The inherited estate is one of the most talked about topics concerning property relation. While it is often said that when two people get married, anything acquired during marriage is deemed conjugal property, there are still some exceptions to the rule and this is where issues become complex. What if the property at the time of marriage has been inherited by one of the spouses? This is an interesting question because the problem usually arises when couples decide to call it quits due to irreconcilable differences. As a result, all of the properties acquired will be divided equally. What makes a property exclusive?

Section 2. Exclusive Property of Each Spouse

"Art. 109. The following shall be the exclusive property of each spouse:

    (1) That which is brought to the marriage as his or her own;

    (2) That which each acquires during the marriage by gratuitous title;

    (3) That which is acquired by right of redemption, by barter or by exchange with property belonging to only one of the spouses; and

    (4) That which is purchased with exclusive money of the wife or of the husband. (148a)

Art. 110. The spouses retain the ownership, possession, administration and enjoyment of their exclusive properties.

Either spouse may, during the marriage, transfer the administration of his or her exclusive property to the other by means of a public instrument, which shall be recorded in the registry of property of the place the property is located. (137a, 168a, 169a)

Art. 111. A spouse of age may mortgage, encumber, alienate or otherwise dispose of his or her exclusive property, without the consent of the other spouse, and appear alone in court to litigate with regard to the same. (n)

Art. 112. The alienation of any exclusive property of a spouse administered by the other automatically terminates the administration over such property and the proceeds of the alienation shall be turned over to the owner-spouse. (n)

Art. 113. Property donated or left by will to the spouses, jointly and with designation of determinate shares, shall pertain to the donee-spouses as his or her own exclusive property, and in the absence of designation, share and share alike, without prejudice to the right of accretion when proper. (150a)

Art. 114. If the donations are onerous, the amount of the charges shall be borne by the exclusive property of the donee spouse, whenever they have been advanced by the conjugal partnership of gains. (151a)

Art. 115. Retirement benefits, pensions, annuities, gratuities, usufructs and similar benefits shall be governed by the rules on gratuitous or onerous acquisitions as may be proper in each case. (n)"

It is a known fact that some properties for sale are still registered in the names of the deceased parent or next of kin. If the property owner passed away, the estate must be settled before the name of the buyer can be transferred. More often than not, this is a complicated process if you do not know the steps. When you settle the estate of a deceased person, it means you should declare the properties of the deceased whether it is real or personal estate. The name of another person cannot be successfully transferred if the estate has not been settled. The rule applies to both testate and intestate.

6 Steps To Settling The Estate Of A Deceased Person

1. Secure and fill out BIR Form 1904. The form is intended for application for registration. It is important to apply for a valid Tax Identification Number (TIN) when you transact with the BIR. The purpose of Form 1904 is to verify the seller's and the buyer's TIN. When it comes to the payment of estate taxes, it is important to secure a separate TIN for the estate of the deceased. 

2. Prepare the mandatory documentary requirements and submit them to the BIR so the estate of a deceased person will be settled.

3. Secure BIR Form 1801. This form refers to the Estate Tax Return Form. Fill out the form with the necessary information such as the name and the TIN of the Estate. The ONETT officer of the Day will help you in filling out the rest of the form based on the computation and review of the documents you have presented. You will need to consult a certified public accountant if the estate of the deceased person is more than P3 million. The accountant will help to determine the taxable estate's initial computation.

4. Pay the estate tax based on the computation. Settle the estate tax with an Authorized Agent Bank (AAB) of the RDO, which has the jurisdiction over the place of residence of the deceased person. You can pay the computed estate tax by cash, manager's or cashier's check. If you are going to settle the estate tax through a Manager's or Cashier's Check, make sure that the following is written as payee:" (Bank, Branch) FAO BUREAU OF INTERNAL REVENUE IFO (Taxpayer's Name) (Tin of Taxpayer)." If you choose to pay the estate tax using a AAB, which is a government financial institution such as Landbank of the Philippines, the payee will be the BUREAU OF INTERNAL REVENUE.

5. The documentary requirements must be submitted including the proof of payment to the RDO, which has the jurisdiction over the decedent's place of residence.

6. Wait for the Certificate Authorizing Registration to be released. Once CAR is released, the property can be sold to a buyer. When paying the capital gains, the CAR along with Affidavit of Self-Adjudication, Extra-judicial Settlement of Estate, Tax Clearance Certificate and other requirements should presented.

When death comes knocking on your door, there is nothing you can do but embrace it and accept that you have reached the final chapter of your life. For an individual who cares for the future of loved ones left behind, leaving properties upon death is a sound decision. However, these properties can become a liability if estate taxes are not properly settled. The question is: Who pays the estate tax?

Estate Tax

Estate tax refers to the difference between the allowable deductions and the gross estate as defined under Section 85 and 86 of the Tax Code. The rates of estate tax are graduated and depend on the amount of net estate. The property may not be transferred to the decedent’s heirs if filing of the estate tax return has not been executed and payment of the estate tax has not been made. The problem often lies with non-payment of estate tax and this is one of the road blocks in transferring the property to the buyers’ or heirs’ names.

Estate Proceedings

When someone passes away, there are things that need to be done so you can prevent problems with transferring the property. 

1.    Within two months, the family has to file a Notice of Death with the Bureau of Internal Revenue after the date of death. When the value of the estate exceeds P20,000, this procedure will be applied. The Notice of Death should be filed by the administrator of the estate of executor. There is no specific format that should be followed for filing the notice.

2.    A Tax Identification Number (TIN) for the Estate of the deceased individual will also be required. This can be secured by filling out the BIR Form No. 1901. The TIN is essential for filing the Estate Tax Return (BIR Form No. 1801).

3.    Make sure the list of decedent’s assets and liabilities are ready. The faire market values of the properties at the time of the decedent’s death must also be obtained.

4.    Essential documents for the assets and liabilities must be prepared. Some of the supporting documents that must be secured are a certified copy of the Death Certificate, Notice of Death received by the BIR, Affidavit of Self-Adjudication etc.

5.    Once required documents are completed, the net estate and estate tax must be computed.

6.    Estate Tax Return must be filed and estate taxes should be paid.

7.    There will be a procedure for transferring the properties to the heir’s name which should be followed.

8.    The procedure for cancellation of the decedent’s TIN as outlined in Section 12 of Revenue Regulations No. 7-2012 must also be followed.

In the Philippines married couples have two options to put an end to marital union: annulment and legal separation. While divorce advocates have been fighting for the legalization of divorce in the Philippines, there is no sign yet that people who want it legalized will emerge victorious. However, it is a different scenario in Muslim Mindanao or in Islamic laws to be more specific. In fact, Islamic laws grant three kinds of divorce and each of them has separate rules. These three kinds of divorce are talaq, li’an and khula. 

Islamic divorce in Mindanao defined: 

1. Talaq

In a talaq divorce, the Muslim husband initiates a divorce and pronounces the word talaq (I divorce you)  to his wife, but this can be withdrawn if both parties decide for reconciliation.  The word talaq can only be withdrawn twice and divorce will be considered irrevocable the third time the word is pronounced. In order to complete irrevocable divorce, the husband needs to comply with the requirements. 

2. Khula

Khula gives a woman the right to seek a divorce. The woman must also follow a waiting period and as compared to the right of men to initiate divorce, women’s rights are only limited. Women will be granted divorce if the husband failed to provide her basic needs or if there was no intercourse taking place for more than two months. Women must also repay marriage expenses and her dowry. If the child is older than seven years, the woman who seeks a divorce will not be granted child custody. However, the custody will be granted if the child is below seven years. By the time the child reaches the age of seven, the woman must give full custody to the father.  

3. Lian

Lian is also referred to as mulaana and this type of divorce is initiated when the husband accused the wife of adultery. This divorce is based on Quranic verses. There are three conditions that must be met for the husband to initiate Lian:

• The marriage state must be continuing.

• The marriage must be valid and there should be witnesses when the marriage was solemnized. 

• The husband must be liable to become a witness and has not received any punishment of qazf in the past. 

The financial obligations in divorce will also dependent on the length of marriage. The income levels of either the husband or the wife will also be taken into consideration. Once divorce is granted, the Islamic laws will apply wherein the wife is not entitled to the assets that have been earned during marriage.