“Death is not the end. There remains the litigation over the estate.”
– Ambrose Bierce, American short story writer, Journalist & Poet
By Realttorney®
An estate planning attorney is a special type of attorney who specializes in helping individuals and families plan for the orderly distribution of their assets after death or incapacity. He or she is a certified professional that creates an estate plan that will ensure the wishes of the individuals and families concerning their finances and properties are carried out after death or in the event of incapacitation.
Also known as an estate planner, some websites say that an estate planning attorney is someone who specializes in “end-of-life planning” or premature death planning. But, most importantly, an estate planning attorney helps inform and educate the general public about the estate planning process, as well as the laws, rules, and regulations that affect the transfer, partition, distribution, and taxation of one’s estate.
Why do you need an estate planning attorney?
Estate planning attorneys create an enduring legacy.
Estate planning attorneys review current estate laws and regulations to advise clients of their rights and duties, and suggest options for reducing taxes on their inheritance, providing for the care of family members, and creating an enduring legacy.
The role of an estate planning attorney is to provide clients with knowledgeable, compassionate advice that helps them make informed decisions regarding their financial and personal welfare. Moreover, the estate planner can help the clients properly administer the estate of a deceased family member or friend.
In this capacity, he can provide guidance on the tasks involved in settling an estate such as filing the necessary court documents, locating and appraising assets, and distributing the deceased’s property in accordance with the wishes of the client.
It is important to note that the benefits of working with an estate planning attorney are numerous. These include asset protection, avoidance of probate court proceedings, tax savings, and peace of mind. The process of estate planning involves a deep understanding of existing laws and interpretation of those laws with the purpose of developing an estate plan that works for the individual or family. Once the estate plan is in place, it is important to execute the documents and communicate any changes in laws that may impact the plan.
What do estate planning attorneys do?
An estate planning attorney is among several professionals (tax advisors, financial planners, and life insurance agents, among others) that assist individuals to create estate plans based on their unique situations and concerns.
Depending on the unique situation or circumstance of each client, the estate planner provides an array of services that include –
1. Identifying legal or compulsory heirs, legatees, or devisee;
2. Preparing or drafting a will, powers of attorney, and other estate planning documents;
3. Creating healthcare directives and plans for long-term care;
4. Assist in determining the best kind of trust for the client, creating such a trust that will protect the assets, and funding the trust to provide for the financial needs of the beneficiaries in the future;
5. Coordinate with the financial advisor to reduce estate tax and other tax burdens through effective tax planning; and
6. Identifying ways to avoid probate proceedings.
The cost of working with an estate planning attorney varies greatly depending on the complexity of the estate and the expectations of the client. Generally, legal fees range from a few thousand pesos to many thousands of pesos.
Yet, working with a trusted estate planner who has experience preparing estate planning documents is worth the investment in order to get the outcome desired. He is a treasured and reliable resource as one works through the process of estate planning.
——-
Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.
Most seasoned CRBs know the difference between an ordinary asset and a capital asset classification of real properties owned by different persons. And, most all know the types of internal revenue taxes that are due on the sale of the different asset classes.
As a review, the sale, barter or exchange of a real estate classified as a capital asset necessitates the payment of capital gains tax (CGT) and documentary stamp tax (DST) only. Meanwhile, if the parcel of land is defined as an ordinary asset of the registered owner then payment of creditable withholding tax (CWT), DST and value-added tax (VAT) is in order.
The biggest percentage of all three taxes is the 12% VAT. And, often, it is the deal breaker in a transaction with both seller and buyer refusing to shoulder the hefty amount of VAT. But, there is a way to avoid paying VAT for a real property defined as an ordinary asset of the registered owner. But, this can only be done if the registered owner is a single-asset corporation.
A common estate planning tool in the 1990s, real properties registered in the name of Family Holding Corporations are typically considered ordinary assets by the Bureau of Internal Revenue (BIR). But, if the deal can be structured where the buyer will purchase the shares of the single-asset family corporation then the payment of VAT can be dispensed with altogether.
Under BIR Revenue Regulation No. 6-2013, the value of the shares of stock at the time of sale shall be the fair market value (FMV) using the Adjusted Net Asset Method. Almost always, using the ANA method of RR No. 6-2013 increases the FMV of the share of stock of the corporation because the BIR would always look for the latest Appraisal Report to determine the current value of the real property and use this value in the computation of the BOOK VALUE of the shares of stock. In its simplest equation, book value is computed as such: total assets minus total liabilities plus retained earnings over the total outstanding number of shares. The value in the appraisal Report is inputted in the asset category.
However, BIR Revenue Regulation No. 20-2020, dated 3 August 2020 changed the rules again to determine the FMV of shares of stocks of corporations not listed and traded in the local stock exchange. Upon the effectivity of the latest Revenue Regulation, the following rule shall apply: “For common shares of stock, the BOOK VALUE based on the latest available financial statements duly certified by an independent public accountant prior to the date of sale, but not earlier than the immediately preceding taxable year, shall be considered as the prima facie fair market value.” What is the effect of this latest regulation?
Since BIR will no longer require the latest Appraisal Report then the FMV of the shares of stock of a single-asset corporation will definitely be lower versus the previous rule using the ANA Method. Finally, please remember that RA 10963 (TRAIN Law) increased the 5%-10% tax rates to a single 15% single tax rate on net capital gains realized by a person or domestic corporation from the sale, barter, exchange, or other disposition of shares of stock in a domestic corporation not traded in the local stock exchange.
Now, the manner and propriety of using a Family Holding Corporation as a wealth-preservation tool in the current regulatory environment is a totally different matter. But, it is observed that setting up a Family Holding Corporation is still somewhat popular among estate planners in today’s setting, “despite its dubious ability to actually save on taxes and transfer fees,” as Atty. Edson T. Eufemio said in his 2004 article in the Philippine Law Journal.
——-
Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.
“Frankly, for Die Broker this isn’t estate planning, it’s premature death planning.”
– Stephen M. Pollan and Mark Levine, authors of “Die Broke: A Radical, Four-Part Financial Plan”
By Realttorney®
Estate planning is the process of making decisions regarding the ownership and distribution of assets upon death, and taking proactive steps to increase and maximize the value of the estate while minimizing legal costs, taxes, and other expenses associated with death. It is a necessary process for everyone, no matter their age or financial situation.
Creating an estate plan is a significant part of financial planning for any individual. Creating an effective and comprehensive estate plan is a critical step for anyone looking to secure and protect their assets after death. As such, a comprehensive estate plan is composed of several components, which typically include a will, powers of attorney, health care directives, tax planning, and beneficiary designations.
A willis a formal document that dictates how the assets will be divided by the compulsory heirs upon the decedent’s death. Powers of attorney is a document executed that appoints someone to handle financial and medical decisions in the event the individual is incapacitated. Health care directives is a document written to provide instructions for medical care in the event of incapacity or death. In addition, tax planning should be taken into account to minimize the estate’s tax liabilities. Lastly, beneficiary designations should be established to ensure that the assets are distributed according to the individual’s wishes.
When creating an estate plan, it’s important to tailor the plan to the individual’s specific needs. Every person’s assets, family structure, and personal preferences are unique. Estate plans should be created with these specific needs and situations in mind in order to ensure that the individual’s wishes are properly executed upon his/her passing.
Estate planning services can be provided by a variety of professionals, depending on the complexity of the plan. Attorneyshave the legal understanding to create the necessary documents and ensure that they are legally binding. Financial advisors can provide advice on how to maximize the value of the estate, as well as minimize taxes. Life insurance agents can provide advice on insurance policies that can help to protect the estate and/or the beneficiary-heirs. And, depending on the complexity of the estate plan and the individual’s needs, other professionals may also be consulted – investment bankers, and real estate brokers, among others.
In other words, estate planning can also be defined as a multi-disciplinary endeavor for designing a program for the effective management, enjoyment, and disposition of property – personal and real – of the planner at the least possible tax cost and avoidance of probate.
Therefore, it is important to find a professional who is qualified and experienced in estate planning, so that the estate plan put in place is wide-ranging and personalized to the individual’s particular needs.
On a final note, I leave you with an important insight of Atty. Edson T. Eufemio on why estate planning is not widespread and acceptable among Filipinos. He said: “In the Philippines, legal concerns are not the only ones that stand in the way of bringing the benefits of estate planning to the public. Cultural factors also exist since people rarely enjoy discussing mortality, especially their own. Further, children bringing up the benefits of estate planning to parents will seem like eager gold diggers.”
It does not matter if you own several or merely one real property. Learn more about estate planning. Research. Ask around. And find the best professional suitable to your needs and personal circumstances.
——-
Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.
“The Family Code itself provides in Article 76 that marriage settlements cannot be modified except prior to marriage.”
– Mr. JusticeRoberto A. Abad, in Pana v. Heirs of Jose Juanite, Sr. et al.G.R. No. 164201, December 10, 2012
By Realttorney®
I was referred to an online article entitled “What is a Post Nuptial Agreement in the Philippines?” last year, which when read by non-lawyers gives an impression that is contrary to legal tenets based on the Family Code of the Philippines.
The article gives sound estate planning advice when it stated that couples should consider prenuptial agreements before getting married and discuss amongst themselves their income and financial objectives. However, it gets dicey after that.
The article states the following:
“A postnuptial agreement is a contract you and your spouse sign after you are married to resolve marital trouble. It is comparable to a prenuptial agreement. However, it takes place after the Marriage. For couples who marry without a prenuptial agreement, it is not too late to establish a postnuptial agreement that addresses concerns of property division, financial management, spousal support, and business split in the event of a divorce or annulment.”
In fairness, the article recommends that couples seek the guidance of a lawyer. It says that lawyers “can counsel you and will know what must be done for your jurisdiction.” Now, when I read this, I know that this article was written by someone living in the United States. And, the person who posted this article on the Philippine-based website, did not even bother to cite the source.
On the whole, the article gives the layman the impression that married couples can just visit a lawyer and ask him/her to prepare or draft an agreement that will divide their assets, pay the marital debt, child support, spousal support, and asset distribution in case of annulment, etc. Thereafter, when every provision is in order and to the satisfaction of the couple, they will sign the agreement, have it notarized and keep it somewhere safe where it can be accessed when the need arises.
To make things absolutely clear for unsuspecting couples, there is no such thing as a postnuptial agreement in the Philippines. If the couples married without a prenuptial agreement then, depending on the date of their marriage, their property regime can be the conjugal partnership of gains or the absolute community of property.
The conjugal partnership of gains or absolute community of property that govern the marriage of couples cannot be modified except before the celebration of that marriage.
Post-marriage modification of such property regimes can take place only where: (a) the absolute community or conjugal partnership was dissolved and liquidated upon a decree of legal separation; (b) the spouses who were legally separated reconciled and agreed to revive their former property regime; (c) judicial separation of property had been had on the ground that a spouse abandons the other without just cause or fails to comply with his obligations to the family; (d) there was judicial separation of property under Article 135; (e) the spouses jointly filed a petition for the voluntary dissolution of their absolute community or conjugal partnership of gains.
Hence, if the married couple wants to modify their property regime to take into account the division of assets, payment of child and spousal support, and division of assets during the lifetime of the marriage or when it is terminated or annulled, they have to seek the imprimatur of the Family Court to do it. It is not as simple as asking a lawyer to draft a contract that the couple will sign and produce legal effects after its execution.
I hope this article clarifies the issue of postnuptial agreements in the Philippines. There are numerous effects of the Family Code on ownership of properties by married couples, common law spouses, and their children. One just has to seek property guidance and advice from a reputable professional.
——-
Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.
Under the Constitution aliens may not acquire private or public agricultural lands, including residential lands…
– Mr. Chief Justice Manuel V. Moran, Krivenko vs. Register of Deeds
By Realttorney®
No, we will not be discussing those non-earth beings. We are going to talk about aliens who are earthly beings belonging to a foreign country or nation. Plainly speaking, non-Filipino citizens.
A colleague of mine sent an email requesting advice regarding her client. The part of the email is quoted as follows:
“I would want to consult with you regarding the concern of my client. The husband is a foreigner and the wife is a Filipina. The husband’s concern is that: in case his wife passes away ahead of him, what will happen to the property (house and lot in Las Piñas City) they are buying. What is the remedy that the family of his wife will not demand right to the property leaving him helpless, they don’t have any kid.”
I first lectured on the topic “Foreign Ownership of Land and Real Estate” in February 2011. Since more than a decade has passed, let us revisit the topic of foreign ownership of land in the Philippines and one of its exceptions.
We’ll also revisit a 40-year-old jurisprudence promulgated by the Supreme Court and shed a new interpretation that is not commonly discussed in various online articles posted on various websites. Of course, an in-depth discussion on the Law on Succession under the Civil Code of the Philippines and how it affects the transfer of real property to foreigners who are legally married to Filipino spouses via last will and testament.
It is a common occurrence that when an alien spouse marries a Filipino citizen, the former is the main source of funds for the purchase of a house and lot in the Philippines. Thereafter, the real property will be registered in the name of the Filipino spouse.
As real estate brokers, we know the answer to the question: Can aliens buy land in the Philippines? As a general rule, only Filipino citizens (natural or juridical) can own land in this country. Accordingly, foreigners are not allowed to own land in the Philippines. This is a constitutional prohibition that will not be changed anytime soon.
But every general rule has exceptions. One particular exception to the general rule written above is Section 7, Article XII of the 1987 Philippine Constitution, which is quoted hereunder:
“Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.”
The case of Krivenko vs. Register of Deeds(G.R. No. L-630, November 15, 1947) eloquently discussed the purpose for the same provision in the 1935 Philippine Constitution – then Section 5, Article XIII, to wit:
“…section 5 is intended to insure (sic) the policy of nationalization contained in section 1 [Article XIII of the 1935 Constitution]. Both sections must, therefore, be read together for they have the same purpose and the same subject matter. It must be noticed that the persons against whom the prohibition is directed in section 5 are the very same persons who under section 1 are disqualified ‘to acquire or hold lands of the public domain in the Philippines.’ And the subject matter of both sections is the same, namely, the non-transferability of ‘agricultural land’ to aliens.” (boldfacing ours, for emphasis)
In the end, the Krivenko doctrine clearly held that “under the Constitution, aliens may not acquire private or public agricultural lands, including residential lands.” However, because of Section 7 [then Section 5, Article XIII of the 1935 Constitution] aliens are given a chance to own real estate in the Philippines. It is clear that aliens can own real estate in the Philippines through hereditary succession.
To answer the question stated above, if the Filipina passes away before the alien spouse then the latter will be able to own a part of the real estate registered in the name of the Filipina wife through hereditary succession. Of course, this is under the assumption that the marriage between the Filipina and the alien spouse is considered legal under Philippine laws.
But, what does “hereditary succession” actually mean? Can the foreigner own the land if it was bequeathed to him/her by the Filipino spouse through a last will and testament? And, what part of the property will the alien spouse own in the end, after the estate of the Filipino spouse has been settled?
In layman’s terms, hereditary succession is the passing or division of an estate when a person dies without a will. It is also known as intestate succession. Therefore, the 1987 Constitution is clear that the only way an alien spouse can own real estate in the Philippines is through intestate succession. Hence, the Filipina spouse must not execute any will (notarial or holographic) during her lifetime bequeathing her real property to her alien spouse. She must die intestate. That is the constitutional edict.
And according to various lawyer-authors, bequeathing the real property to alien spouses through a will shall be contrary to the dictates of the Supreme Court of the Philippines in the case of The Testate Estate of Jose Eugenio Ramirez vs. Marcelle Vda. De Ramirez, et al. (G.R. No. L-27952, February 15, 1982).
However, as an estate planning attorney, I would never recommend that a Filipino pass away intestate. The default estate plan of the State is contained in the provisions of the Law of Intestate Succession – Articles 960 to 1014, and numerous provisions in Chapter 4 [Provisions Common to Testate and Intestate Successions], Title IV of Book III of the Civil Code of the Philippines. Following the estate plan of the State is not the best way to dispose of one’s properties after passing away.
Hence, if a Filipino spouse passes away intestate and there are no other legitimate descendant, ascendant, or sibling who survives with the alien spouse, the latter will inherit the entire estate of the former. Article 995 of the Civil Code mandates this.
According to Article 997 “When the widow or widower survives with legitimate parents or ascendants, the surviving spouse shall be entitled to one-half of the estate, and the legitimate parents or ascendants to the other half.”
However, “should brothers and sisters or their children survive with the widow or widower, the latter shall be entitled to one-half of the inheritance and the brothers and sisters or their children to the other half.” This is provided by Article 1001 of the Civil Code.
So, let us revisit Ramirez vs. Vda. De Ramirez to get a fresh perspective as to what other successional rights an alien spouse has based on his valid marriage to a Filipino spouse. Keep in mind that Jose Eugenio Ramirez is a Filipino, while Marcelle Vda. De Ramirez is the widow who is a French citizen. And, they had no children between them.
The part of the decision that has been quoted numerous times by lawyer-authors in the case of Ramirez vs. Vda. De Ramirez is this:
“We are of the opinion that the Constitutional provision which enables aliens to acquire private lands does not extend to testamentary succession for otherwise the prohibition will be for naught and meaningless. Any alien would be able to circumvent the prohibition by paying money to a Philippine landowner in exchange for a devise of a piece of land.”
When read plainly, it seems that the Supreme Court prohibits the acquisition of land by an alien through testamentary succession for the simple reason that if allowed “the prohibition will be for naught and meaningless.” However, this is a mere obiter dictum of our Supreme Court.
For the laymen, an obiter dictum is an opinion “uttered by the way, not upon the point or question pending, as if turning aside from the main topic of the case to collateral subjects,” or the opinion of the court upon any point or principle which it is not required to decide, or an opinion of the court which does not embody its determination and is made without argument or full consideration of the point and is not professed deliberate determinations of the judge himself. (People of the Philippines vs. Hon. Higinio Macadaeg, et al., G.R. No. L-4316, May 28, 1952)
Why do I say that this pronouncement of the Court is a mere obiter dictum? The pronouncement was made while the Court was discussing the “appellants claim that the usufruct over real properties of the estate in favor of Wanda [the companion of Jose Eugenio Ramirez, who is an Austrian] is void because it violates the constitutional prohibition against the acquisition of lands by aliens.”
The next paragraph in the decision is very telling, and I quote:
“This opinion notwithstanding, We uphold the usufruct in favor of Wanda because a usufruct, albeit a real right, does not vest title to the land in the usufructuary and it is the vesting of title to land in favor of aliens which is proscribed by the Constitution.”
So, the ruling of the Supreme Court as regards the usufructuary rights bequeathed to Wanda via testamentary dispositions of the testator (Jose Eugenio Ramirez) was upheld. And in the own words of the Court, that often-quoted pronouncement stated above is a mere opinion. And thus, it is a mere obiter dictum.
Another reason why the often-quoted pronouncement is an obiter dictum is the final distribution of the estate of Jose Eugenio Ramirez in the dispositive portion of the decision of the case. The testamentary disposition of Jose Eugenio Ramirez to his wife (Respondent Marcelle D. Vda. De Ramirez) was increased to one-half of the estate (which included land and its improvements) in full ownership because the testator’s original disposition impaired the widow’s legitime.
Article 886 of the Civil Code states that a legitime is that part of the testator’s property which he cannot dispose of because the law has reserved it for certain heirs who are, therefore, called compulsory heirs. Meanwhile, Article 887 (3) identifies the widow or widower as a compulsory heir of a testator.
So, we can correctly state that the Supreme Court allowed the testamentary disposition of the testator to his alien legal wife, who is a compulsory heir, and upheld that the legitime of the alien wife (as compulsory heir) over the entire estate should not be impaired based on Article 904, first paragraph of the Civil Code.
Article 900 of the Civil Code of the Philippines states: “If the only survivor is the widow or widower, she or he shall be entitled to one-half of the hereditary estate of the deceased spouse, and the testator may freely dispose of the other half.”
And, since the alien spouse survived the deceased, he shall be entitled to one-half of the estate over which the Filipina spouse cannot impose a burden, encumbrance, condition, or substitution of any whatsoever. Why is this so? Based on Article 904, paragraph 2, the testator cannot impose upon the compulsory heir “any burden, encumbrance, condition, or substitution of any kind whatsoever.”
Also, take note that the brother and/or sister is not a compulsory heir of the Filipino spouse. But, the legitimate ascendants (parents and/or grandparents) are compulsory heirs pursuant to Article 887 (2) of the Civil Code.
As a consequence, “if the testator leaves no legitimate descendants, but leaves legitimate ascendants, the surviving spouse shall have a right to ¼ of the hereditary estate.” (Article 893, Civil Code) The one-fourth shall be taken from the free portion of the estate. Meanwhile, according to Article 889, “the legitime of legitimate parents or ascendants consists of ½ of the hereditary estate of their children and descendants.”
Therefore, if the alien spouse and a legitimate parent survive the testator then the former is allowed to have ¼ of the estate as legitime and the legitimate parent is entitled to ½ of the estate as legitime as well.
Hence, regardless of what is the legitime of the alien spouse, we should be aware that an alien can own land in the Philippines through a testamentary disposition from a Filipino spouse, whose marriage is valid under Philippine laws. I dare say that this is an addition to the constitutional exception to the general rule discussed above.
And if I may posit an obiter of my own, any testamentary disposition of a Filipino testator to an alien who is NOT a compulsory heir of the testator comes under the ambit of the constitutional prohibition disallowing aliens from owning lands in the Philippines.
In summary, we learn from the case of Ramirez vs. Vda. De Ramirez, that any testamentary disposition by the Filipino spouse to the alien spouse should not be less than one-half of the entire estate if they have no child. Remember, the legitime of the alien spouse, as compulsory heir, should not be impaired.
But, what about the free portion of the estate of the testator? Can the Filipino spouse bequeath the free portion, in this case, the remaining one-half of the estate to the alien spouse? Or the remaining one-fourth if the widower survives with the parents of the Filipino spouse?
That would be another discussion at some point in the future.
I hope I have fully answered the question of my colleague and sincerely hope that their buying decision can be guided by this article. And I end by quoting the decision in the same Krivenko case mentioned above, to wit:
“aliens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire.”
Happy selling to my fellow CRBs of the Real Estate Brokers Association of the Philippines, Inc. (REBAP). God bless all licensed and accredited Real Estate Service Practitioners in the Philippines.
——-
Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEP®) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.
