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.