Category: Real Estate

Here is how inheritance rules are simplified: “Love descends, then ascends, and then spreads.”

On one hand, “descends” means that the children inherit first and, in case of predecease, the children’s children succeed. The surviving spouse inherits like a child; hence, he/she gets a share equal to a child’s share.

“Ascends” in turn pertains to the deceased person’s parents who inherit in the absence of descendants and spouse.

On the other hand, “spreads” refers to collateral relatives, who are the deceased person’s brothers and sisters, or nephews and nieces who inherit in the event the other heirs in the order of succession are no longer alive.

Please note that this principle applies only when there is no last will and testament because, should there be one, half of the estate, termed as “legitime”, of the would-be deceased person is reserved by law to his/her children and surviving spouse while the remaining half or the “free portion” can be bequeathed even to a complete stranger to the family.

Kindly bear in mind further that the same simplified rule finds relevance only to legitimate relationships since illegitimate children only gets one-half of the share of a legitimate child. There is also an “iron curtain rule” in that illegitimate children are not entitled to succeed to and inherit from the legitimate relatives of the deceased person.

By: Atty. Jeremy O. Panganiban

The answer depends on whether the condominium corporation will hold title to the land or will merely lease it from another person/entity.

This is because if it will own the private land, the capital stock of the condominium corporation must be 60% Filipino owned so as not to contravene the prohibition under the Philippine Constitution in relation to the Condominium Act, as amended.

However, if the condominium corporation merely leases the land from another person/entity, particularly from the developer or landowner, then there is no legal impediment for the condominium project, not the land, to be entirely owned by foreigners and, accordingly, there will be no limit to the foreign ownership of the Condominium Corporation, this on the basis of the opinion issued by the Securities & Exchange Commission.

By: Atty. Jeremy O. Panganiban

There are two modes of planning for one’s death as a good way of helping your potential heirs keep the real properties within the family.

The first one is putting up a close corporation: You can set up, and transfer your real properties (land and building) to a “family” corporation. This is essential if you have acquired several pieces of real estate. The transfer to the company that will be put up is tax-free. Moreover, you continue to have control over your assets while you are still alive through the corporation. This is because your real properties will be converted into shares of stock and will practically make you the controlling stockholder with your potential heirs owning a minimum of one share of stock each.

However, you can later on distribute a substantial amount of your shares of stock thru a Deed of Assignment to your potential heirs, which transfer used to be subject to 5% capital gains tax for shares of stock worth not over P100,000.00, and 10% in excess of P100,000.00 under the old Tax Reform Code of 1997; but, with the enactment of the TRAIN law with effectivity date of January 1, 2018, a final tax of 15% on capital gains on the sale or other disposition of shares of stock not traded through the local stock exchange is imposed. Your potential heir also needs to pay 1.5% documentary stamp tax and 75% of 1% transfer tax which remain unchanged. The good thing about this is that the assets can be preserved and retained since what your potential heirs can sell if they opt out of the corporation are their shares of stock and not the real properties due to their transformation into corporate assets.

In putting up your family corporation, under the old Corporation Code, there must be at least 5 incorporators but not more than 15. With this, the 5 incorporators should be composed of at least 4 potential heirs and then yourself. If you have potential heirs who are foreigners, their shareholdings must not exceed 40% of the total capital stock.

The second mode of retaining real properties within the family is by executing a last will and testament which under Philippine laws may either be a “notarial will” which must comply with the formalities required by law in order to be probated; or a “holographic will” which must be entirely written, dated and signed by you in your own handwriting. In executing a last will and testament, you can prohibit the sale, disposition or encumbrance of your real properties within a period of 20 years from the time of your demise. By doing so, your potential heirs’ hands are tied and cannot sell to anyone their respective portion of their inheritance over your properties during the prohibited period.

By: Atty. Jeremy O. Panganiban

The Tax Reform for Acceleration and Inclusion Act (TRAIN, for brevity) took effect on January 1, 2018, instituting further reforms and amendments to the Tax Reform Code of 1997, as amended. The taxes that were improved and simplified include estate tax.

Specifically, estate tax is now at a flat rate of 6% based on the amount in excess of P5,000,000.00 for decedents who died on or after the effectivity date of the new law.

The allowable deductions to the estate in order to get the net estate of a citizen or resident are, to wit: (1) P5 million as standard deduction; and (2) P10,000,000.00 as deduction for the family home.

It bears stressing that funeral expenses and medical expenses incurred by the decedent were removed as allowable deductions. What is more, the requirement to secure a certification from the Punong Barangay for the decedent’s home so as to be considered as a family home for estate tax purposes has been deleted.

In contrast, for deductions allowed to non-resident estates, there is a standard deduction of P500,000.00; and a proportionate deduction on: (a) claims against the estate; (b) claims of the decedent against insolvent persons; and (c) for unpaid mortgages upon or any debt/outstanding obligation relative to the property.

Futhermore, the new law has increased the gross value of an estate, for which a return is required to be filed, to P5 million. This must be supported by a statement duly attested to by a Certified Public Accountant. In addition, the time for filing an estate tax return is now one year from the time of the decedent’s death. The requisite notice of death to be submitted to the Bureau of Internal Revenue has been removed.

However, an estate, consisting of registrable property like stocks, real property, motor vehicle or other similar property is still required to have an estate tax return, regardless of value.

Likewise, under the new law, payment by installment on the estate tax due is allowed subject to the following requisites: (a) there is insufficient cash to pay the total estate tax due; (b) payment by installment must be made within 2 years from the statutory date; and (c) it is not subject to civil penalty and interest. Finally, unlike in the old tax law, bank deposits are now withdrawable. To be sure, the funds from the decedent’s bank account can now be withdrawn subject to the automatic deduction of 6% withholding tax, and the same funds shall be excluded from the gross estate for purposes of computing the estate tax.

By: Atty. Jeremy O. Panganiban

The common documents known to realtors like me are Contracts to Sell which we term as CTS, for brevity, and the all popular Deed of Absolute Sale which we name DOAS by way of abbreviation. In contrast, a Deed of Exchange is an often neglected, unused, and uncommon document to real estate brokers and lawyers alike.

In a not so technical point of view, a Deed of Exchange is a document by which a property is transferred for another property. But it is also a mode of transfer by which property is exchanged in place of another property sold by mistake. To illustrate, this second definition and its purpose gain importance and relevance when the seller and the buyer agree to sell to the buyer “Lot A.” Yet, what is actually indicated and sold in the DOAS through oversight is “Lot B,” which is also owned by the same seller. To rectify the error, a DOAS should not be executed or else there will be a duplication of transactions. Instead, a replacement or swap/switch between Lot B for Lot A is made through the facility of a Deed of Exchange.

In order to have a better understanding of this mode of transfer, quoted hereunder is a sample form taken from the Real Estate Brokers Association of the Philippines (REBAP) which I revised a bit, as follows:

I am hoping that this information will assist you in understanding and appreciating real estate law and contracts in the Philippines.