BABUSTAX – INTRODUCTION TO TRANSFER TAX

April 07, 2021

Succession – 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 his will or by operation of law. (Art.
774, New Civil Code).
The inheritance includes all the property, rights and obligations of a person
which are not extinguished by his death. (Art. 776, NCC)

Modes of acquiring property: occupation, intellectual creation, law,

donation, tradition, contract, prescription, and succession.

Kinds of succession

1. Testamentary – results from last will and testament (LWT)

2. Intestate “legal succession” – no LWT or void LWT
3. Mixed – includes both testamentary and intestate

Elements of succession – these three must be present.

1. Decedent – deceased person

2. Estate – properties left by the decedent
3. Heirs – if there is no heir, government will inherit the estate.
a. Compulsory/forced heirs – those who succeed by force of law to some
portion of the inheritance, in an amount predetermined by law – known as
the legitime. They will get their share whether the decedent likes it or not
except by disinheritance properly effected (nakabanggit sa LWT na hindi
siya makakatanggap and pinayagan ng tax code).

COMPULSORY HEIRS
Primary Compulsory Secondary Compulsory
Legitimate parents and
Legitimate children and their legitimate ascendants. (They
A. legitimate descendants. D. inherit only in default of "A")
Illegitimate parents (no other
descendants). They inherit only
B. Surviving spouse E. in default of "A" and "C".
Illegitimate children and their Note: Brothers and sisters are neither
descendants, legitimate or compulsory heirs nor strangers.
C. illegitimate However, they may be voluntary heirs.
 b. Voluntary heirs – those designated in the LWT.
c. Legal/intestate heirs – no LWT
i. Order of Intestate succession:
1. Legitimate children/descendants
2. Legitimate parents or ascendants
3. Illegitimate children of descendants
4. Surviving spouse
5. Brothers and sisters, nephews and nieces
6. Other collateral relatives within the 5th degree of
consanguinity.
7. State/Government

ESTATE
Compulsory Heirs:

 This portion of the estate is reserved by law

specifically to compulsory heirs, regardless
75% of whether or not a last will and testament
LEGITIME was prepared.

Compulsory Heirs and/or Voluntary Heirs:

 As provided in the last will and testament.

25% FREE
 In the absence of a will, this portion of the
estate shall be distributed to “intestate heirs”
based in the order of priority:
 Order of Intestate succession:
1. Legitimate
children/descendants
2. Legitimate parents or
ascendants
3. Illegitimate children of
descendants
4. Surviving spouse
5. Brothers and sisters,
nephews and nieces
6. Other collateral relatives
within the 5th degree of
consanguinity.
7. State/government