Protecting your Inheritance
Protecting your Inheritance
What Is An Estate?
An Estate is comprised of the real and personal properties of a decedent.
How Is An Estate Settled? An Estate may be settled judicially or extrajudicially:
Who May Execute An Extrajudicial Settlement?
1. The Sole Heir. The one and only heir may adjudicate the entire estate to himself by means of an affidavit (called an “Affidavit of Self-Adjudication”) filed in the Register of Deeds of the place where the decedent resided.
2. The Heirs Agreeing Among Themselves. The heirs may divide the estate among themselves by means of a notarized instrument filed in the Register of Deeds.
The steps to follow for Extrajudicial Settlement
Adjudication of Estate” to be signed by all of the heirs, which must contain the following information:
• That the decedent left no will; • That the decedent left no debt • Each heir’s relationship to the decedent (e.g. spouse, son, daughter, father, mother etc.); • That they are the decedent’s only surviving heirs • An enumeration and a brief description of the decedent‘s properties, both real and personal, which the heirs are now dividing among themselves. • How the properties are to be divided among the heirs
B. Have the “Deed of Extrajudicial Settlement and Adjudication of
Estate” notarized before a Notary Public after all the heirs have signed it
C. Secure a bond from a reputable bonding company acceptable to the Register of Deeds.
- The amount of the bond is equivalent to the value of the personal property involved as certified to under oath by the parties concerned and conditioned upon the payment of any just claim that may be filed under Section 4 of this rule. It shall be presumed that the decedent left no debts if no creditor files a petition for letters of administration within two (2) years after the death of the decedent
D. Register the notarized “Deed of Extrajudicial Settlement and Adjudication of Estate” with the Register of Deeds. The bond is simultaneously filed with the “Deed of Extrajudicial Settlement and Adjudication of Estate”.
E. Publish the “Deed of Extrajudicial Settlement and Adjudication of Estate” in a newspaper of general circulation once a week for three (3) consecutive weeks.
Judicial Settlement Of Estate
A. Common Requirements For Judicial Settlement:
1. By means of a petition filed in court. 2. Where filed?
A. If the decedent was a resident of the
B. If the decedent was a resident of a foreign country at the time of his death, the petition must be filed in any Regional Trial Court in the province where he had estate.
3.Publication. Notice of the filing of the petition for settlement of estate and the proceedings thereof are required to be published in a newspaper of general circulation once a week for three consecutive weeks.
B. When Is There A Judicial Settlement?
a. File a petition in court alleging that the estate is of small value.
b. Publish a notice of the settlement proceedings in a newspaper of general circulation once a week for three (3) consecutive weeks.
c. After completion of publication, the court may set the case for hearing and proceed summarily to settle the estate.
2- Probate of Will - If the decedent left a will, such must be probated, i.e., allowed or disallowed.
a. File a petition in court praying for the probate of the will and settlement of estate of the decedent.
b. The court will set a time and place for the probate and shall cause notice of such to be published in a newspaper of general circulation once a week for three (3) consecutive weeks.
c. On the hearing date, the court will proceed with the probate of the will and distribute the estate to the heirs/legatees accordingly
Before filing the Deed of Extrajudicial Settlement with the Register of Deeds where the land is located, it is necessary that the estate taxes be paid first. Under Philippine laws, estate tax is defined as a tax on the right of the deceased person to transmit his estate to his lawful heirs and beneficiaries at the time of death and on certain transfers,
The Estate Tax Return must be filed within six (6) months from the decedent’s death. The deadline may be extended by the Commissioner of the BIR, in meritorious cases, not exceeding thirty (30) days. It must be noted that the estate itself is assigned its own Tax Identification Number (TIN). The Estate Tax Return is filed with Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at the time of his death.
1. The Office of
the Revenue District Officer, Revenue District Office No. 39,
2. The Philippine Embassy or Consulate in the country where decedent is residing at the time of his death.
However, upon request and if the Commissioner of the BIR finds that payment on the due date of the Estate Tax or of any part thereof would impose undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years, in case the estate is settled through the courts or two (2) years in case the estate is settled extra-judicially.
If an extension is granted, the BIR Commissioner may require a bond in such amount, not exceeding double the amount of tax, as it deems necessary.
For extrajudicial settlement of estate, the following documents must be submitted with the BIR
a. For listed stocks – newspaper clippings or certification from the Stock Exchange b. For unlisted stocks – latest audited Financial Statement of issuing corporation with computation of book value per share
Other documents may also be requested by the BIR.
After the estate taxes have been paid, the heirs may proceed to the Register of Deeds where the land is situated.
If the Register of Deeds would allow it, the filing with the BIR and Register of Deeds may be simultaneous.
The proof of payment of the estate tax,
Affidavit of Publication of the Deed,
1. If not over P200,000, it is exempt 2. If over P200,000 but not over P500,000, then tax is 5% of the excess over P200,000 3. If over P500,000 but not over P2,000,000, then tax is P15,000 PLUS 8% of the excess over P500,000 4. If over P2,000,000 but not over P5,000,000, then tax is P135,000 PLUS 11% of the excess over P2,000,000 5. If over P5,000,000 but not over P10,000,000, then tax is P465,000 PLUS 15% of the excess over P5,000,000 6. If over P10,000,000, then tax is P1,215,000 PLUS 20% of the excess over P10,000,000
The basis shall be the net estate. That means that there are allowable deductions on the estate. These deductions include funeral expenses, share of the surviving spouse, medical expenses incurred by the decedent within 1 year prior to his death, family home deduction of not more than P1,000,000.00, standard deduction of P1,000,000.00, among others. It is best to consult with an accountant on this matter to determine the accurate estate tax.