Estate Settlement

Last Wednesday, we had Atty. Jojo Mejia talk about Estate Settlement Taxation and Planning in the Light of Train Law.

I found the talk very, very informative because Atty. Mejia discussed less about what the law says and more about how it is ACTUALLY practiced. Here are my takeaways.

1. In his opinion, estate planning has become less relevant with the TRAIN law. Since donation and estate taxes are now the same (6%), you're better off dying and paying the estate tax. You'll pay less taxes because of the allowed deductions from an individual's estate.

2. The reason why estates aren't settled in the PH, even with the estate tax amnesty, is because of the difficulty of finding all the heirs/signatories. People are forced to forge the signatures of the missing heirs.

3. Between creating a will and just abiding with the government's prescription on how estates should be settled, decedents are better off with the latter. The reason is that most wills are considered void because of the strict rules they have to follow. For example, if a witness who is hearing the will of someone who is just about to pass away looks away from that person even for just a second (e.g., looks at the clock to check the time), the validity of the will can be questioned.

Another reason he gave for not going through the "will" method is due to the high cost of probate proceedings (having the court decide the validity of the will). So unless the decedent's estate is large enough, the "will" method might not be worth it.

4. If the tax regulator knew that a decedent (someone who has passed away) owned multiple properties, it would require the settlement of the WHOLE estate. Conversely, it will NOT ALLOW the estate settlement on a per-asset basis.

JPRE: I'll explain why this is important in next Tuesday's Horror Story post.

5. He does not recommend going through with the "Extra Judicial Settlement with Absolute Sale" method. Parties are better off separating the two transactions.

6. Sec. 4 Annotation: The 2-year prescription period is based on the date of annotation on the title, not the date of the instrument.