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    Succession and Transfer Taxes PR

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    TRANSFER & BUSINESS TAXATION WITH SPECIAL TOPICS Bosed on NIRC as omen ded tc Ouape et Reform for Accelaration Inclusion Act (Train ENRICO D. TABAG a JIMSON R. GARCIA Philippine Copyright, 2019 By ENRICO D. TABAG; and [EARL JIMSON R. GARCIA ISBN: 978-621-8169-01-2 ‘Al rights reserved, Printed inthe Philippines. No part of this book may be used or reproduced in any form and by any means, or stored in a data base or retrieval system, without prior writen permission from the authors. Any copy of this book without the sgnatue of the authors on this page | ‘shall be considered as coming from an illegal source. 7 ‘Available at EDT Book Shop Ground Floor, PRTC CPA Review 2044 CM. Recto Avenue, Quiapo, Manila and ‘edtbookshop.com PREFACE ‘This book ented Tronser and Business Taxaton’,sprimarly intended 0 adress he needs of students taking up B.S. Accountancy, BS. Management Jeooantng. 88. Aconning lformain Technology, 8. Acouning Tend)gy, secre Business Courses fering Taxaton subjects. Uewise, tis educations Paletal may ao serve as supplementary reading for tose who are reviewing fr Ta CPA toonsue examination, tax pracboners, a well as ober professionals in sree elds who wish 10 have krowledge on the concepts and appicaton of transfer and business tax lw bn be Philppines. ‘Tho discussions and the acer ofthe topics presented inthis book were primary ited fom RA No, 6424 (Natonal intemal Revenue Code of 1997, also {ronn as the “Tax Code ofthe Phippins’), as amended, primariy under RA 10969 {the “Tax Reform for Acceereon and Inclusion Ac’ oc TRAIN Law), incuding ts Felted implementing nies and regualons. Recent casas decided by the Supreme Court n rten 10 te diferent topics in anster and business tzxaion were aso inegratd lis book to futher support he pris and theories trated inthis humble vadstaking othe authors. ‘The chaplr exercises in this book have been designed f test and further enhance the undersanding of the reader Inthe diferent aspects of transfor and business taxation. “Te authors hope that this wil be useful fo studenis taking up B.S. ‘Accountancy in reeling thelr dreams to become CPAS in tho future, to students ‘ehing up olter business courses ia passing thelr ranslr ard business tax subject ‘and lo profesional in various Fld in understanding the concep of transfer and bes ttn wht wb sha Ne sean psec endeavors in May 2019 Ki TheAuthory Chapter 1 2 3 4 5 6 7 8 9 10 1 12 13 Brief Contents TOPIC ‘Succession and Transfer Taxes... ; Gross Estate... 3, Deductions from the Gross Estate i Property Relations Esta Tax Credit and Distibuable Esiate Donor’s Tax Business Taxes .. Value Added Tax... Other Percentage Taxes .. Tax Remedies Documentary Stamp Taxes... BOI and PEZA Registered Enlites Local Taxation (Community Tax, Real Property Tax, Local Business Taxes) (Quizzers on Special Topics... Table of Contents Chapter TOPIC 4, Succession and Transfer Tax =Dolnlion-Succession and Transter Taxes Natur of Transfer Taxe «0 La Govering Succession and Esa Ta. Kinds of Suocession Testamentary suecession . Legal or interstate succession. Maced succession Causes of legal succession Elements of succession: Compulsory heirs. Kinds of compulsory hei. ‘Compositon of gross estate . ‘Order of intstale succession Determination of blood relationship (Reaves Table felines. Mil... Ordinary wil. Holographic wits Codd... Probate of awil. Foreign Wil. Sai Revocation of wils — s Institution of Heir Disinhertance Causes for disinherlance Right of Representation Chapter Exercises Gi) eemernnnnnunaag Gross Estate. Definition and Nature ~esticaton fo the imposition of estat ta Ctasstcaton of taxpayers for esta ax. Composition of Gross Estate. Intangible asses with situs within the Philippines .. Situs of Tangible and Intangible Property... Valuation of Gross Eslala Bengirsscsns tombe Ges Esa. : Exclusive property ofthe surviving spcuse + Property ouside the Phigpines of a nonresident alien decedent . angble pepaty oor hn decotr (with reciprocit + Boauest devises egais or welfare, cultural and charitable insttaons +The merger of usufuctin the owner ofthe naked ‘+ The transmission or delivery ofthe inherilanes or legacy ye ian (ne or eg > the fideiconmisary (2 het) . is + The rarsmission om te fst hel, legales or donee in favor of another beneficiary, in accordance withthe desire ofthe predecessor. Exclusions under special las... INCLUSIONS IN THE GROSS ESTATE ‘+ Property physicaly present inthe decodont’s esta = Decedent's inlerest * Transfer in contemplation of death. Transfer with retenton or reservation of rights = Revocable transfers. Transfers under a general power of appointment. ‘Transfers under a special power of appointment ‘Transfers for insuticient consideration tii) BRSSSERRVRLSLSS a a “a Rules on insufficient consideration... Cains agains insolvent persons Proceeds offife insurance Estate Tax Rates The Law that gover the imposition of esate tax and accrual of estate tax Notice of death... Filing of estate tax retum " Payment of esta tax i Chapter exercises Deductions from the Gross Estate, Summary of Alowable Deductore-under TRAIN Law Ordinary Deductions... Losses, Indebiedness, Taxes, Casvatty Losses. Indebledness or Claims against Le estate Requisite for deductibility of claims against the estate ‘Substantaton requirements of csims against the stale Unpaid Taxes (Gis against an insolvent person Requisite for deductibility of dains against insolvent persons Transfer for pubic use Vanishing deduction a Requisite for deduct of losses vanishing decuctons... Rales for vanishing deductions. _ Stotutory formula in computing vanishing deductons .. Special Deductons Standard Deductons Family Home. Requistes for dauetiiy of fami home ‘Amounis received by hers under RA 481 Net share ofthe surving spou ‘Alowabie Deductions for Nonresident Aken. (Chapler exercises fw secs R28 SBAINSRR BeaRE Property Relations Definion and Nature of Property Relations Types of Property Relations. Law Governing property relations... ‘Absolute Community of Property (ACP) Community property under ACP .. Exclusive property under ACP .. Conjagal Partnership of Gans (CPC). Community property under CPG .. Exclusive property under CPG...» ‘Simdaniies and Differences between ACP & crs. Conjugal and Exclusive Deductions Pro-forma computation of Net Taxable Estate Complete Separation of Proper... Property unions of regime witout marrage (Chapter Exercises... Estate Tax Credit and Net Distributable Estate, Estate tax credit. Salto formula in comautng estat tax ced Netcistnbutable estae Chapter Exercises . Donor’s Tax Defnition and Natur of Donor’s Tax PerfectondCompletion of Donation. Tha Law that goers he impstion of dona x. Requistes (Elements of donation) Capacity of the donor Donative tent. DENCH one Acoéptance.. Incomplete git 123 124 124 125 125 128 128 127 127 127 128 130 432 135, 135 137 Purpose of Doror’s Tax... Formaiies of donation... (Characteristics of donors tax. Classification of Donation Valuation of Gross Gis ‘Comparison between estate and donors tax. GROSS GIFTS 167 Compostion of Gross Gifts 168 Reciprocity ule 168 Intangible personal property in he Philippi 168 ‘Computation of Taxable Net Gifts... 168 DDonor's Tax Rate = Under TRAIN Law 169 Donors Tax Rate —Prior to TRAIN Law 169 ‘Cumulative rue of computing the net taxable its 170 ‘Stranger m1 “Transfer for neulcient consideration 1m Bargain Transactions 173 Dorior's tax onsale of shares of stock... 173 Rerunciation of share in the cormman property by the sunviving spouse and share inhertance 105 ‘Condonation of indebtedness im Payment of loan by the guaran 1m Special Rules on husband and wife 192 Donations of property between spouses 193 Contribution for election campaign. 178 Spitting of gifts m9 Donations made by a foreign corporation. 179 Void donations 180 Exempt Gis! 0: 180 Gifts made too forthe use ofthe government 181 Gifs in favor cf non-profit educational andlor cartabe, religious, cultural or social weliare corporation se rpcaone:” 181 \Nolice of donation under TRAIN Law) by a donor ‘engaged in business 181 Encumbrances... 122 wi] Exempt gis under speci ns Donaton to Priippine Red Css Donor's Tax Credit “ Fang of donor’ tax retum as Po Chapter Exercises: Business Taxes Defrston and Nature of business 12188 Defintion of For subsistence Or nr Weioat argiral income Eamet (MIE) “Types of Business Taxes Value Added Tax (VAN) Persons Kable tovat Characteristics of va! Output vat BASIS FOR OUTPUT VAT Computation of output vat Sales RetumsPDiscounis Sale of Goods .. Sale of Service eae Seoutes& Lending iNest ‘Sale of Goods ot Senie 0 a person wih cisabilty Sale of Goods!Servces to Senior Citizens Gross seling pie. Fair market valve G10 PECEIS or VAT REGISTRATION Mandatory registraton VAT Threshold forbusbond andi... Optional registration. CCancelaion of registration . Power ofthe CIR lo suspend business operons. (Computation of Vat Payable i Other Peroeniage Taxes Excise Taxes. Chapler Exercises. Value Added Tax (vii) sen cf 470" BX Vatious Exempt Sales/Transactons ‘Agricutural and marine food products Vat Exempt Sugar Sale or importation of ood and fest Importation of personal household and elects. Importation of professional instruments. Services subject to olher percentages laxes... Services by agricultural contract growers. Vat Exernpt Miler. Medical, dental, hospital and veletnary services .. Doctors Fee ..... ‘ Educational services rendered by private educational Insitutions, duly accredited by DEPED, CHED, TESDA ‘and those rendered by government educational Insttutons SaleslGross Receipls by COOPERATIVES + Agtioultural cooperatives * Creditor Mult-Purpose cooperatives = Non-agrcuttral, non-slectic, non-credit cooperatives Export salos by persons who are non-vat cid Sale of real properties. si 5 Sale of residential lt... Salo of resi¢enl house and lot and other residential alings Low cost housing Socialized housing. Lease of residential unit Sel-Eployed andor Professionals (SEP). COMPUTATION OF VAT PAYABLE. SOURCES of OUTPUT VAT ‘Actual Sala Transaction Deemed Sales (vill SESSRRRRRRE B88 882 BBR od) Ss pyanatingseed et Export sale by Zero Rated Sae of Goods Actual expr sas. Deemed expert sales Effectively zero rated ses: ‘Zero Ratad Sale of Services INPUT VAT Defaton inp vat. JRCES OF INPUT VAT... “ Loca! purchase of goods and Services Input vat on capital goods, “ Input vat on importation ... Inport by tax exempt persons ‘Compuiaon of input vat on imporaton Presumptive input val... Transitonal inpLt Val... ‘Standard input Vat...» Vat on Lease of Real Properties \Vat on Sale of Real Properties Deferred payment of vat Instalment payment of vat Vat on Sale o Services ‘Services by condominium corporations Yat exemption of Senior Ciizens and PWS. Miced Business Transactions... Filing of vat return Invoicing Requirements... Copter exercises Other Percentage Taxes . to Peicertage taxon vatexempl Set-empoyed ander Professionals (SEP) lis} Percentage tax on domestic camers and keepers of garage ‘Transportation Network Companies (TNCs) . Minimum monthly/quartery gross receipts for ‘common cantar by land Intemational Carriers Offtine canes... Percentage taxes on Franchises Franchise tax of PAGCOR . Summary of business taxes of franchise grantees. (Overseas Communication Tax (OCT) Gross Receipis Tax (GRT) on banks and non-bank finance Intermediaries performing quas: barking ‘operations Gross Receipis Tax (GR) on non-bank fancial lntermeciaries not performing quastbanking operations Percentage tax on Life Insurance Premiums . Tax on Agents of Foreign insurance Companies ‘Amusement Taxes Taxon Winnings Stock Transaction Tax ‘nial Pubtc Offering. Persons liable to PO Persons not fable to IPO Folowon fallovethrough offering Advance Payment of Percentage Tax (On Suge). Returns and Payment of Percentage Taxes Chapter Exarcises Tax Remedios ‘Summary of Remedies for taxpayers andthe goverment. Tax assessment and col When Preliminary Assassment x] Beeegees ge wt MS He us 350, 351 353, 354, 355 355) 358 359 360. di ind toon sas Preserption emai Issuance eee Frolasessner Notice (FANY Formal of Demand (FLD) wn Hota br Rocosderatone-mesigaion Fra Desan on Dp Assessment Chai for Refi Remedesclthe goverment. Distant in general ‘Actual isvaint Conszuctve dsr. Ley Forte. : Enforcement of tax fen Cases which cannot be compromised Ci acon Criminal acon No inunctn to restrain tax colietion.. Tax cedt crtcale.. : 44 Documentary Stamp Taxes (087)... 12 BO! and PEZA Registered Entities 43 Local Taxation (Community Tax, Real Property Taxes and Local Business Taxe: Quizzer for Special Topics... bxi] bo Chapter 7 Succession and Transfer Taxes ‘The modes and mechanics of acquiring ownership and other real fights over property are fairly complex. One can gain, transfer and lose ‘ownership on a number of ways Under the New Chil Code (NCC), ownership may be _ AtTI2(Wew ChilCode} ‘acquired through: * TOwentip is acgured by eoapaton and by inelechal 4. Occupation ‘creation, Ownership and oer re 2. Intellectual creation fights over propery are scqured 3. Lew and tansmiied by law, ty 4. Donation ‘onaton, by tetate and intestate 3. Tradtion suecesslon, and in consequence 6 Camedt of cetain contacts, by taxon. 7. Prescription Taian ei eend by 8, Succession mae pact ‘Transfer Taxes and Succession Defined Translar faxes are taxes Imposed upon the gratuitous disposition of Private properties or rights, Gratuitous transfer is one that nelther imposes burden nor requires consideration from transferee or recipient. ‘The transfer of ownership is free because of the absence of financial consideration. Hence, gratuitous ransters are essentially donations. The reverse side of gratultous transfer Is onerous, one where the transferee gives consideration In. retun for the property or rights) received However, onerous transfers are subject to business taxes instead of transfer taxes, Business taxes are discussed in chapters 7 to 11 of this ‘book. Gratuitous transfer or donalion may take effect at the time of death of the donor or during the lifetime of both the donor and the donee, The fo Uiges view aed C former is nown 83 “donabo morts causa” subject to estat ax whe 8 Jater is known as “donaton inter vivos” subject 0 Home, Tae Gonsequentty, vansfer taxes, which are typically assessed &) 9 te value of the taxable assets transferred, fall info two basic ramely; estate tax and donor's tax. ‘Succession is a mode of acquisition by virtue of which, tha Boer, fights and obligations to the extent of the value of the iahertones. person are transmitted through his death to another or hers etter 1 A will or by operation of law (APL774 NCC). The inheritance IMATE A property, nights and obligations of a person which aro not extinguBtiee By his death (Ant. 776 NCC). The nights to the succession are Tansey from the moment of death of the decadent (At. 777 ) ‘notwithstanding the postponement of the actual possession oF enjoyment of the estate by the beneficiary. The “heirs succeed immediately 10 2 property of the deceased ancestor at the moment of death as completely 13s if the ancestor had executed and delivered to them a deed for the same before his death. Cen > meuet Pome Tha arnt of obipars scrutiny Apolo coe ocean ol tetectaty, an fae shod! rot be Mere tan te comet ‘aloe roperias ae ight ert Nature of transfer taxes The subject matter ofa transfer tax is the privilege ofthe transferor to gratuitously ransfer property or rights which takes effect at the date of Geath of the transferor (known as transfer montis causa subject to estate tax) oF during the lifetime of the donor and the donee (known as transfer inter vivos subject to doncr’s tax). Although the amount of tansfer tax is based on net estate oF not gs, it shall not be construed as a propery tax. On this basis, transfer tax is classified as “excise tax" or privilege tax imposed on the act of passing the ownership of property and not on the value ofthe property or ight Succession and. Transfer Tages ‘The Law that Governs the Imposition of Estate Tax {ls @ wall soiled rule that esta taxation is governed statute foea at tne time of doath of the eceven The ea, Sccrues as the dole of death of tha decedent and ho aconual of the tax distinct from the obligaon to pay the same. Upon the death of the ‘ecedent, succession takes place and the ight of the Sato tothe tox tho privilogo fo transmit the estate vests stanly upon death (Section 3 RR 2.2003). In the Philippines, succession teal exstding the tax aspect Is ‘Governed by tie new chil code, TLLUSTRATIONT: TALL Pedro sured an unexpected heart atack causing his death on November 1, 2018, His estate composed ofthe folowing: Cashinbank 1,000,000, Commerc buiding 5.900.000, | Cas 4,900.00, House and ot 3.900.000 an the ony ber ofthe decedent, Peto remains weve cremated on Noveber 8, | 2018. The executor of Pedros esialo fled the ecist lax rem and pad te | | corresponding state tax on Cciober 31, 2019. The properties lt by the decedent | were aly ditt ta Juan on Decenber 14,2018. Answot he fokoving: | Question 4: When wil he wansfe of nership rom the decedent io the hei take effect? Answer: November 1, 2018 ‘The righ’ to the succession are ransmited trom the moment of death of ie ecedent, notwithstanding the achal Lanster dated December 14, 2019 (At. THINGS}, Question 2 When should the estate tax accrue? | > Angwer: November 1, 2018 Beginning 2018 (TRAIN Lav), the executor is alowed under the tax code to fle and pay the corresponding estate tx witin one (1) year for the date of ‘death, nowerer, the estate tx due accrues knmedatly atthe time of death. It shall be noted that the acoual of the estate tx is cistnct from the ‘obligation to poy te same (RR 2-2003); (Lorenzo vs, Posadas, 64 Phil. 353). | Prior to TRAIN Law, the filing was within six months from death. However, under RA10963 otherwise Known as the TRAIN Lav, the fling period was extended to within one (1) year from date of death, swine aed, Uinasfer Ueees Sees Question the te of bis 2 Assume tt Pecr's foal outstanding fabies as o Sos Secened © PIZn00000. How much of fe cusndng Habis of he ‘Secucent srould be assumed by a"? Answer. P10,000,000 Lind ony Be extent th valve of proper and nights iaherted. ___ Kinds of Succession (At 778 NCC) dies leaving property (inheritance). 8 question nore ten to row hs property or eta wi ba dealt wi y those earn reas Tha answer dopends on wheter of nol a decadent aa a ne ine of deat.” The defnton of succession” fe Hr ectovas decursed ln page 2, deal slats wat the inertance a fay cose Sune by hs nl (ih last wl and testament or by operators Tears nicenes ofall wil and tesament. te provisions of the Se cose on succession shal 72) he left avi tho |A person is normally said to have died tesiate if time of his/her death and a person Is said to have died intastate if such a person Gied without leaving a wil To summarize, succession may be Classified as: 1, Testamentary or estate succession. A from the designation of an heir, made in prescribed by law. te succession. A type of succession which is effected by operations of law (based on the provisions of the civil code regarding succession) since the decedent did not execute a will or If the last will and testament executed by nim is vold. type of succession that results '@ will executed ia the form 2 Legal or int 43. Mized succession. A type of succession which is effected partly by “wil and party by operation of aw. [ RLUSTRATION 2: - 3 ‘The folowing cases Uustrato the deren ypesof succession. ¢ Case A: Testamentary Succession ‘Assime the same data in station #1, lo adon, Pedro lef a duty executed last | wiland tastarert ransfering al his properties to Juan upon his death. (Case B: Intestate or Legal Succession Assume the same data in @ustabon #1 except thal Posto dd nok execete ad estan arg his tn a an ee nea equaled to ert ope. In such ca, an nce or gl euceeSon ess. The eae lhe disposed. of in. accu é inet ance with the provisons of law on | Case 0; Mixed Succession ‘Assume the same dats in Mustiaton #1, Assume further that Pedro lef a | exe tw nd ear taelng his popes Jan von de | The last wil and testament was Caled November 1, 2017 or exactly one year before | Ped doh aden, eune tt fom papas aaa psoas | date of his ceath, rertal income from the commercial bung amountad fo P250,000. | | Ort are sod was sd acute pelo et we bo ance ‘of P100,000 was deposi in a new bank account. Sinco the parc of land tnd the | ‘new bark account were acqured by the decedent ater Noverber 1, 2017, the | | Biarementoned properties were not incude od in his wil. Hence, mixed succession | tsa, Sono eel terse m esd wn be ay eee | eicarty mivbenes peteceanac Soot conan | | Gavin spantns Sie inno esas) cuion aad Toersfer Tages CAUSES OF LEGAL SUCCESSION OR INTESTACY: F with a vold will, or one which has subsequently lost its validity. CASEA: VOIDWILL | lun Deia Cruz deed in his ‘wT one of is parcals of andloated in Valo Varte | Subsvision oon of is dauphars Mara Dela Griz. Jun can eter wa or ed | “Chinese Mandar’ but it was te lrguage used fis bist wif ad testament. In ‘uch a case, the “wi hall be considered vod. AS aru, thalast wil and testament | ‘tial be execute ina language or dale known the tesiatorabe considered vad. | ‘CASE B: "WILL" WHICH HAS SUBSEQUENTLY LOST ITS VALIOTTY | (Onto eve of Noverber 2, 2018, a day ater executing his ast and testaent, he | testator accdentaly cbiteaie the sare, The testator was nctaba to prepare anew | “wa bore his daath, Consoquerty, thar is no more “ast wil end lasament’o | Of, Anette gal scm exis, Alte ie oh dodo dea, fis etal sal ba dissed ofby operations lian, wisn ted Toeasfer Toes Sacceutn ead Tatesfor Tes -2._When the “Will® does not institut ILLUSTRATION & Assume the sara data in Mustaton #3-Case A, except thal thee was no heir ‘Gertied in lst wil and estanent. The deviseo as Simply described in the “wil 3s flows ch a8: iment of the suspenshe condition atathed to the ‘Suspensive condition is a condition epencing upon the happening of an uncertain event which ‘mus! de fulfilled bafare an obligation arises. b. Protariion (omission in the lestalor’s wil of one, some ora of tho compulsory hei F the dct ine which has the effect of frpnuing tho nsttuson of ht). ce. Fotfimont of “Tes01tory condor”. A resoltory conditen refers 10 a condillon whereby, upon fulfilment terminates an already anlrceabla ebigation. 4. Exptaton of lerm or pariod of nsttuton. . Nomcomplance or mpossiby of corpiance with te wil Repudition ofthe inebtuted hor. fin ri! ave “Lan desing my parc of land in Vabe Verde Subdivision to my coset and fvonta daughter” Assume luther ha tbe lestaic has ve (5) eidren, Pedro D. Magba (signed) November 1, 2017 ‘+ Nobeir was Werte in the wil. As a result, there is ro val “wi because lL tthe abeence ofan insted he. 3. Partlat Institution of heir. Consequently. iniestacy takes place as to the undisposed portion. Elements of Succession: Partial institution of heir means the entire estate was not disposed Of in the last will and testament, Therefore, a mixed succession exists. Par of the estate will ba d'sposed of or disirbuted to the heirs based on the last wil and testament. Nonathelass, since there are Propertis in the eslate that wore nol included in tho wil, such ropertios chall be disposed of by operations of law (only as to tho lund:sposed portion of as to the portion ef the estate not mentioned in tho wi 1, Dececent is the general term applied to the person whose property is transmitted Unrough succession, whether or not he left @ wil. he lef ‘wil, hes called a fasiator (Art. 775 NCC) Executor is 9 person designated In the fast wil and testament to cary out the provisions of the dacedants wil. He also performs jury duty such as taking care of the decadonts stale prior to final Gspesiton to the hele. Adminisbetor is a porecn appointed by the .eourt and performs the samo duty, in Hou of an axocuter, ite latter ‘olused to accept the oppoiniment, fale to quelfy under th law or ‘the lat wil end testament did not appeint one. ILLUSTRATION 5 (Partial nstlvtion} — stMvettcmen | 4. Whon tho helr instituted is incapable of succeeding 2 hore estat = deat Wi Gros, Sata and citation. ‘of 2 person which are not ex feath and all which have ‘cctued thereta since the opening of succession. Rights which are purely persona! are no! transmissitte for Ley are extinguished by death (Ar. 776 NCC). ILLUSTRATION 6: Case A: ‘Assume Potto named Juan in his wil as his sole beneficiary, except that Juan Ged | ahead of Pedro. Accordingly, the last wil and testament prepared by the testator shall | ‘be considered voi. | | | casoe: ‘Assume Pedro named Juan in his wil as his sole benefcary. Nonetheless, the lator | © “mentaly i. The her in this case is not capable of succeading the tester. | Henca, the last wil and testament shall be declared voi. 3. Successors ‘An helt or successor Is a parson who is called to the succession ‘ether the provision of a will or by operation of law (Art. 782 NCC) Dovisoss snd logaleos are persons to whom gifts of ral and person! property are respectively given by virtue of a wil Succéssors or heirs are classviod under the law as follows: Sevesvise end Touasfer Ties 1s — those who succeed by force of law to some. RS ae aunt proetermined yam, Krew for es f oF not ee ged water ine Lt Be Be per, ead oy ie esa of Olan eH by ssnhertance property effected 8 COMPULSORY portion of the nbertancs oes cf compen Mano have precedence over and excude other rinusary nes (ve. legtimate children and descondants). «SERED these who succeed only in the absence of the SSray Tcompusay Reis: (le, legitimate parents end « HEESEE oso wo succeed logatar wih the primary or SEEEr compulsory hes: 9, llegtmate chidren ond Gescandarts and surviving 5pOUs0. Primary Compulsory ‘Secondary Compulsery ‘A. Lepimate micrenand thes —D._Legibmate parents and legitimate legerate descedans. scendan’s. (They ahort only fo defeutof'A) we 1B Sirmng spouse E. Vogtate parents (0 of C. bepunse, citéen and ter cescendns) They Mer only fa cescerdarss, \egamate of —— cefautol"A"B“C™. egterate NOTE: Grates end sates ae neler compulsory heirs nor srangers. However, they maybe vourty hers b. VOLUNTARY HEIRS ~ those insituled by the testator In his will to 1 succeed to the inhentance of the portion thereof of which the testator can treely dispose. Free potion relers to the portion or valuo left in” the estate after deducting the legiimes of the compulsory heirs. A ‘voluntary hei is determined through tne last wll and testament. ¢. LEGAL OR INTESTATE HEIRS — those who succeed to the ostate of the decedent by operation o! lam (decedent dled without a valid will oF his estate was not entirely disposed of by will) Succession aa Truufe Tapes Compostion of Gross Estate ‘he gross este ‘vided ito two mal categows ‘Succession purposes, the legitime and free portion as shown elle mare Tha portion el fe eshte is msared by specs a conpusr hee 23 pve 4, reardesn of weer orotate secarrert vas pracared. Rel cb Tale $31 te arang of tees by be compan Ps be Tiss ee ‘Company Was an Vay Pa ‘+ As provéed i feat wl and ester + Infe abeence la wl i porn of Pei shal be Gstaad i tea ery” bat fr prey pov Tab 12 LEGITIME is part of @ teslatos’s property which he cannot because lw hae eeaed fr cera hes wo, heel cled carplay hte 80 NGC). Te company Vr ret be apr of Pot ‘egitime by the testator except by disinhertance property effected. On the olher hand, Free Porton Is that portion of the estate which the testator can treely depose of. Hence, anyone may Inherit fom free porton (cxmpulsory or velunizy hes) ‘Nonethaloss, voluntary heirs may inhent only if mentioned in the wil. In the absence: dla pevaie hia wl wart horse nt Wear. han care be ‘free portion shal be disposed of ta intestate heirs based in the order of priarty as Frenne 120 a Legitimate chidren or dascendants Legitmate parents ec ascendarts estimate ciden or cescendanes Surving spouse 3. Brohers and sistas, nephews and nieces ‘Other colateral relatives wihin te $8 degree 1 Slate ‘The aistibuton of free portion in intestate succession Is based In he cordar of priority because In every-inheritance, the relative nearest in degree excludes tha more dislant ones. saving the right of representation ‘when It proparly takes place. vvewtoe ded Teteser Tages sine anl Tye Tiga re release dencaring ire re, From Cen cromar degree ond trom G to Mis Collateral Relatives A.C, G ond I, In that order, Ke Cla one degree; from trahar degree = sla TS SEE to oder or reorves in th encending tO, end N tha cotoreral toe. Ee or ek he uci of ©; Ine nephew of CC hie ceo oes eta canine ove four degrees apert. M0 CC 12 wed Do! "oe second cui they or sit degrees opr . Nese Sr'St montage tk K becomes es broerintov, H bing G's NSREE Sey bacon rises byotony finish eeonecton exiting aoe of a mernage beteoen ech of fw marind soos tiara fw oe ——————a SH AS TE, ee Ba eB i P| Sin a ei egunty at whch aa persons wha have ie sama ancestor, but whe nets ‘88cend) One from the othor. Proximity of relationship is determined by the umber of generaions. Each gonaraten omnes segiee Ae ace A.LUSTRATION 7: Determining Blood Rl ‘iba conearg CH get tam Ba at Fe porn Pa are lB Ss havi precees ore Bal of Be IC, whose stare may afer non prota bien Bary 876 prince anerg arses Wate iy erry soe or we coeur CH Cacia erie ta Daas mag "Tf rarrags sac POTD Sd Secs Spee Ges win nore ae mare ¥. % & Eackckd | Chiron era a acura eaabahed Beep ls Imyas | Naren oo SS apa a Gee ae is i a Note: o setts vce 1 ithe Mhatration, € and D ore siblings. Their commen parents 2. Giisthe daughter of C ond E; | the son of D ond F 3, Milsthe son of G ond kj N isthe davghier of J ond L. 10 a Secceuive aud nsec Caged [LLUSTRATION 8 (LEGITIMES and FREE PORTION of ihe ESTATE): ain | (Case A. Naraalom Nha das leaving an esate Vlued ot P12000.00. The survivng bes were his souse, 2legtinate chin and legtmat cid Required: Osroun the eiata by app he ues onegtines we: ‘he cist lis ett shoud be as flows (Based on Table 1.3: ‘Legere Chien (12) 600,00 * Legtimale chid'# 1 Pa}ora.000 + Legtimatechidt2 3,000,000 Vlegirate chi (12 of 1L.) 1.500,900 Sunvng Spouse (1) 3000.000, Five Porton (erainder) 4.500.000 Total 12,000,000, NOTE: ‘The letme of the legitimate rveren as provided in tha tabla of agit i of re otal ‘iat regartiess of the nimber ol egtmaie chien), ‘© Trt epmeof an gmat chi i fhe legit ot 1 legate child. The egpume ofthe surviving spouse is as provided in te abe of gtr * The remsring porton in ts paricular caso the free parson i ay be given by the {estat to anyone in accordance wih his wshes. Honever, only rese voluntary hei) | freed inthe provision of a wl shouldbe recognaed. | ie | B: Assume the amount of esata sP12,000,000 and he decedent s survived only to @) iegimate chien, The csmbvion of te ese under hese succes shout be Meet Cs (2) PM ar Free Portion (112), ee ‘oa | © Ana is sera though his ast wil and testament. Cows, th egos of ‘wo 2) Degtmate chidren wera impaired The avout of ett eh air deducing 00000 wil rot be enough to sal he logis oft conpuleryNers amu {> P8.000.000. Hence, the amaunt be given lo the saclay shoud be modad of | reduced to P6,000,000 to saisty tha legtimes, The distribution ofthe decedens este should be as tows: |, tegmate Chi (12); (3M perc) e.000.00 |__ Sees Poen iy ‘5.000,000, L__Total_ i R ESE ~~ ae fer Tages ‘wil 's an actswhereby a person is permitted, with the formatiies proto o,f cl fs eoram degre te aposten of Ns estate to take effect after his death (Art. 783 NCC). It is a document whereby a person, called the “testator, disposes of his or her properties ‘or “estate to take effect upon his or her death. Seceession and. Toa Wills ‘The making of a willis a strcty personal act. It cannot be eft in whole corn pat of the discretion of thd person, or accomplished tough the Instrumoniality of an agent or ationey. All persons who are not expressly ‘rohibited by law may make 3 will The persons prohibited by law to make, ‘will are those below 18 years ad and those who are nol of sound mind atthe ime of is execution. ‘Tho law prosumes that every person Is of sound mind, in the absence ‘of proot to te contrary. ‘The burden of proof that the testator was not of ‘sound mind at the tima of making his dispositions is on the person who ‘opposes the probate of tne wil. I the testator, one month, or less, before making his will was publicly. known to be_insane, the person who ‘maintains the validty ofthe will mast prove that the testator made it uring ‘a lucid interval, ‘Supervening incapacity does not invalidate an effective wil, ror Is te will of an incapable validated by the supervening of capaci. A manied woman may make a will without the consent of her husband, and without the authorty of the court. A maried woman may dispose by wil of all her soparala property as well as her share of the ‘conjugal partnership or absolute commurity property Kings of Wiis: 4. NOTARIAL OR ORDINARY OR ATTESTED WiLL ~ is one whi ich is executed in accordanca with he formalities prescribed by Art 80d to £808 of ha New Civil Cod. ‘Requistes fora Vali Notaria, Wit 8) must be in witing and executad in @ language oF dialect known Jo the testator. by It must bo subscribed at fhe end thereot by the testator himsatf or by tho ‘ebtalors name witlen by some other person in his presence and by his express ciraction, ©) Mt must be stested and subscribed by three or more credible ‘winessos inthe presence ofthe testator and of one another. 2 Seaveuitn end Totasfer Tae The folowing «te disqualified trom being witnesses to a wil (AM. 624 Nc} ‘© Any person not domiciled in the Philipines ‘+ Those who have been convicted of falsification of a document, perury, or false tosimony. Secceuton aed Tonasfer Te Foralgn Wills, Tho wil of on aon who is abroad produces effect in the Philippines i made wih the formats presenibed by the law of the place in witeh he Tesides, or according to tne formalities observed in his ouniry, of In conformty wih those whien the Phiippine. cial code proseries, A wil mado in te Piippines by a ctizen or subject of ancther Country, which is executed in accordance with the law of the country of whieh he i a efizen or subject, and wich might be proved and allowed by the law of his own county, shall hava the same effect as i executed According 10 He laws of te Philppines. in the absonce of bas fat, fouery. % or fraud, oF undue and impmOpor waa snc: Bressure and infuonce, detects ard Ae aa toas Imperfactons In the form of sfestalon gre “ape "une te orinthe langage used herein shatiaat "ewe ot te tow ie render te wit valid itis proved that ger atwesao timed tho wil was Ih fact execulod and tested in substantial eampiince with atte requrements of hela. When a Filipina isin a fereign country, he is authorized to make @ ‘wil in any of the forms establsted by tbe law of ine country in which be ‘may be. Such will may be probated in the Philippines (Art. 815 NCC). Ravocation of wills and testamentary dispositions 2. HOLOGRAPHIC WILL-is a waitten will which must-be entirely writen, ated and signed by the hand of he testator himsel. It subject to no jother for and it may be made in of out of the Philippines and need _ not be witnessed (Art 811 NCC). In case of any insertion; Cancellation, erasure or alteration in @ holographic will, the testator ‘must authenticate the same by his fll slgnature. Awill may be revoked by the testator at any time before his death ‘any waiver or restiction of this ight is void (Art 628). A revocation done ‘outside the Philippines, by a person who does not have his domicile in the Philippines, Is valid when it Is done according to the faw of the place ‘where the will wes made. oF according to the law of the place in which tho {estator had hiis domicile at the time and if the revocation takes place the Philippines when it is in accorcance with the provisions of the new civil code. Codie! is @ supplement or addition to a will, made after the ‘execution of a will and annexed {o be taken as 8 part thereo!, by which) ‘any disposition made in the orginal wil Is explained, added to of altered, In order that a codkcil may be elfecive, lt shall be executed: MODES OF REVOKING A WILL: in the case of a wil (Arts.825 and 826). 1) Bylmplcation of law 2) By some wil, codicil, oF other writing executed as provided in case of walls 3), By buming, tearing, cancelling, ar obliterating the wil wth the intention ‘f revoking i. by the testator himself, or by some otter person in his PROBATE OF A WILL isa court procedure by which 2 will is proved to be valid of Invalid. In the probete of a holographic wil, Ie shall be necessary that atleast one witness Presence, and by his express direction, If bumed, tom, cancelled, oF 1 an bat sie who knows the hotdurltng and senotate ot billerated by some other person, without the express direction of the Broven Pat at tthe testator explicky deciare that the wll and lestator, the will may stl be established, and the estate distributed in tera the ast the egnonre are 9 te renaevting ot We ‘accordance therawith, if its contents, and due execution, and the fact and isamert se SN of iis unauthonzed ‘destuction, cancellation, or obiteration are bps val in The peceechibs ne SiSeNErot a ba established according lo the Rules of Cour. wil and. testament is called “intestate proceedings” 14 8 Secceve ued Uoensfr Tages Subsequent wis which do nat anearnce: revoke the previous ones in an express "Later malong awil he manner, annul only such dispositions in the ‘estar makes a second prior wil a5 are inconsistent. with oF wil exsessy rerchog contrary to those contained in the latter will. A revocation made in 8 subsequent wil shall take effec, even if the new will should become Inoperative by teason of the Incapacity of the heirs, devisees or legatees designated therein, or by thelr renunciation, ‘A revocation ofa will based on a false cause ‘an ilegal cause & null and void, Institution of holr (Art. 840) Insfiution of an heir is on act by virtue of which a testator’ -dasignatos in his will he parson or persons who are to succeed him in his § propery and transmissible rights and obligations. A will shall be valid feven though i should not contain an institution of an heif, or such institution should nol comprise the eniire estate, and even though the person $0 Instituied should rot accept the inheritance or should be incapacitated to succeed. In such cases the testamentary dispositions made in accordance wit law shall be complied with and the remainder of {ho estate shall pass tothe lagal heirs. A compulsory heir may, In consequence of disinheritance, be. deprived of his tegtima, for causes expressly stated by law. Disinhertenee can be eltected only through a wil wherein the logel cause therefore shall be specified. The Durdon ot proving tne truh of the cause | for dsinheritance shall rest upon the olher heirs of the testator, If the disinherted heir should deny it. Disinheritanco Disinhertance is @ testamentary disposition by which a conipuls hele ceprved of, or exched fom tne innerianc fo wich he has & right, Disinheritance is not applicable to voluntary heirs. REQUISITES for Disinheritance: 41. Effected only through a valid wil 2. Fora cause oxprossly stated by law 3. Cause must be stated in the wil self 4. Couse must be certain and true 16 Succession sel Teasfr Tacs Unconditional Total (there is no partial dsinneriance) ‘The heir disinhertod must be designated in such manner that there can be no doubt as to his identity As sited above, the ground{s) ot couse(s) of dsinnertance shat bo limited lo those expressly stoted by law. Under Ar. 850 of the new cil code, the burden of proving the truth of the cause for disinheritance shall rest upon the other heirs of the testator, if the disinherited heir should deny it. Disinheritance without @ specification of the cause, or for a cause ‘the truth of which, if contradicted, is not proved, or which Is not one of ‘osa set forth inci cade, shal annul the netiuton oF helrs insofar as it may prejudice the person dhherled. ‘The devises and legacies and other testamentary dispostions shall be” valid to such extent as will not impair the legitime. The children and clescendants of the person deinhérted Sener and be ofented person i shall take" HIS-Or er place and shall {deprives the late ofthe night fo preserve the rights of compulsory heirs {desert and rendor Iefecal ‘with respect to the legitime; but the {any dsirhetnce tat may have sinherted ‘parent shall rot have the { beenmade,” usufruct or administration of the 4, Droperty which consttutes the leltime, “= COMMON CAUSES FOR DISINHERITANCE of descondants, parents or ascendants, and spouse: children oF 1. Whan bs hel hasbeen fund guilty of an amp against he He of ‘the testator, hishhor descendants or ascendants, and spouse in case of children and parents; wee ‘meee cused the testator of.a crime for which the law imprisonment for 8 year or more, ithe sosusaion Deen found groundless; a ee ‘3. When the ‘by freud, violence, intimidation of undue influence: causes the tesiaior a maka aw rte change che aleedyrados Ren witout pti cave lo supper elosaor une dnc Pecullar Gauses for Disinherltance 4. CHILDRENDESCENDANTS: SION coed appa aad nt teen a en eid ty 7 Snccesiion und. Toesfr Tee b. Maveatment of the tosiator by word or deed by the cididescendant; ; Winon tho chlor descendant leads a dishonorable or disgracal we 4. lien the chid or descendant is convicted of 3 crime wh Carries win ita ponaly of civ ilar, 2. PARENTSIASCENDANTS: 1. When the parents have abandoned their children or induced thei daughlers to lve 3 corrupt or immoral We, or aternpled against ther virtue: b, When the porent or ascendant has been convicted of adultery concubinage with the spouse of the tesator: cc Loss of parental cuthory for causes specifi in the Civil Codes and 4, Attempt by ona ofthe parents against the feof tho other, ui there has been reconciliation between ther. 3, SPOUSE: “3, When the spouse has givan cause for legal separation: D. When the spouse has given grounds for loss of ‘parent authority es Right of Reprosontation ii.a “right” created by fiction of law where the representative, raised (o the place and degree of the person represented, and acqui tho fights which the fatter would have if he were living or could i ‘nheritog, Representation may arise elther becausa of 1. Death 2. Incapacity 3. Disinnertance ‘The representalive(s) shall nat inherit more than what the par they represent wou'd inher, if he were living or could inherit. (At. 974 “Tho lave futhar provides that“reprasentation” is not a avaiable fo: 1, As to compulsory heirs: In case of tepudation, the one. Topuiates his Inheritance cannot be represented. Thelr own hy Inberitin their own right 2. Astovvoluntary heirs 3. Voluntary heirs, legalees and devisees who ‘a. Predecease the testator, or , Renounca the inheritance cannot be represented by ‘own hits, wth respect to their supposed inheritance. Seccewion and Transfer Tages ight of repcesontaion takes place ony in favor of chiéren of brother airs whether ful or half blood and ont fey concur wih at fr uncle died can inherit by representing their predeceased parents. If the nephews and nieces are Blegiimate, then they ara prohibited by ‘Attide 992 of the new civil code from inheriting from the relatives of thelr father or mother tke thelr uncles or aunts, or even from thelr grandparents. Grancnephews and grandnieces in the collateral line ceannot inherit by right of representation. vsti aad Connsfer Tees ry ‘TRUE OR FALSE. Weta True ifthe statement is corroct. Otherwise, write Faisa, 1. Estate tax 's a tax on the right to transfer property at death and on certain transfers which ara made by law the equivalent of testamentary disposition and is measured by the value of the property, 2. Estate taxis an exciso tax. 3. The taxpayer in estate taxation is the estate of the decedent as a juridical person. 4. Estate tax accrues as of the dato of tha actual possession or ‘enjoyment ofthe estate by the beneficiary. 5S. Executor is the person appointed by a court to camry out the directions and request of @ decedent in his will and to dispose of his property ‘according to his testamentary provisions after his death. 5. Intestate succession arises when thera is transmission of properties in the absence of a will or if there ts 0 wil, the same ls void of lost is validity, oF nobody succeeds inthe wil 3 7. Every will may be in wiling and executed in @ language not) Necessarily known to to testator, “at 8. A holographic wil fs a wil ontraly written by a testator wih his own hand and may be witnessed or atiested, 9. The will f an alien residing abroad produces effect in the Philippines it” made In cortormity with the formales prescribed by law of tha place ~ In which he resides. , 10. A person has unlimited right to make eonations in his fast wil and. testament. 11. The rights to the succession are transmitted from tha moment the heirs receive their shara in inheriance. 4 12. The law presumes that every person is of sound mind in the absence of proof to the contrary, 13. Brothers and sisters (whether haif or full blood) of the decedent are ‘not compulsory heirs, 14. Brothers and sisters (whether half or full blood) of the decedent can be’ an intestate heir 15. There canno! be a disinheritance for compulsory heirs. 16. Relatives by affinity are strangers for estate tax purposes. 17. An heir who inherits a specific personal property by willis known as devise. 20 Secession wl Tope Tages 18. A codicil 9 supplement o accion to 8 wil, mace after the execution of a will and srnoxed 10 be takan as a part thereof, by which any

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