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  • From Expired to Revived: SEC Rules on Reviving Corporations

    “This will translate to more market players competing, introducing innovations and more choices, and creating employment opportunities, among others.”

    – Emilio B. Aquino, Former SEC Chairperson [on the revival of expired corporations under the Revised Corporation Code and SEC MC No. 23]

    (Part 4 of 4)

    By Realttorney®

    On November 21, 2019, the Securities and Exchange Commission (SEC) of the Philippines issued Memorandum Circular No. 23, Series of 2019 (MC No. 23), also known as the Guidelines on the Revival of Expired Corporations. This circular was prompted by the passage of the Revised Corporation Code of the Philippines (Rep. Act No. 11232), which grants perpetual existence to corporations unless otherwise specified.

    Under this new framework, corporations that expired under the old Corporation Code of 1980 now have a chance to revive their corporate existence through a verified petition filed with the SEC.

    For entrepreneurs, corporate officers, and heirs of deceased stockholders, understanding how to revive an expired corporation is critical for preserving business interests, real estate assets, and corporate continuity. This is especially important if the “dead corporation” has real estate registered in its name.

    What is Corporate Revival?

    Corporate revival is the legal process of restoring a corporation that has expired due to the lapse of its original term of existence. Once revived, the corporation regains its juridical personality, rights, and obligations as if its expiration never occurred.

    This concept differs from re-registration, which creates a brand-new corporate entity. Revival, therefore, is more advantageous for corporations with assets (real estate), liabilities, or pending transactions that need continuity.

    Who Can File for Revival Under SEC MC No. 23?

    The following corporations are eligible to apply for revival:

    ✅ Expired corporations whose original term of existence stated in their Articles of Incorporation has lapsed.

    ✅Corporations suspended or revoked for failure to file reports (e.g., General Information Sheet, Audited Financial Statements).

    ✅ Expired corporations whose names have been reused by another corporation already registered with the SEC.

    📌 Pro Tip: Even if your corporate name has been reused, you may still revive your expired corporation under a different corporate name approved by the SEC.

    Corporations Not Qualified for Revival. Not all corporations may file for revival. MC No. 23 specifically disqualifies:

    ✅ Corporations that have completed the liquidation of assets.

    ✅ Corporations whose registration was revoked for causes other than non-filing of reports (e.g., fraud, serious violations).

    ✅ Corporations dissolved under the Anti-Dummy Law (C.A. No. 108, as amended).

    ✅ Corporations that have already undergone re-registration under SEC MC No. 13, Series of 2019, unless the re-registered entity consents to dissolution or a name change in favor of the expired corporation.

    Step-by-Step Procedure for Revival of Expired Corporations. If your corporation is qualified, here’s how to revive your corporate existence with the SEC:

    1. Secure Approval from the Board and Stockholders

    • A majority of the Board of Directors or Trustees must approve the revival.
    • A majority of the outstanding capital stock or members must also consent.

    2. File a Verified Petition with the SEC

    • Submit a Verified Petition for Revival of Corporate Existence.
    • Include the required details under Section 6 (a) of MC No. 23 (corporate name, incorporation date, expiration date, grounds for revival).
    • Attach the documentary requirements listed in Section 7 (Articles of Incorporation, By-Laws, latest GIS, audited financials, etc.).

    3. Publish the Petition

    • Publish the petition stamped “received” by the SEC in a newspaper of general circulation within 15 days from filing.
    • File proof of publication with the SEC.

    4. Opposition and Clarificatory Conference

    • Interested parties, such as creditors or heirs of stockholders, may file an opposition.
    • The SEC may schedule a clarificatory conference to resolve issues.

    5. Issuance of Certificate of Revival

    • Once approved, the SEC issues a Certificate of Revival of Corporate Existence.
    • The revived corporation is restored with all rights, privileges, duties, debts, and liabilities it had prior to expiration.
    • Unless otherwise stated in the Verified Petition, the revived corporation is granted perpetual existence.

    Legal and Business Effects of Revival

    Reviving a corporation has significant legal and financial implications:

    👉 Continuity of Legal Personality – The revived corporation is treated as though no expiration occurred.

    👉 Restoration of Rights and Privileges – It regains its franchise, contracts, and ability to transact.

    👉 Accountability for Liabilities – All prior debts, obligations, and liabilities remain enforceable.

    👉 Perpetual Existence – Unless specified, the revived entity now enjoys perpetual corporate life under the Revised Corporation Code.

    Revival vs. Re-registration: What’s the Difference?

    Revival Re-registration  
    Restores the same corporate entity  Creates a new juridical person
    Retains existing assets, liabilities, and contracts  No continuity with prior corporation
    Rights and obligations are revived  New entity must establish rights anew
    Certificate of Revival issued  New Certificate of Incorporation issued

    📌 Pro Tip: For corporations owning real estate, pending cases, or valuable business licenses, revival is often the more practical remedy.

    Practical Importance of Revival for Business Owners and Heirs

    ✅ Estate Planning and Inheritance – Revival allows heirs to maximize the value of corporate shares tied to real estate or businesses.

    ✅ Creditor Rights – Creditors may continue pursuing claims since revival restores liabilities.

    ✅Corporate Restructuring – Useful for family-owned corporations seeking to resume operations or reorganize without starting from scratch.

    Frequently Asked Questions (FAQ)

    ⚠️ Can an expired corporation still own its real estate properties? Yes. Ownership remains with the corporation unless assets have been liquidated. Revival simply restores the corporation’s legal personality to deal with those assets.

    ⚠️ Is revival automatic under the Revised Corporation Code? No. A Verified Petition must be filed with the SEC and duly approved.

    ⚠️ How long does the revival process take at the SEC? Timelines vary depending on the completeness of requirements, publication, and whether there are oppositions. Generally, it may take several months.

    ⚠️ Will a revived corporation automatically have perpetual existence? Yes, unless the petition expressly requests a fixed corporate term.

    🔗 Reference: Click here for the full text of SEC Memorandum Circular No. 23, Series of 2019.

    Conclusion

    The issuance of SEC Memorandum Circular No. 23, Series of 2019, provides a clear legal pathway for the revival of expired corporations in the Philippines. By filing a verified petition, publishing it, and complying with SEC requirements, business owners and heirs can restore corporate existence and preserve both corporate and family assets.

    Whether for business continuity, estate planning, or creditor protection, corporate revival is a powerful tool under the Revised Corporation Code.

    This is the final article of the series that answered the question, How can a “dead” corporation sell its real estate? The third article of the series discussed the significant decisions of the Supreme Court regarding the legal authority and actions of dissolved corporations, particularly discussing the process of liquidating their properties – both real and personal.

    If you have any questions about the process of reviving a “dead” corporation, kindly leave your comments in the comments section.

    ——-

    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 committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.

  • Leveraging the One Person Corporation: A Game-Changer for Estate Planning in the Philippines?

    “A tax-free transfer of real properties to a One Person Corporation merits further study especially when there are several parcels of land to transfer that is meant to be preserved by the heirs or controlled by family for generations to come.”

    – Ernesto C. Perez II, CTEP®, Real Estate & Estate Planning Attorney

    By Realttorney®

    In an era where entrepreneurship is thriving and business structures are evolving, the concept of a One-Person Corporation (OPC) has gained prominence. Introduced under the Revised Corporation Code of the Philippines, the OPC offers unique opportunities for individuals looking to establish a single-owner corporation.

    In this article, we delve into the basics of an OPC, explore its advantages and disadvantages compared to an ordinary stock corporation, and examine the implications of the single stockholder’s demise. In addition, we shall explore the benefits of utilizing an OPC to hold various real properties, highlighting how it can effectively save estate taxes and avoid probate.

    What is a One-Person Corporation?

    A One-Person Corporation is a type of corporation where a single individual can establish and operate a business as a separate legal entity. Unlike a traditional stock corporation that requires a minimum of five shareholders, an OPC enables sole entrepreneurs to enjoy the benefits of limited liability protection and corporate structure without the need for additional shareholders. The OPC structure is governed by the rules and regulations outlined in the Revised Corporation Code of the Philippines.

    Advantages of a One-Person Corporation

    Limited Liability Protection: One of the key advantages of an OPC is the limited liability protection it offers to the sole owner. By establishing a separate legal entity, the personal assets of the owner are shielded from liabilities arising from the corporation’s activities. Therefore, in the event of lawsuits, creditors’ claims, or other unforeseen circumstances, the real properties held by the OPC are protected, safeguarding the individual’s or family’s wealth and ensuring financial security.

    Simplified Management and Decision-Making: Unlike an ordinary stock corporation that requires multiple shareholders and a board of directors, an OPC places decision-making authority solely in the hands of the single stockholder. This streamlined management structure allows for quicker and more efficient decision-making, as well as increased flexibility and control over business operations.

    Greater Privacy and Confidentiality: With an OPC, the single stockholder can maintain a greater degree of privacy and confidentiality compared to a stock corporation. As the sole owner, there is no need to disclose personal information or financial details related to other shareholders. This confidentiality can be advantageous for individuals who value privacy or operate in sensitive industries.

    Consolidation and Management of Real Properties: The OPC allows a single individual to establish a corporation, thereby enabling the consolidation of diverse real properties under one legal entity. This feature is particularly advantageous for families with multiple real estate holdings, as it facilitates centralized control and management. By transferring ownership of these properties to the OPC, families can streamline administrative processes, simplify financial reporting, and enhance asset protection.

    Disadvantages of a One-Person Corporation

    Limited Access to Capital: Since an OPC is owned by a single individual, raising capital can be more challenging compared to a stock corporation with multiple shareholders. Access to financing options such as equity investments or loans may be limited. However, this disadvantage can be mitigated by the owner’s personal financial resources or alternative sources of funding.

    Potential for Personal Liability: Although an OPC provides limited liability protection, there are situations where the single stockholder’s personal assets could be at risk. If the owner engages in fraudulent activities, commingles personal and business funds, or fails to observe corporate formalities, courts may “pierce the corporate veil” and hold the individual personally liable for the corporation’s obligations.

    Succession Considerations for One Person Corporations

    When the single stockholder of an OPC passes away, several scenarios may unfold:

    Transfer through Succession Planning: Prior to the stockholder’s demise, a well-designed succession plan can be implemented. The owner can designate a successor or beneficiaries who will inherit the shares and assume control of the OPC. This ensures the continuity of business operations and facilitates a seamless transition of ownership.

    Transfer through Intestate Succession: If the stockholder does not have a valid will or succession plan in place, the shares and assets of the OPC will be transferred according to the laws of intestate succession. The process may involve court proceedings and the appointment of an administrator to oversee the distribution of assets to the legal heirs.

    Flexibility in Succession Planning: Estate planning is a critical consideration for individuals seeking to ensure the seamless transfer of assets to their heirs while minimizing the impact of taxes and probate. The OPC structure provides considerable flexibility in succession planning, making it an attractive tool for families with substantial real estate holdings. Through shareholding arrangements, the founder can easily transfer ownership of the OPC to family members or chosen beneficiaries while retaining control during their lifetime.

    Estate Tax Efficiency: The use of an OPC as an estate planning tool can significantly reduce the burden of estate taxes. Under the Philippine Tax Code, the transfer of shares in a corporation through inheritance or bequest is subject to a lower tax rate compared to the transfer of real properties. By transferring ownership of real properties to the OPC, the founder can subsequently transfer the shares to the heirs, minimizing the estate tax liability. This strategy effectively capitalizes on the favorable tax treatment of corporate share transfers, resulting in substantial tax savings.

    Probate Avoidance: Probate is a legal process that validates a will and facilitates the distribution of assets to the rightful heirs. However, probate proceedings can be time-consuming, costly, and potentially contentious. By holding real properties within an OPC, these assets are not subject to probate. Instead, the transfer of shares can be carried out through a simple and efficient process, bypassing the complexities and delays associated with probate. This allows for a smoother transition of ownership and ensures that the family’s real properties remain accessible and functional without disruption.

    Conversion to a Stock Corporation: In certain cases, the OPC may be converted into an ordinary stock corporation upon the stockholder’s death. This conversion allows for the admission of new shareholders, enabling the business to continue with a broader ownership base. The conversion process would involve compliance with the necessary legal requirements and filing the appropriate documents with the relevant government agencies.

    Dissolution of the OPC: If there are no successors or heirs willing or eligible to take over the OPC, the corporation may be dissolved. The assets of the OPC would then be liquidated, and the proceeds would be distributed according to the provisions of the Revised Corporation Code and other applicable laws.

    Conclusion

    The advent of the One Person Corporation has opened up new possibilities for entrepreneurs seeking to establish a business as a separate legal entity with limited liability protection. The OPC offers advantages such as streamlined decision-making, enhanced privacy, and simplified management. However, potential challenges include limited access to capital and the risk of personal liability if corporate formalities are not followed.

    Be that as it may, the One Person Corporation (OPC) has gained notoriety among a wide range of Filipinos, not just entrepreneurs. This innovative legal framework also offers significant advantages for individuals seeking to consolidate and manage their family’s real properties, while also serving as a strategic estate planning tool.

    When it comes to succession planning, the single stockholder of an OPC must consider the future of the corporation upon their passing. By implementing a well-thought-out succession plan, the owner can ensure a smooth transition of ownership and the continued operation of the business. Alternatively, the conversion to a stock corporation or the dissolution of the OPC may be appropriate depending on the specific circumstances.

    Likewise, the One Person Corporation has brought about significant benefits for individuals seeking to consolidate and manage their family’s real properties. Additionally, it offers a unique opportunity to strategically utilize the OPC as an effective estate planning tool, allowing families to save on estate taxes and avoid probate. By taking advantage of the OPC structure, families can achieve enhanced asset protection, centralized management, and seamless succession planning while optimizing tax efficiency. As always, it is recommended to consult with legal and financial professionals to tailor these strategies to individual circumstances and ensure compliance with relevant laws and regulations.

    As with any legal and financial matters, it is essential for individuals considering the establishment of a One Person Corporation or implementing succession and estate plans to seek advice from qualified professionals who can provide guidance tailored to their specific needs and circumstances. By doing so, entrepreneurs can maximize the benefits of an OPC while effectively addressing potential challenges and ensuring a secure future for their businesses and the well-being of their families.

    ——-

    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.

  • Now is the Time to Talk About Your Estate Plan

    “Making an estate plan is taking action from the heart. Estate planning is a gesture that comes from a place of love and caring for those who depend on you.”

    – Connie Aschenbrenner Estate Planning Attorney in the State of Alaska
    Photo by Mike Bird on Pexels.com

    By Realttorney®

    It is ten days before the end of the year. Typically, you will see on television programs the yearend reviews about the economy, and specific sectors or industries in the Philippines. Sadly, part of this yearend review consists of recalling personalities or celebrities who suddenly and unexpectedly passed away during the year.

    Think about your situation now. If you suddenly die tomorrow, what will happen to your immediate family – your spouse and children or your old parent living with you? How will be taken care of? Who will care for your children when they are not yet of legal age?

    Who will care for your child with special needs or an old relative depending on you for support, if this is applicable in your situation? What will happen to your properties – real and personal? Can your immediate family members continue your business venture?

    There are so many questions to ask. And the answers are very difficult to provide. But the questions can only be answered if you are willing to sit down and commit to talking about your estate plan.

    Talking about estate planning is always very difficult for a vast majority of people because most of us cannot imagine what things would be like after we die. But, I argue, that it is precisely what we should be doing – imagining what and how our loved ones would live after we are gone. We must look at and consider the different scenarios that will affect the quality of life of our loved ones when we pass away or become incapacitated for a long time.

    Every family situation is unique. Hence, every estate plan is very much different from the next. There is no one-size-that-fits-all plan when you want to set up one. Estate Planning is, according to one author, premature death planning. So, what exactly is an estate plan?

    Your estate plan is a tool where you communicate your wishes when you die or become incapacitated permanently or for a long time. It is a set of instructions to your loved ones on how you will be remembered and how they will be provided financially when you are no longer present or unable to dictate your wishes personally. It is also a road map on how your debts and other liabilities will be settled, as well as how the business will go on without you at the helm.

    Several days ago, the husband of a lady lawyer passed away. He was 31 years old. So much of life ahead but cut short. The couple had a two-year-old and a baby several months old, it seems. When I read the news, the first thing that came to my mind was the welfare of the children.

    The second thing was I hope the couple was savvy enough to get life insurance for each spouse and prepare a simple estate plan. Purchasing life insurance is part and parcel of an estate plan because it is one of the basic tools of estate planning.

    It does not matter whether you have a large or small estate, or you are just starting out in life; whether you are single or married; or whether you are separated or estranged from your legal spouse. Every Filipino of legal age, who is gainfully employed and has dependents – young or old – for financial or economic support must have an estate plan in place, as you as possible.

    WHERE DO YOU START? If you are now convinced that you need to take this estate planning seriously, how do you begin the process? Here are my suggestions for you to consider:

    1. Research on the topic exhaustively. The first thing to do is to go to Google, type in the words “estate planning in the Philippines” in the search bar, and press ENTER. There are multitudes of articles for you to start reading. When you read these articles, please take down copious notes so that you can go back to read them after going over the rest of the articles that Google suggested.

    2. Learn about the basic estate planning tools. In your quest for information, you must know what are the basic tools that are available and applicable to the Philippine setting. There are plenty of articles about basic estate planning tools that are written by authors from the United States. Again, you must take down notes so that you know what each tool can do and what are the best tools that are needed for your situation.

    3. Take note of your current family situation. You must take stock of where you are in life when you begin the process of planning for your demise. Are your children still minors? If yes, then you must think about who you will appoint as guardian if you die suddenly.

    This is also very much true if you have a child with special needs, like me. How will your child be cared for? Who will bring your child to therapy – occupational or speech, or both? How will the cost of the therapies be paid for?

    Do you get the picture? Do you get the sense of how to go about meticulously planning for this eventuality in your life? Take notes, make a mind map, or draw a flow chart. Whatever it takes to capture your thoughts on paper, or the computer will be worth it.

    4. Talk to your immediate family or nearest of kin. It is my opinion that an estate plan should not be made or crafted in secret. You must talk to your spouse or immediate family members whom you will rely on to execute your plan to perfection. Pick out the relatives who you can trust and make them involved in the process. Get their input and comments on certain things that you want done when you are gone. Again, take note of what they say positively as well as their objections to certain things.

    Now that you have more than a handful of notes, what do you do will all this information? Learn them by heart. And when you are ready, it’s time to reach out to a professional. Estate planning is a multi-disciplinary approach to crafting your plans after you have passed. These experienced professionals – estate planning attorneys, certified public accountants, life insurance brokers, licensed real estate brokers, registered financial planners, etc. – will guide you in preparing an estate plan that is tailored to fit your needs.

    Once you have made your estate plan, with the able assistance of various professionals, please remember that its contents are not set in stone. It can be changed and revised based on the changes in your family circumstances or life-altering events that affected your health or your business.

    In conclusion, Connie Aschenbrenner said, “Don’t wait until a crisis arises to begin the conversation. In a crisis, you may not have the time to fully consider your options. Or you may be incapacitated and unable to decide on anything at all.”

    Estate Planning is more than just premature death planning. It is a protection plan for the lives of your survivors, according to Ms. Aschenbrenner. Don’t wait before it is too late. Start the process of planning your estate now. The Google search bar awaits you.

    ——-

    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 (CTEPTM) professional who is committed to educating Filipinos about the value and importance of having an estate plan in their lives.

  • Understanding Joint Wills and the Alternatives for Couples in the Philippines

    “Some people decide all the estate planning they want is a will. They prefer the ease of using a will to the more complicated methods needed to avoid probate or reduce death taxes.”

    – Atty. Denis Clifford, Author of “Plan Your Estate with a Living Trust”

    By Realttorney®

    In the Philippines, joint wills, which are wills executed by two or more persons, are prohibited under Philippine law. Joint wills are wills that are typically executed by married couples, where they express their wishes for the distribution of their assets after their deaths in a single document. However, due to legal restrictions, couples in the Philippines need to explore alternative options to effectively execute their last will and testament. In this article, we will delve into the prohibition of joint wills in the Philippines and discuss the best alternatives for couples who wish to execute their wills.

    Prohibition of Joint Wills in the Philippines

    Under Philippine law, joint wills are not recognized and are considered null and void. Article 818 of the Civil Code of the Philippines provides that “two or more persons cannot make a will jointly, or in the same instrument, either for their reciprocal benefit or for the benefit of a third person.” This means that couples cannot create a single joint will expressing their joint wishes for the distribution of their assets after their deaths. This prohibition is rooted in the principle of freedom of testation, which allows individuals to freely express their own wishes and preferences in their last will and testament.

    Reasons for the Prohibition of Joint Wills

    The prohibition of joint wills in the Philippines is based on several reasons. One of the main reasons is to ensure that each person has the freedom to express their own individual wishes and preferences in their will. Joint wills can potentially create conflicts of interest between the parties involved, as their interests may change over time or after the death of one of the parties. Additionally, joint wills can also be vulnerable to undue influence or fraud, as one party may unduly influence the other in the preparation of the will.

    Best Alternatives for Couples

    Despite the prohibition of joint wills in the Philippines, there are several alternatives that couples can consider to effectively execute their last will and testament:

    Separate Wills: Couples can create separate wills, wherein each spouse executes their own individual will expressing their own wishes and preferences for the distribution of their assets. This allows each spouse to freely express their own wishes (or make specific bequests as each desires) without any conflicts of interest or potential undue influence.

    Mutual Wills: Couples can also consider executing mutual wills, which are separate wills that contain reciprocal provisions. Mutual wills are typically used by couples who want to leave their assets to each other and then to their chosen beneficiaries after both spouses have passed away. Mutual wills can include provisions that restrict the surviving spouse from changing the beneficiaries or the distribution of the assets after the death of the first spouse.

    Moreover, mutual wills typically contain an agreement not to revoke or alter the terms of the will without the consent of the other spouse. Mutual wills are often used to ensure that the surviving spouse is taken care of and that the agreed-upon distribution of assets to heirs or beneficiaries is carried out.

    Trusts: Another alternative is to create a trust or a series of trusts as part of an estate plan. Trusts can be established during the lifetime of the spouses or through their wills. A trust allows assets to be managed and distributed according to the specific instructions outlined in the trust document. It can provide for the surviving spouse’s needs while also ensuring that the assets are ultimately distributed to the intended beneficiaries.

    Family Arrangements: While not legally binding like wills or trusts, some couples may choose to rely on family arrangements. This involves open discussions and agreements among family members about the distribution of assets after the couple’s passing. While such arrangements may be informal, they can help guide the family and reduce potential conflicts. Just make sure that all the children are on the same page and will strictly follow the arrangements outlined by the parents.

    It is important to consult with a qualified attorney or estate planning professional in the Philippines to ensure that the chosen alternative aligns with existing laws and the Rules of Court. Experienced estate planning attorneys can provide personalized guidance based on the couple’s specific circumstances and help draft the necessary legal documents to establish an effective estate plan.

    Conclusion

    While joint wills are prohibited in the Philippines, couples have alternative options to effectively execute their last will and testament. Separate wills, mutual wills, and trusts are recognized under Philippine law and can provide couples with the flexibility to express their individual wishes and preferences for the distribution of their assets after their deaths. It is essential for couples to seek legal advice from a qualified estate planning attorney to ensure that their wills or trust agreements or documents are valid and comply with the legal requirements in the Philippines. Proper estate planning can provide peace of mind for couples and their loved ones, ensuring that their assets are distributed according to their wishes after their deaths.

    ——-

    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.

  • Cultivating Your Legacy: Understanding Probate and the Role of Wills in Estate Planning

    “Wills are trumped by legal titles to real estate or beneficiary designations on financial accounts, retirement plans and insurance policies.”

    – Jean Chatzky, President & CEO of HerMoney, Personal Finance Columnist

    By Realttorney®

    When it comes to estate planning, many individuals may assume that simply creating a will is enough to ensure that their assets are distributed according to their wishes. However, there is much more to estate planning than just executing a Last Will and Testament.

    One of the key considerations in estate planning is understanding probate and the role that will play in this process, especially in the context of the Philippine Law on Succession. Do you really need a Will or are there tools that are more appropriate to your current situation and circumstances?

    According to the Civil Code of the Philippines, there are two kinds of will – notarial and holographic. A holographic will is one which is entirely written, dated, and signed by the hand of the testator. According to Article 810 of the Civil Code, “It is subject to no other form, and may be made in or out of the Philippines and need not be witnessed.”

    Meanwhile, a notarial will is one which is signed and sworn to by the Testator (or signed for him/her by a person in his/her presence at his/her express direction), then likewise signed and sworn to by three credible witnesses all in each other’s presence and acknowledged before a notary public, who is not obligated to retain a copy of the notarial will being notarized.

    If you did execute a will, what happens next?

    Article 838 states that “No will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court.” In addition, the Testator may, during his/her lifetime, petition the court having jurisdiction for the allowance of his will. In such case, the pertinent provisions of Rule 76 of the Rules of Court for the allowance of wills shall govern.

    Therefore, the allowance or the presentation of a will is a legal process where a will is submitted to a court of competent jurisdiction to be probated. This is a mandatory process, and the probate of the will cannot be dispensed with. Therefore, unless the will is probated, the right of a person to dispose of his property may be rendered nugatory.

    However, the Supreme Court of the Philippines held that in the probate of the will, the authority of the Philippine court is limited to ascertaining the due execution or the extrinsic validity of the will as provided by Section 1, Rule 75 of the Rules of Court. Due execution is “whether the testator, being of sound mind, freely executed the will in accordance with the formalities prescribed by law, as mandated by Sections 805 and 806 of the Civil Code.” [In The Matter of the Petition for the Probate of the Will of Consuelo Santiago Garcia, G.R. No. 204793, June 8, 2020]

    Now you know that the probate process is overseen by a court and can be a lengthy and costly process, depending on the size and complexity of the estate. As an example, the case of the Probate of the Will of Consuelo S. Garcia was filed on August 11, 1997, was and decided with finality by the Supreme Court only on June 8, 2020. It took almost 23 years. Do you want your heirs to litigate for more than two decades?

    This is why informed individuals choose to engage in estate planning to help simplify the probate process and ensure that their assets are distributed according to their wishes, at the soonest possible time, and at the least possible cost. Although I normally dissuade clients from executing a will, this estate planning tool still has its merit.

    The Role of Wills in Probate. A will is a legal document that outlines a person’s wishes for the distribution of his/her assets after he/she passes away. As stated above, when a person dies, the will is presented to the court as part of the probate process.

    The will serves as a roadmap for the court and the executor of the estate (the person appointed to manage the estate during the probate process) to follow when distributing the assets. If the will is valid and there are no challenges or disputes, the assets are distributed according to the instructions in the will.

    If a person dies without a valid will (known as dying intestate), their assets will be distributed according to the Law on Intestate Succession under the Civil Code. I always say that the law on intestate succession is the estate plan of the State for those who did not create their own estate plan. The law on intestate succession distributes your assets to your relatives who you feel do not deserve to get a share of your estate.

    Even though I would dissuade clients from executing a will, I would be remiss not to discuss the process of creating a Will in the Philippines.

    For those who are convinced, creating a will is also an important part of estate planning, as it helps ensure that your assets are distributed according to your wishes. Here are some tips for creating a will:

    1. Work with an Estate Planning Attorney. An experienced estate planning attorney can help you create a will that is tailored to your specific circumstances and meets all legal requirements. They can also help you navigate the probate process and ensure that your wishes are carried out as intended.

    2. Identify Your Assets. Before creating a will, it is important to identify all your assets and how you would like them to be distributed. This includes bank accounts, shares of stock (listed or unlisted in the stock exchange), real estate, vehicles, investments, and all other types of personal properties.

    3. Identify Your Compulsory and Voluntary Heirs. In general, when someone executes a will, their estate is typically composed of two main components: the legitime and the free portion. The legitime is a portion that is legally reserved for compulsory heirs and is distributed according to specific ratios outlined in the Civil Code of the Philippines. On the other hand, the free portion can be bestowed upon anyone (voluntary heirs), so long as the recipient is not legally prohibited from accepting an inheritance or a donation.

    4. Name an Executor. Name an executor in your will who will be responsible for managing your estate during the probate process. This should be someone you trust who is organized and responsible and must be a resident of the Philippines.

    5. Keep Your Will Updated. It is important to keep your will updated as your circumstances change. This includes changes in your assets, heirs, or executor.

    Estate planning is a dynamic process. If you so desire to execute your last will and testament, then you should understand that as your circumstances in life change for the better or worse, after the will is executed, then you have the power and the choice to amend your will or scrap the old and create a new will even.

    Avoiding Probate. If you are now having second thoughts about making or executing a will, then let me share with you why you should avoid probate at all costs. Here are several compelling reasons why you may want to avoid probate:

    1. Time-consuming process: Probate proceedings can be lengthy, often taking years or even decades to complete. During this time, the assets of the deceased are tied up or frozen in limbo, causing delays in distributing them to compulsory and voluntary heirs, if any.

    2. Costly: The probate process is an expensive endeavor, with various fees and costs associated with the process, including court fees, attorney fees, executor fees, and appraisal fees. These expenses can significantly reduce the overall value of the estate.

    3. Lack of privacy: Probate is a public process, which means that the details of the decedent’s assets, debts, and heirs become part of the public record. This lack of privacy may not be desirable for individuals who value confidentiality or privacy.

    4. Loss of control: The probate court oversees the distribution of assets according to the provisions or the terms of the will. However, when the estate is hotly contested the court has the final say in how the assets may be distributed, which may not align with the decedent’s desires or wishes. It is not outside the realm of the discretion of the Court to ask that the litigant-heirs enter into a compromise to put an end to the acrimonious litigation between formerly close relatives.

    5. Family conflicts: Probate proceedings can often lead to family disputes and conflicts. It is impossible to guarantee with complete certainty that an individual’s estate will smoothly transfer to the heirs without any conflicts, particularly when the involvement of in-laws comes into play. Typically, a perceived unequal distribution of the estates among compulsory heirs engenders disagreements or challenges to the will. This conflict can further delay the distribution of assets and create emotional stress for the family members involved.

    6. Business disruptions: If a decedent owned a thriving business, probate can disrupt its operations, especially if the court has to appoint a special executor to manage the business affairs during the probate process.

    To avoid these potential drawbacks, individuals often employ estate planning strategies such as creating living trusts, designating beneficiaries on retirement accounts and life insurance policies, and gifting assets during their lifetime. These strategies can help bypass probate or simplify the process, ensuring a smoother transfer of assets to intended beneficiaries while minimizing costs and maintaining privacy.

    Here are the options to consider avoiding probate through estate planning:

    1. Irrevocable Living Trusts. An irrevocable living trust is a legal document that allows you to transfer ownership of your assets to a trustee while you are alive. This can help avoid probate, as the assets remain in the trust after you pass away and are distributed to your beneficiaries according to your wishes. This can help avoid the probate process altogether.

    2. Gifting. This is commonly referred to as a donation. The National Internal Revenue Code allows for a PhP 250,000.00 tax-free donation by a donor to anyone. By planning for timely and regular donations to one’s heirs, the estate planner would shrink his/her gross estate so that when he/she passes away the estate will not be exposed to a high amount of estate tax.

    3. Beneficiary Designations. Designating beneficiaries for retirement accounts, life insurance policies, and other assets is an important tool to avoid probate because it allows certain assets to pass directly to designated individuals or entities without going through the probate process. Key-Man Insurance for the owner of the business, life insurance policies of the decedent designating his/her children and spouse as beneficiaries, and retirement account proceeds are some concrete examples of this.

    In summary, estate planning is an important process that can help ensure that your assets are distributed according to your wishes. Creating a will may be a part of this process, as it serves as a roadmap for the probate court and the executor of your estate.

    If you are convinced to make a will, then it is important to act immediately and work with an experienced estate planning attorney to ensure that your wishes are carried out as intended. Remember to identify your assets, identify your heirs, name an executor, and keep your will updated.

    But it is likewise important to consider ways to avoid the probate process, such as revocable living trusts, gifting, and beneficiary designations.

    Hence, by taking the time to engage in estate planning and understanding the probate process and its pros and cons, you can help ensure that your assets are distributed according to your wishes and provide peace of mind for you and your loved ones.

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    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.