SUCCESSION

and TRANSFER TAXES

BLT 4A

Atty. Jennilene V. Lorico, CPA

 SUCCESSION
is a mode of
acquiring ownership
Article 712 of the New Civil Code
 Modes of Acquiring Ownership
NCC

1. Occupation
2. Intellectual Creation
3. Law
4. Donation
5. Tradition
6. Contract
7. Prescription
8. Succession
Transfer Taxes
Vs Business Taxes

Taxes imposed on the

GRATUITOUS
disposition of properties
or rights
Gratuitous - FREE
Onerous - with
CONSIDERATION
 Transfer Taxes
Donor’s vs Estate

Gratuitous Transfer:
1.

1. Donation
Donation Mortis
Causa
Donation Inter Vivos
2. 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 or others either by his
will or by operation of law
Article 774 of NCC
 INHERITANCE
Includes all the PROPERTY,
RIGHTS and OBLIGATIONS of a
person which are not extinguished
by DEATH

Article 776 of NCC

The RIGHTS to the SUCCESSION
are transmitted from the moment
of death of the decedent.

Article 777 of NCC

 Nature of Transfer Tax
Subject matter of tax is PRIVILEGE

The subject matter of a transfer tax is the privilege of the

transferor to gratuitously transfer property or rights which takes
effect at the date of death of the transferor or during the lifetime of
the donor and donee.
Although the amount of the tax is based on net estate or net gifts,
it shall not be construed as a property tax.
TRANSFER TAX is classified as “EXCISE TAX” or privilege
tax imposed on the act of passing the ownership of property.
 QUESTIONS

1. When will the transfer of ownership from the decedent to the heir take
effect?

2. When should the estate tax accrue?

Accrual of taxes is distinct from the obligation to pay the same.

3. How much liabilities should be assumed by transferee?

 Kinds of
Succession
Art 778 of NCC

Testamentary or Testate
Succession
Legal or Intestate
Succession
Mixed Succession
 CAUSES OF LEGAL
SUCCESSION or INTESTACY
1. If a person dies without a will, or with a void will, or one
which has subsequently lost its validity;
2. When the “WILL” does not institute an HEIR;
3. Partial institution of heir. Consequently, intestacy takes
place as to the undisposed portion;
4. When the HEIR INSTITUTED is INCAPABLE of
succeeding
 Elements of
Succession
1. DECEDENT
Executor
Administrator
2. INHERITANCE
3. SUCCESSORS
Devisees & Legatees
Compulsory Heirs
Voluntary Heirs
Legal or Intestate
Heirs
LEGITIME
Vs FREE PORTION

Compulsory Heirs:
This portion of the
LEGITIME (75%) estate is reserved by law
specifically to
compulsory heirs

FREE PORTION Compulsory Heirs

(25%) and/or Voluntary Heirs
 LEGITIMEs and FREE PORTION

Michael Jackson died leaving an estate valued at

CASE P12,000,000. The surviving heirs were his spouse, 2
A legitimate children and 1 illegitimate child.

REQUI Distribute the ESTATE

RED
ANSWER Legitimate Children (1/2) P6,000,000
P3,000,000
LC 1 LC 2
P3,000,000
Illegitimate Child (1/2 of 1 LC) P1,500,000
Surviving Spouse (1/4) P3,000,000
Free Portion (remainder) P1,500,000
TOTAL P12,000,000
 LEGITIMEs and FREE PORTION

Assume the amount of estate is P12,000,000 and the

CASE DECEDENT is survived only by his 2 illegitimate
B children.

REQUI Distribute the ESTATE

RED
ANSWER Illegitimate Children (1/2) P6,000,000

P3,000,000
IC 1 IC 2
P3,000,000

Free Portion (1/2) P6,000,000

TOTAL P12,000,000
 LEGITIMEs and FREE PORTION

Assume the amount of estate is P12,000,000 and the

CASE DECEDENT is survived only by his 2 illegitimate
C children. However, testator provided P8,000,000 to Vice
Ganda (his secretary) through his will.

REQUI Distribute the ESTATE

RED
ANSWER Illegitimate Children (1/2) P6,000,000

P3,000,000
IC 1 IC 2
P3,000,000

VICE GANDA: Free Portion (1/2) P6,000,000

TOTAL P12,000,000
A WILL is an act 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.
Article 783 of NCC
 Kinds of
WILLS

1. NOTARIAL or
ORDINARY or
ATTESTED WILL
2. HOLOGRAPHIC WILL

CODICIL
PROBATE OF A WILL
 DISINHERITANCE
A testamentary disposition by which a compulsory heir is DEPRIVED
of, or excluded from the inheritance to which he has a right.

REQUISITES OF DISINHERITANCE
1. Effected only through a VALID
WILL
2. For a cause expressly stated by law
3. Cause must be stated in the will
itself
4. Cause must be certain & true
5. Unconditional
6. Total (no partial disinheritance)
7. The heir disinherited must be
designated in such a manner that
there can be no doubt as to his
identity.
 Right of
REPRESENTA
TION
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.

Representation may arise either because of:

1. Death
2. Incapacity
3. Disinheritance