Effectivity Type Tax Object of Nature

Taxation
Upon death of Mortis Causa Estate tax Privilege to
the donor transfer
DONATION During the Intervivos Donor’s tax Gratuitously Excise tax
lifetime of the
donor and
donee

Accrual: as of the death of decedent, notwithstanding postponement of the actual possession or enjoyment of the estate
by the beneficiary. Upon the death of the decedent succession takes place and right of the estate to the tax the privilege
to transmit the estate vests instantly upon death
Filing of Estate tax return:
 Decedent died before 2018: within 6 mos after death
 Decedent died upon/during effectivity of TRAIN Law: 1 year from date of death
Accrual of the tax is distinct from the obligation to pay the same (filing period)
Under meritorious cases (BIR determination), filing of estate tax return may be extended for a period not more than
30 days.
Tax payer: “Estate” of decedent as a juridical person, represented by administrator, executor, legal heir
Personal obligation to file and pay the applicable taxes:
 Primarily liable: Administrator or executor
 Secondarily liable: any of the heirs
Law to be applied: Law/statute in force as of the death of the decedent

Succession: mode of acquisition by virtue of which the PRO to the extent of the value of the inheritance of a person are
transmitted through his death to another by will or operation of law.

TYPES:

1. Testamentary- designation of an heir, made in a will executed in the form prescribed by law
2. Legal/Intestate – operation of law or transmission where there is no will OR will may be void/lost its
validity/nobody succeeds in the will
3. Mixed- partly will or operation of law

Note: value of obligation transferred to heir should be < inheritance transferred

Succession it is a mode of acquisition by virtue of which the property, rights and obligation to the extent of the value of
the inheritance, of a person are transmitted through his deaths to another or others either by will or by operation of law
(Art. 774, Civil Code of the Philippines).

TYPES:

1. Testamentary. That which results from the designation of an heir, made in a will executed in the form prescribed by
law.

2. Legal or Intestate. That which is effected by operation of law or transmission of properties where 0 There is no will; or
p If there is a will, the same is void or lost its validity, or nobody succeeds in the will. 3. Mixed. That which is effected
partly by a will or by operation of law.

Note: The value of obligations that may be transferred from the decedent to his/her heir(s) should' not exceed the value
of the properties and rights (inheritance) transferred.

WILL- 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 (Art. 783, CCP) from the moment of the death of the decedent, the
rights to the succession are transmitted, and the possession of the hereditary property is deemed transmitted to the heir
(Art. 777, CCP).

Kinds of Wills:

1. Notarial or Ordinary or Attested Will — is one which is executed in accordance with the formalities prescribed by Art.
804 to 808 of the New Civil Code. It is a will that is created for the testator by a third party, usually his lawyer, follows
proper form, signed and dated in front of the required number of witnesses (3 or more witnesses) and acknowledged by
the presence of a notary public.

2. Holographic Will-is a written will which must be entirely written, dated and signed by the hand of the testator himself,
without the necessity of any witness. This kind of will does not need formalities because many people can recognize his
handwriting and it can be verified by a penmanship expert.

Codicil — a supplement or addition to a will, made after the execution of a will and annexed to be taken as a part
thereof, by which any disposition made in the original will is explained, added to or altered.

Elements of Succession

Succession takes place if the following elements are present:

a. DECEDENT - the person whose property is transmitted through succession, whether or not he left a will (Art. 775,
CCP).

b. HEIR - the person called to the succession either by the provision of a will or by operation of law (Art. 782, CCP).

c. ESTATE - refers to all the property, rights and obligations of a person which are not C. extinguished by his death (Art.
776, CCP).

Decedent's Estate

1. LEGITIME is the portion of the testator'sproperty which could not be disposed freely because the law has reserved it
for the compulsory heirs. (Art. 886, CCP). the whole estate whichdispose r of

2. FREE PORTION is that part of th the testator could disp freely through written will irrespective of his relationship to the
recipient.

Kinds of Heirs

1. Compulsory Heirs. They inherit with or without a will.

a. Primary Compulsory Heirs
i. Legitimate children and descendants
ii. Illegitimate children
iii. Widow or widower
b. Secondary Compulsory Heirs ( In default of legitimate children and descendants, legitimate parents and
ascendants L..
- The compulsory heirs are entitled to their legitime, with or without a will, unless validly "des-inherited".
2. Voluntary Heirs. They inherit only if they are in the will.
3. Intestate Heirs The compulsory heirs in testamentary succession are also heirs in intestate succession. They are
entitled to their legitime. However, as to the free portion of the estate, it shall be distributed to the following
intestate heirs as follows (order of priority):
a. Legitimate children
b. Legitimate parents
c. Illegitimate children
d. Spouse
e. Brothers or sisters
f. Relatives by consanguinity up to 5th civil degree
g. State
Table of Legitime:

LC ½ divide by the number of LC, whether they survive alone or with concurring
1 LC ½ compulsory heir (CH)

SS ¼
2 or more ½
LC
SS Equal to 1
LC
LC ½
SS ¼
All the concurring CH get from the half free portion, the share of the SS
IC ½ of 1 LC having preference over that of the IC, whose share may suffer reduction pro-
LPA ½ rata because there is no preference among themselves
LPA ½ Whether they survive alone or with concurring CH
IC ¼ IC succeed in the 1/4 in equal shares
LPA ½
SS ¼
LPA ½
SS ¼
LPA ½
SS 1/8
IC ¼
IC ½
SS 1/3
IC 1/3
SS ½ Divide equally among the IC
IP ½ 1/3 if marriage is in articulo mortis and deceased spouse dies within 3 months
after the marriage
IP Excluded
Children inherit in the amounts established in the foregoing rules.
Any child It depends Only the parents of IC are included. Grandparents and other ascendants are
IP ¼ excluded.
SS ¼
Gross Estate

1. Components of Gross Estate:

a. Real property and other tangible Personal property
b. Decedent’s interest and intangibles
a. Extent of equity or ownership participation of the decedent on any property physically existing or
present in the gross estate, whether or not in his possession, control or dominion. It also refers to
the value of any interest in property owned or possessed by the decedent at the time of his death
(int having value or capable of being valued, transferred)
c. Intangibles property located in PH
a. Franchise which must be exercised in ph
b. Shares, obligations or bonds issued by any corpo or sociedad, anonima organized or constituted in
PH
c. Shares, obligations or bonds issued by any foreign corpo, atleast 85% of the business of which is
located in PH
d. Shares, obligations or bonds issued by any foreign corpo if such shares, obligations or bonds have
acquired business situs (used in the furtherance of its business in PH) in PH
e. Shares or rights in partnership, business or industry established in PH
d. Properties transferred gratuitously during lifetime, but in substance transferred upon death
a. Transfer in contemplation of death
b. Transfer with reservation of right – beneficial ownership (title only passed)
c. Revocable transfer – transfer enjoyment with right to revoke at will with or without notif bef he dies
d. Property under General power of Appointment
 e. Transfer with insufficient consideration – sale below FMV (amount to include is FMV, adjust the SP if
needed in gross estate)
f. Proceeds from life insurance:
i. Revocable or non revocable: the beneficiary is:
1. Estate of the deceased
2. His executor
3. Administrator

When beneficiary is 3rd person, ONLY IF REVOCABLE.

EXEMPTIONS FROM ESTATE TAX

1. Sec 85 & 86
o Separate property of surviving spouse(capital of husband or paraphernal of wife)
o Properties outside PH by a non resident alien decedent
o Intangible Personal property in PH of a non resident alien when the rule of reciprocity applies
2. Sec 87
a. Merger of usufruct in the owner of naked title
b. Transmission from the first heir, legatee, or done in favor of another beneficiary in accordance with the desire
of the predecessor (SPA)
a. GPA – include
b. SPA – exclude
c. Transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicomissary
(almost same as SPA, the diff is the relationship is only1 degree apart eg. Father-son)
d. All bequests, devises, legacies, or transfers to social welfare, cultural and charitable institutions, no part of
the net income of which goes to the benefit of any individual, provided however that not more than 30% of
the said bequests devises, legacies or transfers shall be used by such institutions for admin purposes

3. Exemption under special laws

a. Proceeds of life insurance and benefits received by members of GSIS
a. where beneficiary is irrevocably appointed
b. under a group insurance taken by the employer in favor of employee
b. Benefits received from SSS by reason of death
c. Benefits received from US veterans admin
d. War benefits given by Ph gov and US gov due to damages suffered during war
e. Grants and donations to Intramuros admin
f. Retirement benefits from officials/employees of a private firm
g. Payments from PH to US gov to the legal heirs of the deceased of WWII veterans and deceased civilians for
supplies /services furnished to US and PH army
h. Transfer by way of bona fide sales
i. Transfer of NG to political subdivision
j. Personal Equity and Retirement Account (PERA) assets of the decedent contributor

Decedent Gross Estate

Citizen WITHIN AND WITHOUT –
Resident Alien 1. Real or Personal property
2. Intangible personal prop
Nonresident Alien WITHIN PH –
1. Real property
2. Tangible Personal prop
3. Intangible personal prop (excluded if
reciprocity clause)
In General FMV at time of death – date at which tax
accrues regardless of any subsequent
contingency affecting estate

Real Property HIGHER between: FMV or zonal value

FMV determined by BIR
COMMISSIONER
4. FMV in schedule of values
fixed by provincial and city
ASSESSORS
*If there’s no Zonal Value, taxable base is
the FMV that appears in the latest tax
declaration. If there’s an improvement,
value of improvement is the construction
cost per building permit or the FMV per
latest tax declaration.

Personal Property FMV at time of death (prescribed

book)
5. Acquisition cost for recently
acquired property OR Current
market proce for previously
acquired property (Valencia)

*******NOT SURE VERIFY

Shares of Stock  UNLISTED COMMON
*Listed = Local Stock SHARE: Book Value per
Exchange share of issuing corporation
(EXCLUDING Appraisal
Surplus and assigned amount
for Preference share)
 UNLISTED PREFERENCE
SHARE: Par value per share
 LISTED SHARES: FMV is
mean of highest and lowest
quotation at a date nearest the
date of death, if none is
available of death itself

Right to usufruct, use, or According to latest basic standard

habitation and annuity mortality table taking into account the
probable life of beneficiary, to be
approved by Sec of Finance upon reco of
the Insurance Commissioner
Property relations:
1. Based on agreement:
a. ACP
b. CPG
c. Complete separation
2. Ops of Law
a. Bef aug 3 1988 – CPG
b. On or after aug 3 1988- ACP
3. Customs or traditions

ACOP CPG
Prop acquired bef marriage Common Exclusive
Prop acquired during marriage:
From exclusive prop
From common prop Exclusive Exclusive
Those obtained from labor, work, industry of either or both Common Common
spouse Common Common
From gratuities title (inheritance or donation)
CPG
ACOP
 Generally
 The donor/testator expressly provided that it shall Exclusive
form part of the community prop
Exclusive
Common
Fruits/income on prop:
ACoP- follow the source
CPG- all fruits are common

Prop for personal and exclusive use of either spouse

 GR
 Except: Jewelry under ACoP
Exclusive Exclusive
Common