NOTES ON SURVIVORSHIP CLAUSES/AGREEMENTS

1. What is a Survivorship Agreement?

A Survivorship Agreement is a contract whereby the parties, usually only two,
agree that (a) certain properties, usually money in a bank account, are theirs in
common and (b) upon the death of either of them, the said properties shall belong to
the surviving party.1
2. Are Survivorship Agreements allowed under Philippine law?
Yes. The Supreme Court has upheld the validity of Survivorship Agreements
in the case of Vitug v. Court of Appeals,2 where it was held that:
The validity of the contract seems debatable by reason of its
"survivor-take-all" feature, but in reality, that contract imposed a
mere obligation with a term, the term being death. Such
agreements are permitted by the Civil Code.
Under Article 2010 of the Code:
ART. 2010. By an aleatory contract, one of the parties or both
reciprocally bind themselves to give or to do something in
consideration of what the other shall give or do upon the happening
of an event which is uncertain, or which is to occur at an
indeterminate time.
Under the aforequoted provision, the fulfillment of an aleatory
contract depends on either the happening of an event which is (1)
"uncertain," (2) "which is to occur at an indeterminate time." A
survivorship agreement, the sale of a sweepstake ticket, a
transaction stipulating on the value of currency, and
insurance have been held to fall under the first category,
while a contract for life annuity or pension under Article
2021, et sequentia, has been categorized under the second.
In either case, the element of risk is present. In the case at bar, the
risk was the death of one party and survivorship of the other.
(Emphasis supplied)

1 Geronimo, Reynaldo G., Will the Survivorship Agreement Survive?, TODAY,

November 26, 2004 Issue. See also on
http://www.thetrustguru.com/Today/today112604.htm
2 G.R. No. 82027, March 29, 1990

3. Are Survivorship Agreements absolute?

No. Survivorship Agreements are not absolute and are subject to the
following limitations:
a. Payment of estate tax before distribution to/withdrawal by the surviving
party
Revenue Ruling No. 010-2003 issued by the BIR on September 08,
2003 explained in essence that a Survivorship Agreement is a Transfer in
Contemplation of Death under Section 85(B) of the NIRC. As such funds
under a joint account covered by a Survivorship Agreement shall be
subject to the payment of estate tax and cannot be withdrawn by the
surviving party unless the Commissioner has certified that the taxes
imposed thereon have been paid as provided under Section 97 3 of the
NIRC. However, the administrator of the estate or any one (1) of the heirs
of the decedent may, upon authorization by the Commissioner, withdraw
an amount not exceeding Twenty thousand pesos (P20,000) without the
said certification.
b. Survivorship Agreements may be set aside or declared void by the court if
executed for unlawful purposes or in order to frustrate our laws on wills,
donations, and conjugal partnership
As stated by the Supreme Court in the Vitug4 case:

3 Section 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights.
- There shall not be transferred to any new owner in the books of any corporation, sociedad
anonima, partnership, business, or industry organized or established in the Philippines any
share, obligation, bond or right by way of gift inter vivos or mortis causa, legacy or
inheritance, unless a certification from the Commissioner that the taxes fixed in this Title
and due thereon have been paid is shown. If a bank has knowledge of the death of a
person, who maintained a bank deposit account alone, or jointly with another, it
shall not allow any withdrawal from the said deposit account, unless the
Commissioner has certified that the taxes imposed thereon by this Title have
been paid: Provided, however, That the administrator of the estate or any one (1) of the
heirs of the decedent may, upon authorization by the Commissioner, withdraw an amount
not exceeding Twenty thousand pesos (P20,000) without the said certification. For this
purpose, all withdrawal slips shall contain a statement to the effect that all of the joint
depositors are still living at the time of withdrawal by any one of the joint depositors and
such statement shall be under oath by the said depositors.

But although the survivorship agreement is per se

not contrary to law its operation or effect may be
violative of the law. For instance, if it be shown in a given
case that such agreement is a mere cloak to hide an inofficious
donation, to transfer property in fraud of creditors, or to defeat
the legitime of a forced heir, it may be assailed and annulled
upon such grounds. xxx
(Emphasis
supplied)

4 Supra. Citing Rivera v. Peoples Bank and Trust Co.,73 Phil. 546 (1942).
3