ESTATE PLANNING
 One of the greatest gifts you can leave your survivors is an
organized estate. The time you spend now will help your
loved ones to cope later, and also will ensure your wishes will
be carried out.
 If you've been successful in managing your money throughout
your life, you'll likely want to decide what happens to it
when your life comes to its end.You need to plan your estate.
Estate planning means arranging how you will leave your money and property
when you die and what you intend to leave for your spouse, children or other
family members. It involves a variety of topics, including:
 writing your will and naming someone to be responsible for carrying out your
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wishes
deciding who will look after your children if you die while they are minors
distributing assets during your lifetime
arranging your assets so that you will pay only the minimum taxes necessary
arranging insurance to cover costs, provide for your survivors and pass on assets
arranging who will handle your affairs if you become unable to manage them
yourself, and giving them directions.
 Estate planning is generally guided by three rational
motivations
1. Provide adequately for family members and/or other loved
ones
2. Ensure that your estate is distributed in the most timely
manner possible after your death
3. Minimize taxes – during your lifetime and, equally
important, for the beneficiaries of your estate
... and three emotional motivations
1. Gain comfort from knowing your loved ones are well looked
after
2. Feel secure knowing that settling your affairs will not add
more stress to those grieving for you
3. Rest assured that your estate will be distributed the way you
wish
Creating your estate plan – Step by
step
Step 1: Consult and retain appropriate professionals. The
complexity of your situation will determine the assistance
you will require from professionals to create your estate plan.
Your team may include an advisor, lawyer and tax planner.
Creating your estate plan – Step by
step
Step 2: Draw up a household balance sheet. A household
balance sheet is a summary of your financial situation that
ultimately determines your overall net worth. Your net
worth is the value of your assets (what you own) minus your
liabilities (what you owe). If you don’t already have one,
work with your advisor to develop your household balance
sheet.
Creating your estate plan – Step by
step
Step 3: Understand your life insurance needs. It’s important to
work with your advisor or insurance expert to match your
long-term financial objectives with your insurance needs.
Creating your estate plan – Step by
step
Step 4: Draw up your Will.
Creating your estate plan – Step by
step
Step 5: Establish power of attorney for property. At some point
in the future you may be unable to make your own financial
or personal care decisions. But you can prearrange for
someone to make these decisions according to your wishes by
having a lawyer draft a separate power of attorney for
property and personal care.
Creating your estate plan – Step by
step
Step 6: Plan your funeral.
Creating your estate plan – Step by
step
Step 7: Name your beneficiaries.
Creating your estate plan – Step by
step
Step 8: Keep track of accounts and important information. One
of the most difficult roles for an executor and family
members is gathering the information required to settle the
estate. Eliminate this concern by centralizing all household
information from birth certificates, passports and other legal
documents, to bank accounts and insurance policy numbers,
to phone company and hydro account details. Once you have
documented your important information, store a copy in a
safe place and let someone close to you know where it is.
Creating your estate plan – Step by
step
Step 9: Give some of your property as gifts before your death.
Creating your estate plan – Step by
step
Step 10: Protect your business with succession plan.
Creating your estate plan – Step by
step
Step 11: Establish an irrevocable trust.
Creating your estate plan – Step by
step
Step 12: Transfer by sale.
Creating your estate plan – Step by
step
Step 13: Incorporate a family corporation.
Creating your estate plan – Step by
step
Step 14: Let someone know. After you have gone through all
the steps of developing an estate plan, the final piece of the
puzzle is communication. It’s really important to
communicate your plans to a family member or close friend
whom you can trust, and who is capable of working with
your advisor to execute your estate plan.
Creating your estate plan – Step by
step
Step 15: Review and update regularly. Review and, if necessary,
update all information at least once a year. By updating your
estate plan, you’ll get a snapshot of where you are on an
annual basis. This gives you the opportunity to trace your
progress and, if need be, to revise your financial plan to get
you where you want to go.
Applicable Taxes
Estate Tax
 is a tax on the right of the deceased person to transmit
his/her estate to his/her lawful heirs and beneficiaries at the
time of death and on certain transfers, which are made by
law as equivalent to testamentary disposition. It is not a tax
on property. It is a tax imposed on the privilege of
transmitting property upon the death of the owner. The
Estate Tax is based on the laws in force at the time of death
notwithstanding the postponement of the actual possession
or enjoyment of the estate by the beneficiary.
Tax Rates
Effective January 1, 1998 up to Present
 If the Net Estate is
Over
But not Over
The Tax Shall
be
Plus
Of the Excess
Over
P 200,000.00
Exempt
P 200,000.00
500,000.00
0
5%
P 200,000.00
500,000.00
2,000,000.00
P 15,000.00
8%
500,000.00
2,000,000.00
5,000,000.00
135,000.00
11 %
2,000,000.00
5,000,000.00
10,000,000.00
465,000.00
15 %
5,000,000.00
1,215,000.00
20 %
10,000,000.00
10,000,000.00
Deadlines
 File the return within six (6) months from decedent's death.
However, the Commissioner may, in meritorious cases, grant
extension not exceeding thirty (30) days.
 When the Commissioner finds that the payment of the estate
tax or of any part thereof would imposed 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 it settled extra-judicially.
What are included in gross estate?
 For resident alien decedents/citizens:
a) Real or immovable property, wherever located
b) Tangible personal property, wherever located
c) Intangible personal property, wherever located
What are included in gross estate?
 For non-resident decedent/non-citizens:
a) Real or immovable property located in the Philippines
b) Tangible personal property located in the Philippines
c) Intangible personal property - with a situs in the Philippines such as:
- Franchise which must be exercised in the Philippines
- Shares, obligations or bonds issued by corporations organized or
constituted in the Philippines
- Shares, obligations or bonds issued by a foreign corporation 85% of the
business of which is located in the Philippines
- Shares, obligations or bonds issued by a foreign corporation if such
shares, obligations or bonds have acquired a business situs in the
Philippines ( i. e. they are used in the furtherance of its business in the
Philippines)
- Shares, rights in any partnership, business or industry established in the
Philippines
What are excluded from gross estate?
 GSIS proceeds/ benefits
 Accruals from SSS
 Proceeds of life insurance where the beneficiary is irrevocably
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appointed
Proceeds of life insurance under a group insurance taken by
employer (not taken out upon his life)
War damage payments
Transfer by way of bona fide sales
Transfer of property to the National Government or to any of its political
subdivisions
Separate property of the surviving spouse
Merger of usufruct in the owner of the naked title
Properties held in trust by the decedent
Acquisition and/or transfer expressly declared as not taxable
Donor’s Tax
 Donor’s Tax is a tax on a donation or gift, and is imposed on
the gratuitous transfer of property between two or more
persons who are living at the time of the transfer. It shall
apply whether the transfer is in trust or otherwise, whether
the gift is direct or indirect and whether the property is real
or personal, tangible or intangible.
Tax Rates
Effective January 1, 1998 to present (Republic Act No.
8424)
But not Over
The Tax Shall
be
Plus
Of the Excess
Over
100,000.00
exempt
100,000.00
200,000.00
0
2%
100,000.00
200,000.00
500,000.00
P 2,000.00
4%
200,000.00
500,000.00
1,000,000.00
14,000.00
6%
500,000.00
1,000,000.00
3,000,000.00
44,000.00
8%
1,000,000.00
3,000,000.00
5,000,000.00
204,000.00
10%
3,000,000.00
5,000,000.00
10,000,000.00
404,000.00
12%
5,000,000.00
10,000,000.00
and over
1,004,000.00
15%
10,000,000.00
Net Gift Over
 Donation made to a stranger is subject to 30% of the net gift.
A stranger is a person who is not a:
 brother, sister (whether by whole or half blood), spouse,
ancestor and lineal descendants; or
 relative by consanguinity in the collateral line within the fourth
degree of relationship.
Deadlines
 Within thirty days (30) after the date the gift (donation) is
made. A separate return will be filed for each gift (donation)
made on the different dates during the year reflecting therein
any previous net gifts made during the same calendar year.
 If the gift (donation) involves
conjugal/community/property, each spouse will file separate
returns corresponding to his/ her respective share in the
conjugal/community property. This rule will also apply in
the case of co-ownership over the property.
Capital Gains Tax
 Capital Gains Tax is a tax imposed on the gains presumed to
have been realized by the seller from the sale, exchange, or
other disposition of capital assets located in the Philippines,
including pacto de retro sales and other forms of conditional
sale.
 Tax Rates: 6%.
 Deadline
Within 30 days after each sale, exchange, transfer or other
disposition of real property.
Lessons’ Learned:
 It is important to have an organized estate plan.
 There are several ways and tools to create an estate plan
depending on one’s goals.
 Taxes differ depending on the type of transfer of property that is
used.
 An estate plan will secure that one’s property is properly taken
care of and is distributed to those who will be left behind by the
decedent.
Thank you.