law
 Legitimate parents or ascendants
 Cause must be stated in the will itself
 Illegitimate children or descendants
 Cause must be certain and true
 Surviving spouse
 Unconditional
 Brothers and sisters, nephews and nieces
 Total (there is no partial disinheritance)
 Other collateral relatives within the 5th
degree  The heir disinherited must be designated in
such a manner that there can be no doubt
 State
as to his identity.

DETERMINING BLOOD PECULIAR CAUSES FOR

RELATIONSHIP DISINHERITANCE

1. Children/Descendants
AB a) When the child or descendant has been
convicted of adultery or concubinage with
the spouse of the testator

DF b) Maltreatment of the testator by word or

CE deed by the child/descendant
H I c) When the child or descendant leads a
dishonorable or disgraceful life
JL d) When the child or descendant is convicted
GK of a crime which carries with it penalty of
civil interdiction.
M N

DISINHERITANCE PECULIAR CAUSES FOR

DISINHERITANCE
2. Parents/Ascendants
Is a testamentary disposition by which a
compulsory heir is deprived of, or excluded a) When the parents have abandoned their
from the inheritance to which he has a right. children or induced their daughters to live a
corrupt or immoral life, or attempted
Disinheritance is not applicable to against their virtue
voluntary heirs. b) When the parent or ascendant has been
convicted of adultery or concubinage with
the spouse of the testator
c) Loss of parental authority for causes
specified in the Civil Code
d) Attempt by one of the parents against the
life of the other, unless there has been
reconciliation between them

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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. This may
arise because of:

 Death
 Incapacity
 Disinheritance

RIGHT OF REPRESENTATION

Representation is not available to the

following:

As to compulsory heirs – in case of

repudiation, the one who repudiates his
inheritance cannot be represented. Their own
heirs inherit in their own right.
 As to voluntary heirs
 Voluntary heirs, legatees and devisees who
a) predecease the testator
b) renounce the inheritance cannot be
represented by their own heirs, with
respect to their supposed inheritance

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ELEMENTS OF SUCCESSION

Deceased or Decedent
Person who died leaving properties
behind. He is called testator if he wrote a
last will and testament.
and Inheritance (Estate)
The bulk of properties left behind by the
decedent

Successors/Heir
The persons to whom the estate is given
to

ESTATE TAX THINGS TRANSMISSIBLE

IN SUCCESSION
Is a tax imposed on the privilege that a
person is given in controlling to a certain
 Property – things that the decedent
extent, the disposition of his property to take
effect upon death. owned before the time of his
death: real property,
Is an excise tax imposed on the act of
tangible property, intangible
passing the ownership of property at the property
time of death and NOT on the value of the
property or right.  Rights – legal claims, franchises

 Obligations – unpaid debt

CONCEPT OF SUCCESSION JUSTIFICATION FOR

IMPOSITION OF ESTATE TAX

 Benefit Received Theory

 Testamentary or Testate succession The law considers the services rendered by
government in the distribution of the estate
 Legal or Intestate succession of the decedent, either by law or the
 Mixed succession decedent’s wishes

 Privilege or State Partnership Theory

The State being a passive silent partner in
the accumulation of property has the right to
collect its share properly due.

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INTANGIBLE PERSONAL PROPERTY

JUSTIFICATION FOR
IMPOSITION OF ESTATE TAX
 Ability to Pay Theory
Receipt of inheritance and assets into the
hands of the heirs creates an ability to pay
tax and contributes to government income.
 Redistribution of Wealth Theory
The imposition of estate tax reduces the
property received by the successor, thus
helping to promote equitable distribution of
wealth in society.
(With Situs in the Philippines)
1. Franchise exercised in the Philippines
2. Shares, Obligations or Bonds issued by any
corporation organized in the Philippines
3. Shares, Obligations or Bonds issued by any
foreign corporation, 85% of business
activity is located in the Philippines
4. Shares, Obligations or Bonds issued by any
foreign corporation, if such have acquired
a business situs in the Philippines
5. Shares or Rights in any partnership,
business or industry established in the
Philippines.

COMPOSITION OF GROSS ESTATE SITUS OF TANGIBLE &

INTANGIBLE PROPERTY
Decedent Gross Estate
PROPERTY SITUS
Real or Personal property wherever
Resident situated. Real and Tangible Location of property
Citizen (RC) personal property
Intangible personal property wherever
Resident situated
Alien (RA) Shares, Franchise, Where the intangible is
Copyright, and the exercised regardless where
like the certificate is stored.
• Real property situated in Phils
NonResident • Tangible personal property in Phils Receivables Residence of debtor
Alien (NRA)
• Intangible personal property with situs
in Phils, unless excluded on the basis Bank deposits Location of depository bank
of reciprocity

The gross estate of decedent with their fair DINA NATUTO, Filipina, died in the United
C market values are as follows: C
States with the following properties:
A House & Lot, family home in QC - 1,500,000 A
Condo unit in New York City 3,000,000
S S
Bank deposit in foreign branch Shares of stock – foreign corp 700,000
E E
of a domestic bank - 500,000 Interest in partnership, domestic 500,000
Bank deposit Makati branch A Bank deposit, New York bank 200,000 Car
A of a foreign bank - 300,000 N in Cebu, donated inter vivos
N
Shares of stock issued by DC A 5 years ago to her son 500,000
A
L certificate kept in Canada - 1,000,000 L
Y Franchise exercised in Manila - 800,000 Y 1. Which property should be included in the gross
S Receivable, debtor in Mindanao - 200,000 S estate of the decedent?
I I 2. If decedent is a nonresident alien with
1. Decedent is nonresident alien, there is reciprocity, S reciprocity, how much is the gross estate ?
S
what is the amount to be excluded from gross 3. If decedent is a nonresident alien with no
estate ? 2 reciprocity, how much is the gross estate ?
1 2. Decedent is nonresident alien, there is no
reciprocity, the gross estate is valued at

1
1

VALUATION OF GROSS ESTATE
(Republic Act 10963/ RR 12-2018)
PROPERTY VALUATION
In general FMV at time of death
Real property The higher value between:
 FMV determined by
the Commissioner
 FMV fixed by Provincial
& City Assessors
Personal property FMV at time of death
VALUATION OF GROSS ESTATE
(Republic Act 10963/ RR 12-2018)
PROPERTY VALUATION
• Unlisted common share –
book value per share of
issuing corporation
• Unlisted preference share –
Shares par value per share
of stock
• Listed shares – FMV of
arithmetic mean between
highest and lowest quotation
at a date nearest date of
death, if none is available on
date of death
VALUATION OF GROSS ESTATE
(Republic Act 10963/ RR 12-2018)
PROPERTY VALUATION
Units of
• The bid price nearest the date
participation in
of death published in any
any association,
newspaper or publication for
recreation or
general circulation
amusement club
• In accordance with Basic
Right to usufruct, Standard Mortality Table
use or habitation, taking into account the
and annuity probable life of the
beneficiary approved by the
Sec of Finance as recomm by
Insurance Commissioner
7/25/2020
EXCLUSIONS FROM GROSS ESTATE
(Sec 85 & 86 of Tax Code)
 Exclusive property of the Surviving
Spouse
 Property outside the Phils of a non-
resident alien decedent
 Intangible personal property in the Phils
of a non-resident alien under the
Reciprocity Law.
EXCLUSIONS FROM GROSS ESTATE
(Sec 87 of Tax Code)
 The merger of usufruct in the owner of the
naked title
 The transmission or delivery of the inheritance
or legacy by the fiduciary heir (1st heir) or
legatee to the 2nd heir (fideicommisary)
 The transmission from the 1st heir, legatee or
done in favor of another beneficiary.
 All bequest, devises, legacies or transfers to
social welfare, cultural and charitable
institutions, no part of the net income of which
inures to the benefit of any individual.
EXCLUSIONS FROM GROSS ESTATE
(under Special Laws)
 Proceeds of life insurance from GSIS and SSS
 Amounts received from Phils & US for war
damages
 Amounts received from US Veterans Admin
 Benefits received from Phils & US government
for damages during WWII
 Retirement benefits from private firms
 Proceeds of life insurance taken out by the
decedent himself where the beneficiary is a 3rd
person
 Proceeds of life insurance taken out by his
employer on the employee’s life
1
2

INCLUSIONS IN THE GROSS
ESTATE (TAXABLE TRANSFERS )
A. Property owned by the decedent “actually
and physically present in his estate” at the
time of his death – land, buildings, shares
of stocks, vehicles, bank deposits, and the
like.
B. Decedent’s interest
• The extent of equity or ownership
participation of the decedent on any
property physically existing and present in
the gross estate, whether or not in his
possession, control or dominion.
INCLUSIONS IN THE GROSS
ESTATE (TAXABLE TRANSFERS )
B. Decedent’s interest
• The value of any interest in property
owned or possessed by the decedent at
the time of his death such as:
 Dividends declared before his death
but received after death.
 Partnership profits which have
accrued before his death.
 Usufructuary & rights.
INCLUSIONS IN THE GROSS
ESTATE (TAXABLE TRANSFERS )
C. Property “NOT physically in the estate”
(already been transferred during the lifetime
of the decedent but are still subject to
payment of estate tax) such as :
1) Transfer in contemplation of death
The disposition of the property is induced by
the thought of death thus avoiding payment
of appropriate tax.
However, there is no transfer in
contemplation of death when the transfer of
property is a bona fide sale with consideration
7/25/2020
INCLUSIONS IN THE GROSS
ESTATE (TAXABLE TRANSFERS )
2. Transfer with retention or reservation of
certain rights
The transfer do not actually convey full
ownership over the transferred property,
hence still part of the gross estate of the
transferor.
INCLUSIONS IN THE GROSS
ESTATE (TAXABLE TRANSFERS )
3) Revocable transfer
The transfer do not actually convey full
ownership over the transferred property,
hence still part of the gross estate of
the transferor.
INCLUSIONS IN THE GROSS
ESTATE (TAXABLE TRANSFERS )
4) Transfer under a general power of
appointment
Refers to the right to designate the
person or persons who will succeed to
the property of the prior decedent.
When the appointment authorizes the
donee of the power to appoint any
person he pleases thus, the appointed
property
forms part of the gross estate of the
donee (beneficiary).
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INCLUSIONS IN THE GROSS RULES ON INSUFFICIENT

ESTATE (TAXABLE TRANSFERS ) CONSIDERATION
CONSIDERATION INCLUSION IN GE
4) Transfer under a special power of
appointment Sale was made in the Valid sale – excluded
ordinary course of trade from gross estate
W hen the donee can appoint only from
a r estricted or designated class of
persons other than himself. No consideration Either donation
received mortis causa
Under this appointment, the property (subject to estate
transferred should be excluded from the tax) or donation
gross estate of the donee since he inter vivos ( subject
holds the property in trust only. to donor’s tax).

INCLUSIONS IN THE GROSS

ESTATE (TAXABLE TRANSFERS )
5) Transfer for insufficient consideration
When a sale or transfer (not a bonafide or
valid sale) was made for a price less than
its FMV at the time of sale or transfer, the
excess should be included in the gross
estate.
Fair market value at time of death 1,000,000
Consideration received 500,000
Difference (gross estate) 500,000
Determine the amount to be included in the
C Gross Estate of the Decedent from the
A following independent cases:
S
E
A FMV at time of transfer – 55,0,00000,0,00000
N FMV at time of death - 6,000,000
A Consideration received - 56,000,000
L Answer: Zero / Valid Sale
Y Answer: Zero / Valid Sale
S
I
S

RULES ON INSUFFICIENT
Determine the amount to be included in the
CONSIDERATION C Gross Estate of the Decedent from the
A following independent cases:
CONSIDERATION INCLUSION IN GE S
E
Consideration is > at the Valid sale – excluded
A FMV at time of transfer – 5,000,000
time of transfer from gross estate
N FMV at time of dtreaantshfer -– 56,,000000,,000000
A CFMonVsaidtetrai mtieonofredtrceaeanitvshefedr -– 567,000000,000000
Consideration is < at the Insufficient
L CFMonVsaidtetriamtAieonnsowfredrce:eaitvZheedro-/ 62V,a0l0id0,S0a0le0
time of transfer consideration.
Y ConsideratAionnswrerc:eiPv4e,d00-0,n0i0l 0
Include in the gross
S
estate the excess of I Answer: P6,000,000
FMV at time of death S
over consideration
received. 3

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INCLUSIONS IN THE GROSS ESTATE TAX RATES :

ESTATE (TAXABLE TRANSFERS ) Prior to TRAIN Law
BUT NOT TAX
OVER OVER SHALL BE PLUS
6) Claims against insolvent persons
0 200,000 Exempt
Whether solvent or insolvent, the full 200,000 500,000 5% of excess
P 0.00
amount of the claim against the insolvent
over
person shall be included in the gross
P200,000
estate of the decedent.
500,000 2,000,000 P15,000 8% of excess
The portion of the claim which is uncollectible over
shall be allowed as a deduction from the P500,000
gross estate.
2,000,000 5,000,000 P135,000 11% of excess
over
p2,000,000
5,000,000 10,000,000 P465,000 15% of excess
over
p5,000,000
10,000,000 P1,215,000 15% of excess
over
p5,000,000

INCLUSIONS IN THE GROSS

ESTATE (TAXABLE TRANSFERS )

7) Proceeds of life insurance

Taken out by the decedent on his own life,
shall be included in the gross estate
subject to the following:
 It must be an insurance on the life of the
decedent.
 The beneficiary must be either of the
following - his estate ; his executor; his
administrator; any 3rd person provided
the designation is not irrevocable
 If silent, the designation of beneficiary is
assumed “revocable”

PROCEEDS OF LIFE INSURANCE

(Taken out by the Decedent)

BENEFICIARY DESIGNATION GROSS ESTATE

Estate Revocable or
Irrevocable Included

Executor Revocable or Included

Irrevocable

Administrator Revocable or Included

Irrevocable
3rd party –
Revocable Included
i.e. wife
3rd party - wife Irrevocable Excluded

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The following transfers were made in

Decedent has the following data:
C contemplation of death as follows:
C
A Value of the property at the A Consideration FMV upon FMV upon
S time of sale P1,200.000 S Received Transfer Death
E Value of the consideration when sold 1,000,000 E Land 150,000 150,000 200,000
Value of property at time of death 1,500,000 Shares of stock 10,000 5,000 15,000
S S Vintage car 5,000 8,000 10,000
T T Painting 25,000 40,000 50,000
U U
D D
What is the amount includible in the gross estate ?
Y Y
The amount of gross estate of decedent ?
1 4

When ALBINO was informed by his physician that he was

about to die of cancer, he sold his properties as follows: The items in the gross estate of Pedro,
C C decedent include a claim against an insolvent
Market value Selling Market value D
A A person amounting to P500,000. Juan, the
ate of Sale Price Upon death
S S
Land 2,500,000 1,500,000 2,700,000 insolvent debtor can still pay P200,000 out of
E Jewelries 500,000 300,000 300,000 E his P500,000 obligation with the decedent
Shares of stocks 200,000 220,000 250,000
S Transfer under limited S
Pedro.
T power of appointment 1,000,000 600,000 800,000 T
U U
D D 1. How much will be included in the
Y How much must be included in the gross estate of
ALBINO upon his death? Y decedent gross estate ?
2 2. How much will be deducted from his
Assuming no more deductions on gross estate, 5
gross estate ?
how much is the estate tax due prior and under
TRAIN law?

Pedro died on April 15, 2018, leaving the

following:
a) 2,000 common shares of ABC Corp, listed
C
A in PSE (highest-P40; lowest-P39)
S
E
b) 1,500 common shares of XYZ Corp, not
listed in PSE. Cost – P50 per share;
Chapter
S
book value – P45 per share
c) 3,000 preferred shares of DIY Corp, not
Exercises
T
U
listed in PSE. Cost-P70/share; book value
P60/share
P2.1, P2.2,
P2.3, P2.4
D
Y
d) Car, cost P600,000; book value P350,000
3 market value P400,000

e) Real properties, zonal value-P120,000;

assessed value- P72,000.

The amount of gross estate of Pedro ?

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DEDUCTIONS FROM GROSS ESTATE:

Prior to TRAIN Law
For Citizen and For Non-resident Alien
Resident Decedents Decedents

Ordinary deductions Ordinary deductions

2. Transfer for public purpose 2. Transfer for public purpose
and
3. Vanishing deductions 3. Vanishing deductions

Special deductions Special deductions

1. Standard deductions
2. Family home Not allowed
3.Medical expenses
4. R.A. 4917

DEDUCTIONS FROM DEDUCTIONS FROM GROSS ESTATE :

GROSS ESTATE Under the TRAIN Law
For Citizen and For Non-resident Alien
Resident Decedents Decedents
Section 6 and 7 of Revenue Regulations 2-2003
in relation to Sec 86 (A) and 86 (B) of the Tax
Ordinary deductions Ordinary deductions
Code allows deductions from the gross estate to
arrive at the taxable estate which is used as a 1. LIT 1. Proportionate Deductions
basis in determining the applicable estate tax. for LIT computed as
• Losses
follows:
• Indebtedness/claim
s against the Gross Estate Phils
estate X LIT
• Taxes Gross Estate World World
• Claims against
insolvent persons

DEDUCTIONS FROM GROSS ESTATE : DEDUCTIONS FROM GROSS ESTATE :

Prior to TRAIN Law Under the TRAIN Law
For Citizen and For Non-resident Alien For Citizen and For Non-resident Alien
Resident Decedents Decedents Resident Decedents Decedents

Ordinary deductions Ordinary deductions Ordinary deductions Ordinary deductions

2. Transfer for public purpose 2. Transfer for public purpose
1. ELIT 1. Proportionate Deductions
for ELIT computed as 3. Vanishing deductions 3. Vanishing deductions
• Funeral expenses
follows:
• Judicial expenses Special deductions Special deductions
• Claims against Gross Estate Phils
the estate X ELIT 1. Standard deductions • Standard
• Claims against Gross Estate World World deduction of
an insolvent 2.Family Home
P500,000
person 3. R.A. 4917
• Taxes
Share of surviving spouse Share of surviving spouse
• Losses

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DEDUCTIONS FROM GROSS ESTATE

A. Ordinary Prior to TRAIN Law Under the TRAIN Law C
deductions A
• Funeral expenses • NA
S
1. LIT
• Judicial expenses • NA E How much is the deductible amount of funeral
• Claims against the • Indebtedness and expenses under each of the following
estate claims against the A independent cases ?
estate N Actual Gross estate
• Claims against an • Claims against an A Case 1 P180,000 P4,000,000
insolvent person insolvent persons L Case 2 140,000 2,900,000
Y Case 3 207,000 4,250,000
• Taxes • Taxes
S
• Losses • Losses I
2. Transfer for • Transfer for • Transfer for S
public use public use public use
1
3. Vanishing • Vanishing • Vanishing
deductions deductions deductions

DEDUCTIONS FROM GROSS ESTATE

C
B. Special Prior to TRAIN Law Under the TRAIN Law
A
deductions S
• Standard • Standard FRANKENSTEIN died. The amount of his funeral
deductions deductions E
expenses is covered by a memorial plan up to
P120,000. Other actual funeral expenses
• Family home • Family Home A
amounted to P75,000. The amount of his
N
• Medical tangible properties upon death was P3,700,000.
A
expenses • NA L
Y
• R.A. 4917 • R.A. 4917 S 1. How much is the gross estate ?
C. Share of • Share of • Share of I 2. What is the amount of the funeral expenses ?
surviving surviving Surviving S
spouse spouse spouse
2

ORDINARY DEDUCTIONS FROM ORDINARY DEDUCTIONS FROM

GROSS ESTATE: PRIOR TO TRAIN LAW GROSS ESTATE: PRIOR TO TRAIN LAW
B. Judicial expenses
A. Funeral expenses
Includes those actually and necessarily incurred
Paid or unpaid up to the time of interment, the
during the settlement of the estate but not beyond
amount deductible shall be whichever is the lowest
six months, or the extension thereof for the filing
among the following:
of the estate tax return. Expenses are:
a) The actual funeral expenses
b)The amount equal to 5% of the gross estate • Testamentary or intestate court proceedings
c). Amount not to exceed P200,000. • Inventory taking of assets comprising the
gross estate
• Payment of debts of the estate
Note: Medical expenses as of the last illness will not form • Expenses for the distribution of the estate
part of funeral expenses but should be claimed as medical among the heirs
expenses.
• Expenses under “extrajudicial proceedings”.
NOTE: No longer allowed under TRAIN Law

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ORDINARY DEDUCTIONS FROM ORDINARY DEDUCTIONS

GROSS ESTATE: PRIOR TO TRAIN LAW FROM GROSS ESTATE
 Other Judicial expenses D. Unpaid Mortgages on the properties
• Attorney’s fees Mortgages upon the property left by the decedent.
• Accountant’s fees
The requisites for deductibility are the following:

• Executor/Administrator’s fees • The motgage indebtedness was contracted in

• Appraiser’s fees good faith and for an adequate and full
consideration in money or money’s worth
• Cost of preserving the estate
• The fair market value of the property mortgaged
• Brokerage fees
without deducting the mortgage indebtedness
has been included in the gross estate

ORDINARY DEDUCTIONS ORDINARY DEDUCTIONS

FROM GROSS ESTATE FROM GROSS ESTATE
C. Claims against the Estate E. Claims against Insolvent persons
This represents personal obligation of the Receivable of the decedent which are uncollectible
deceased existing at the time of his death except due to insolvency of the debtor, Its requirements
unpaid funeral expenses and unpaid medical for deductibility are as follows:
expenses and may arise out of the following • The value of the decedent’s interest therein
sources: must be included in the gross estate
• Contract • The debtor’s insolvency / incapacity is proven
• Tort and not merely alleged
• Operation of law • If the insolvent could only pay partial amount,
the full amount owed shall be included in the
gross estate, and the amount uncollectible shall
be allowed as a deduction

ORDINARY DEDUCTIONS
FROM GROSS ESTATE C
A
Requisites for deductibility S
E Amount of claim against the debtor P 50,000
• Must have been contracted in good faith and for Total assets of the debtor 500,000
an adequate and full consideration in money or A Total liabilities of the debtor 800,000
money’s worth.
N
• The debt instrument must be duly notarized A
except for loans granted by financial institutions L 1. How much should be included in the gross
where notarization is not part of their business Y estate of the decedent ?
practice S
I 2. What is the amount of deductible claim against
• It must not have been condoned by the creditor S the insolvent person ?
• The action to collect from the decedent
must not have been prescribed. 3

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ORDINARY DEDUCTIONS
The following expenses and obligations were left by
FROM GROSS ESTATE C ROBIN HOOD upon his death:
A
F. Unpaid Income and Property taxes S Notes payable, not notarized P 30,000
Unpaid taxes which have accrued prior to the E Loans payable, PNB 300,000
death of the decedent, thus the following are not Accounts receivable, debtor not insolvent 40,000
allowed as deductions: A Accounts receivable, debtor is insolvent 60,000
N Death benefits from employer 200,000
• Income tax on income received after death Mortgage paid 50,000
A
• Property taxes accrued after death L Income taxes on income of
• Estate tax Y decedent’s estate 7,500
S
I What is the total amount deductible
S from gross estate ?

BATMAN died on July 5, 2018 leaving the following ORDINARY DEDUCTIONS

C data on deductions: FROM GROSS ESTATE
A Unpaid 2017 real estate taxes P 40,000
S Unpaid 2018 real estate taxes 40,000
E Income tax on income from Jan 1
NOTE: If the decedent is a non-resident
July 4, 2018 35,000
A Losses from fire that occurred on alien, prorate the above deductions/
N July 3, 2018 (60% compensated expense as follows:
A by insurance) 800,000
L Casualty loss on Sept, 2018 450,000
Y Building destroyed by earthquake, Philippine Gross Estate
S on February 2019 1,300,000 X ELIT
Total Gross Estate
I
S
What is the amount deductible from gross estate ?
4

ORDINARY DEDUCTIONS
TSONG SY TSANG, a non-resident alien died leaving
FROM GROSS ESTATE C
the following assets:
A
G. Losses S Domestic shares P 1,000,000
Foreign shares 3,000,000
The amount deductible is the value of the property E
Tangible personal property, Phils 6,000,000
lost. Its requisites for deductibility are: Expenses (deductible) 1,200,000
A
• The loss must arise during the settlement of the N
estate but not beyond the deadline for the The country where she is a citizen and resident does
A
payment of the estate tax not impose transfer tax on transmission of intangibles
L
of Filipinos.
• It must arise from fires, storms, shipwreck, or Y
other casualties, or from robbery, theft or S
embezzlement I
S What is the amount of net estate subject to tax
• Such losses have not been claimed as deduction
in the Philippines ?
for income tax purposes
6
• Not compensated by insurance or otherwise.

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REQUISITES FOR
TA PUE, a non-resident alien, single, died leaving the
C following properties and deductions: DEDUCTIBILITY
A Shares domestic corporation P 500,000
S Shares, foreign corporation 500,000 DEATH
E Tangible personal property 1,500,000
Deductible expenses 500,000 •The present decedent died within 5 years from
A the date of death of the prior decedent or date
N of gift
A
L 1. What is the amount of gross estate ?
IDENTITY of
Y 2. Assuming there is no reciprocity, what is the
PROPERTY
S amount of net taxable estate?
I 3. What is the amount of the estate tax payable ?
•The property with respect to which deduction is
S a) Prior to TRAIN Law sought can be identified as the one received from
b) Under the TRAIN Law the prior decedent, or from the donor, or as the
7 property acquired in exchange for the original
property so received

ORDINARY DEDUCTIONS REQUISITES FOR

FROM GROSS ESTATE DEDUCTIBILITY

Transfers for Public Purpose LOCATION

This are the amount of bequests, legacies,
devisees or transfers to or for the use of the
Government of the Philippines, or any political
subdivision thereof, for exclusively public purposes.
Before transfers are allowed as a deduction from
the gross estate, same amount shall be included
first in the computation of the gross estate.
•The property on which vanishing deduction is
being claimed must be located in the
Philippines
INCLUSION OF THE
PROPERTY
•The property must have formed part of the
gross estate situated in the Philippines of the
prior decedent or have been included in the
total amount of the gifts of the donor made
within 5 years prior to the present decedent’s
death.

ORDINARY DEDUCTIONS REQUISITES FOR

FROM GROSS ESTATE DEDUCTIBILITY

Vanishing deductions PREVIOUS TAXATION

Is an amount allowed to reduce the taxable
estate of a decedent where the property received
by him from a prior decedent by GIFT or by
BEQUEST, DEVICE or INHERITANCE.
The deduction is also referred to as a deduction
for “property previously taxed”.
of the PROPERTY
•The estate tax on the prior succession, or the
donor’s tax on the gift must have been finally
determined and paid by the prior decedent or
by the donor as the case may be.

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REQUISITES FOR SPECIAL

DEDUCTIBILITY DEDUCTIONS

NO PREVIOUS VANISHING A. Standard Deductions

DEDUCTION on the PROPERTY
 The law allows a standard deduction of
a) P5,000,000 for citizens & resident (P1
•No such deduction on the property, or the million prior to TRAIN Law
property given in exchange therefore, was b) P500,000 for NRA
allowed in determining the value of the net
estate of the prior decedent. No qualification, condition nor requisite
whatsoever. This amount shall be allowed as
an additional deduction without need of
substantiation. The full amount shall be
allowed as deduction for the benefit of the
decedent.

VANISHING SPECIAL
DEDUCTION RATES DEDUCTIONS

Period from Receipt to
Decedent’s Death
Within one year
Beyond 1 year to 2 years
Beyond 2 years to 3 years
Beyond 3 years to 4 years
Beyond 4 years to 5 years
B. Family Home
Rate % the dwelling house including the land on which
it is situated, where the husband and wife, or a
100 % head of the family, and members of their family
reside, duly certified to by the Barangay Captain
80 %
of the locality.
60 % the amount of family home allowable as a
40 % deduction would be whichever is lower of P 10
million or the fair market value at the time of
20 % the decedent’s death (P1 million prior to
effectivity of TRAIN Law.

VALLE WALA died on November 20, 2018. Some of the REQUISITES FOR
C properties he left are the following: DEDUCTIBILITY – FAMILY HOME
A
S Mode of Date of Market Value
E Assets Acquisition Acquisition Acquired Time of
1. The decedent was married or if single, was a
Death Land Donation 7-3-14 500,000
350,000 head of the family
A
N Car Purchase 10-2-17 800,000 980,000 2. Along with the decedent, any of the
A beneficiaries must be dwelling in the family
Other information:
L home.
1. The gross estate of the decedent amounts to P 3 million.
Y 2. The land was mortgage for P50,000 when it was 3. The family home as well as the land on which it
S acquired and VAL paid the same before he died. stands must be owned by the decedent and
I 3. The allowable deductions total P125,000, which includes should have been included in the computation
S medical expenses of P30,000. It excludes bequest to a of the decedent’s gross estate.
charitable institution in the amount of P50,000.
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What is the amount of the vanishing deduction ?

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REQUISITES FOR ALLOWABLE DEDUCTIONS FOR

DEDUCTIBILITY – FAMILY HOME NONRESIDENT ALIEN DECEDENT

No deduction shall be allowed in the case of a non-

4. The family home must be the actual residential resident decedent not a citizen of the Philippines,
home of the decedent and his family at the time unless the executor, administrator, or anyone of
of his death, as certified by the Barangay the heirs, as the case may be, includes
Captain of the locality where the family home is in the return required to be filed under Section 90
situated. of the Code, the value of at the time of the
decedent’s death of that part of his gross
5. The total value of the family home must be
estate not situated in the Philippines.
included as part of the gross estate of the
decedent.
6. Allowable deduction must be in an amount
equivalent to the current fair market value of
the family home as declared in the gross
estate.

SPECIAL
DEDUCTIONS
C. Medical expenses
all medical expenses ( cost of medicine,
hospital bills, doctor’s fees, etc), paid or unpaid,
within one year before the death of the
decedent shall be allowed as a deduction
provided duly supported by receipts and does
not exceed P500,000.

Requisites for Deductibility

 incurred by the decedent within one (1)
year prior to his death
 substantiated by receipts
Note: Not included under TRAIN Law 2 starting 2019

SPECIAL The heirs of a resident citizen decedent with a total

DEDUCTIONS C gross estate of P15 million provided the break down
A as follows:
D. Amounts received by Heirs under RA 4917 S Receivable from JUAN – debtor 500,000
E Amount collectible from JUAN 400,000
any amount received by the heir/s from the Unpaid taxes on estate before death 150,000
decedent’s employer as a consequence of the A Unpaid taxes on nestate after death 50,000
death of the decedent employee in accordance N Unpaid mortgage on estate 200,000
with R.A. 4917, provided that the amount of A Funeral expenses (paid) 182,000
separation benefit is included as part of the L Judicial expenses 100,000
gross estate of the decedent. Y Unpaid loans- debt instruments notarized 125,000
S Unpaid loans- instrument not notarized 75,000
I Unpaid loans- instrument not notarized but
S the institution do not require notarization 100,000
Casualty loss 65,000
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How much is the total amount of allowable deduction
from gross estate ?

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JUANCHO died in June 30, 2018 leaving a gross estate of P 15 M

NIHONGGO died on January 1, 2019 leaving among including a land inherited from his uncle 3 ½ years before his
C others the following charges and obligations: C death and a car donated to him 7 years before death as follows:
A Real property tax for the year 2018 P 100,000 A Unpaid mortgage FMV upon receipt FMV upon death Land
S Real property tax for the year 2019 100,000 S P 100,000 P 1,800,000 P 1,250,000
E Notarized interest bearing E Car 50,000 300,000 400,000
The decedent was able to pay ½ of the unpaid mortgage on the
Promissory note 100,000 land before his death.
A Accrued interest on the promissory note A Other deductions claimed:
N at the time of death 20,000 N Expenses, losses, indebtedness, taxes excluding
A Interest to accrue on the promissory note A unpaid mortgage above but including funeral
L from the date of death to date of L expenses and mmedical expenses of P300,000
and P 600,000, respectively 1,200,000
Y maturity 10,000 Y
Standard deductions 1,500,000
S Income tax due for 2018 200,000 S Transfer to Government included above 300,000
I I Death benefits from employer – RA 4917 200,000
S S Family home, included above 2,000,000
How much were the deductions from
10 13 1. How much is the amount of vanishing deductions?
the gross estate (disregard standard deduction)?
2. How much is the net taxable estate?

The following data relates to the estate of ABAN

C
DONADO:
A
House & lot (family home) in QC,
S
(zonal value is P1,150,000) P 2,230,000
E
Personal properties 2,500,000
Benefits received from employer
A
as a consequence of his death 150,000
N
Unpaid mortgage on a riceland
A
with a value of P1 million 200,000
L
Claims against Dimalupig, insolvent 35,000
Y
S
How much is the value of the
I
gross estate of ABAN DONADO ?
S

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ALANIS, a resident citizen, single but head of family, died January

3, 2018 leaving the following:
C
Properties:
A Real properties (excluding family home
S of P1,100,000) . . . . . . . . . . . 3,200,000
E House & lot in Australia . . . . . . . . . 1,500,000
Other personal properties . . . . . . . . . . . 800,000
Deductions:
A Funeral expenses ...... 120,000
N Claims against insolvent persons . . . . . . 100,000 Claims
A against the estate, not notarized. 50,000
L Unpaid mortgage on family home ...... 30,000
Y The personal properties do not include shares of stocks valued at
S P50,000 which were purchased by the decedent from Astra Co.
one month prior to his death.
I The house in Australia was inherited by ALANIS from his father
S who died 2 ¼ years ago. Said property was mortgage for
P200,000 which was paid by the decedent before his death.
12 1. What is the amount of decedent’s gross estate ?
2. What is the total allowable deductions (excluding
standard deduction) ?

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