Outline

***jamaicaa
principles and definition
succession
kinds and elements of succession
causes of legal succession
**kinds of heirs (tho i think this should be under 4.1.3)
kinds of will blah blah…
rate of estate tax
inclusions in the gross estate***

(4.1.4)
net estate
Deductions
Pls include FMV computations here if kaya

(4.1.5)
Tax due and tax credits

(4.1.6)
Procedures
Who
When where
Extensions
compliance

(4.1.7)
Documentary requirements
ESTATE TAX

4.1.1 Principles and Concepts

Estate tax is the tax imposed on the transfer of property from the decedent to the heirs. It is not
a tax on property. It is an excise tax on the privilege/ right to transfer property gratuitously at the
time of death.

There shall be an imposed rate of six percent (6%) based on the value of such NET ESTATE
determined as of the time of death of decedent composed of all properties, real or personal,
tangible or intangible less allowable deductions.

The taxpayer in estate taxation is the estate of the decedent represented by the administrator ,
executor, or legal heirs. The executor/administrator of the estate has the primary obligation to
pay the estate tax but the heir or beneficiary has subsidiary liability for that payment for the
payment of that portion of the estate which his distributive share bears.

Estate taxation is governed by the laws in force at the time of death of the decedent.
Accordingly, the provisions of the Tax Reform and Acceleration and Inclusion Act (TRAIN)
amending pertinent provisions would apply only to deaths that occurred January 1, 2018
onwards. For deaths prior to said date, the provisions of the Tax Code before the amendment
would apply.

Justification for the imposition of Estate Tax

● Benefit Received Theory - state collects tax as there is a service rendered by
government in distribution of the estate of the decedent
● Privilege or State PArtnership Theory - inheritance is not a right but a privilege granted
by the state and legatees.
● Ability to pay theory - inheritance is an unearned wealth or windfall that creates an ability
to pay.
● Redistribution of Wealth Theory - estate tax reduces the value of the inheritance which is
a contributing factor to the inequalities in wealth and income.

Succession
Succession is a mode of acquisition by virtue of which the property, rights and obligations to the
extent of the value of the inheritance of a person are transmitted through his death to another.
This can be through his will or by operation of law.

Will
Will is a form of declaration whereby a person is permitted with the formalities prescribed by law
to control to a certain degree the disposition of his estate, to take effect after his death.
Kinds of wills
 1. NOtarial of Attested Will - a will which is executed in front of three or more credible
witnesses and acknowledged by the presence of the notary public; and in accordance
with the formalities prescribed in Art 804 to 808 of the New Civil Code

2. Holographic Will - a written will entirely written, dated, and signed by the testator himself
without necessity of a witness.

Kinds of succession
1. Testamentary Succession - results from designation of an heir and made in a will which
is executed by the law. This is when the decedent left a duly last will and testament
transferring all or a portion of his properties to the heir upon his death.

2. Legal Succession - is a succession which is done with the operation of law when the
decedent did not execute a will or if the last will and testament is null.
Causes of legal succession
- Person dies without a will, or with a void will, or one which has subsequently lost
its validity.
- Will does not institute an heir.
- Partial institution of heir. Consequently, intestacy takes place as to the
undisposed portion.
- When the heir instituted is not capable of succeeding.

3. Mixed Succession - includes partly by will and partly by operation of law. Some of the
estate will be transferred in accordance with the duly executed will while some will be
distributed by operations of law.

Elements of Succession
1. Decedent is the person whose property is transmitted through succession whether or not
he left a will. If the person left a will, he is called a testator.
*Executor- is the person designated in the last will and testament to carry out the
provisions of the decedent’s will.
**Administrator- is the person appointed by the court and performs the same duty, in lieu
of executor
Kinds of Decedents for Estate tax purposes
a. Resident and/or citizen
b. Non-resident aliens
*A resident and/or citizen of the Philippines is taxed on his worldwide property (all real
and personal property, wherever situated); while a non-resident alien is taxable for his
properties only within the Philippines.

2. Inheritance or Estate- includes 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.
 3. Successor- also called as heir, is a person who is called to the succession either by the
provision of will or by the operation of law.
Classification of Heirs for Estate tax purposes
a. Compulsory- succeed by force of law and cannot be deprived of by the testator
i.e. legitimate children, legitimate parents, legitimate descendants or ascendants

b. Voluntary- instituted by the testator for the free inheritance after deducting that of
the compulsory; enacted by will and testament.

c. Legal or intestate heir- succeeded by operation of la, when there is no will.

Order of Priority in distribution of intestate

1. Legitimate children or descendants
2. Legitimate parents or ascendants
3. Illegitimate descendants
4. Surviving spouse
5. Brothers and sisters; nephews and nieces
6. Other collateral relatives within the fifth degree
7. State

4.1.2 Transfers which may be considered for estate taxation

GROSS ESTATE
In general, the value of the properties shall be determined as the fair market value at the time
of the descendant’s death.

USUFRUCT
Right of usufruct, use of habitation as well as annuity. There shall eb taken into account the
probable life of the beneficiary in accordance with the latest Basic Standard Mortality Table, to
be approved by the Secretary of Finance, upon recommendation of the Insurance
Commissioner

REAL PROPERTY- whichever is higher

a. Air market value as determined by the Commissioner; or
b. Fair market value as shown in the schedule of values fixed by the Provincial and City
Assessor

PERSONAL PROPERTY-
a. If recently acquired by the decedent, purchase price may be fair market value;
b. If not recently acquired, here should be evidence of the fair market value
SHARES OF STOCK
a. If unlisted:
i. Common shares based on their book value
ii. Preferred shares based on their par value
b. If listed: the mean between the highest and lowest quotation on the date of death; if
none, the date nearest the death.

INCLUSIONS
Gross estate includes property falling under any of the following categories:
1. Decedent’s interest, to the extent of his interest therein at the time of his death;
2. Transfers in contemplation of death;
3. Revocable transfers;
4. Property passing under general power of appointment;
5. Proceeds of life insurance;
6. Prior interests; and
7. Transfer for insufficient consideration.

EXCLUSIONS
The following are excluded from the gross estate:
1. GSIS proceeds/ benefits
2. Accruals from SSS
3. Proceeds of life insurance where the beneficiary is irrevocably appointed
4. Proceeds of life insurance under a group insurance taken by employer (not taken out
upon his life)
5. War damage payments
6. Transfer by way of bona fide sales
7. Transfer of property to the National Government or to any of its political subdivisions
8. Separate property of the surviving spouse
9. Merger of usufruct in the owner of the naked title
10. Properties held in trust by the decedent
11. Acquisition and/or transfer expressly declared as not taxable
12. Personal Equity and Retirement Account (PERA) assets of the decedent-contributor.