Module 1: Succession - Definition of Terms

Business and Transfer Taxes Presented by: Atty. William P. Manzanares, Jr., CPA, MBA, MPF Atty. Manzanares  MODULE 1 – SUCCESSION Governing Law: Republic Act No. 386 or the Civil Code of the Philippines which took effect on...

Business and Transfer Taxes Presented by: Atty. William P. Manzanares, Jr., CPA, MBA, MPF Atty. Manzanares  MODULE 1 – SUCCESSION Governing Law: Republic Act No. 386 or the Civil Code of the Philippines which took effect on August 1, 1950 Atty. Manzanares  Modes of Acquiring Ownership: Occupation Law Donation Tradition Intellectual Creation Prescription Succession Atty. Manzanares Definition of Terms: 1. Succession -- is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the value of the inheritance, of a person are transmitted through his death to another or others either by his will or by operation of law. (Article 774) 2. Decedent is the general term applied to the person whose property is transmitted through succession, whether or not he left a will. If he left a will, he is also called the testator. (Art 775) Atty. Manzanares Definition of Terms: 3. An heir is a person called to the succession either by the provision of a will or by operation of law. Devisees and legatees are persons to whom gifts of real and personal property are respectively given by virtue of a will. (Art. 782) 4. The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death. (Art. 776). The inheritance of a person includes not only the property and the transmissible rights and obligations existing at the time of his death, but also those which have accrued thereto since the opening of the succession. (Article 781) Atty. Manzanares Definition of Terms: 5. Legitime is that part of the testator's property which he cannot dispose of because the law has reserved it for certain heirs who are, therefore, called compulsory heirs. (Art. 886) Atty. Manzanares Definition of Terms: 6. Compulsory heirs (Art. 887) – Those who succeed by force of law to some portion of the inheritance, in an amount predetermined by law, known as the legitime. They succeed whether the testator likes it or not. They cannot be deprived of their legitime except by disinheritance properly effected. They are: a. Legitimate children and descendants, with respect to their legitimate parents and ascendants b. In default of the foregoing, legitimate parents and ascendants, with respect to their legitimate children and descendants c. The widow or widower d. Illegitimate Children* (filiation must be proved) Atty. Manzanares Definition of Terms: 7. An executor (male) or executrix (female) is the person named in a will to perform these duties. 8. An administrator (male) or administratrix (female) is the person appointed by the probate court to complete these tasks when there is no will or no executor or executrix has been named in the will. 9. Accrual - The rights to the succession are transmitted from the moment of the death of the decedent. (Art. 777). Payment of taxes accrues from the time of death of the decedent. (RR 2- 2003, as amended) Atty. Manzanares Effect of Decedent’s Death Decedent’s Estate To be acquired by the Heirs Property Property Rights Rights Obligations Obligations Atty. Manzanares The Law that Governs the Imposition of Estate Tax Example: Roque was infected with COVID-19 on July 1, 2020 and was cremated the following day. His estate is composed of the following: Cash in bank P1,000,000 Commercial Building 5,000,000 Cars 1,000,000 House and lot 3,000,000 Joseph is the only heir. Roque’s executor filed the estate tax return and paid the same on August 1, 2020. Roque’s properties were finally distributed on January 1, 2022. Atty. Manzanares The Law that Governs the Imposition of Estate Tax Question: When will transfer of ownership to Joseph take effect? Answer: July 1, 2020 The rights to the succession are transferred from the moment of death of Roque, notwithstanding the actual transfer on January 1, 2022 Atty. Manzanares Kinds of Succession: Testamentary Legal or intestate Mixed Atty. Manzanares Kinds of Succession: Testamentary - is that which results from the designation of an heir, made in a will executed in the form prescribed by law. (Art. 779) Atty. Manzanares Kinds of Succession: Legal or intestate: 1. If a person dies without a will 2. With a void will 3. With a will which has subsequently lost its validity 4. When the will does not institute an heir to, or dispose of all the property belonging to the testator 5. If the suspensive condition attached to the institution of heir does not happen or is not fulfilled 6. If the heir dies before the testator 7. If the heir repudiates the inheritance, there being no substitution, and no right of accretion takes place; 8. When the heir instituted is incapable of succeeding, except in cases provided in the Civil Code. (Art. 960) Atty. Manzanares Kinds of Succession: Mixed - is that effected partly by will and partly by operation of law. (Art. 780) Atty. Manzanares Elements of Succession: Decedent - Inheritance (Estate) – Includes all the property, rights, and obligations of a person which are not extinguished by death and all which have accrued thereto since the opening of succession. Rights which are purely personal are not transmissible for they are extinguished by death. Successors – An heir or successor is a person who is called to the succession either by the provision of a will or by operations of law. Devisees – Person to whom gifts of real property is given by virtue of a will. Legatee – Person to whom gifts of personal property is given by virtue of a will. Atty. Manzanares Compulsory Heirs Primary – Those who have precedence over and exclude other compulsory heirs (legitimate children and descendants Secondary – Those who succeed only in the absence of the primary compulsory heir; (i.e. legitimate parents and ascendants) Concurring – Those who succeed together with the primary or secondary compulsory heirs; (i.e. illegitimate children and surviving spouse) Atty. Manzanares Voluntary Heirs Those instituted by the testator in his will to succeed to the inheritance of the portion thereof of which the testator can freely dispose. Free Portion Refers to the portion or value left in the estate after deducting the legitimes of the compulsory heirs. A voluntary heir is determined through the last will and testament Legal or Intestate Heirs Those who succeed to the estate of the decedent by operation of law (decedent died without a valid will or his estate was not entirely disposed of by will Atty. Manzanares With Will vs. Without Will Heirs: Free 1. Surviving Spouse Portion 1/4 LC 2. Legitimate Child Legitime 1/2 With Will SS 1/4 Estate SS LC 1/2 1/2 No Without Will Legitime Atty. Manzanares Collateral Relatives Consanguinity is the relation of persons descending from the same stock or common ancestor. These persons are know as blood relative and are said to be related by blood or consanguinity. Lineal consanguinity – may be descending or ascending, that which subsists between persons of whom one is descended in a direct line from the other. Collateral consanguinity – that which subsists between persons who have the same ancestors, but who do not descend or ascend one from the other. Atty. Manzanares Atty. Manzanares Will A will is an act whereby a person is permitted, with the formalities prescribed by law, to control to a certain degree the disposition of this estate, to take effect after his death. (Art. 783) The making of a will is a strictly personal act; it cannot be left in whole or in part to the discretion of a third person, or accomplished through the instrumentality of an agent or attorney. (Art. 784) Atty. Manzanares Kinds of Wills 1. Notarial or Ordinary or Attested Will 2. Holographic Will Atty. Manzanares Kinds of Wills Notarial or Ordinary or Attested Will – One which is executed in accordance with the formalities prescribed by Article 804 to 808 of the New Civil Code. Requisites: 1. It must be in writing and executed in a language or dialect known to the testator. 2. It must be subscribed at the end thereof by the testator himself of by the testator’s name written by some other person in his presence and by his express direction 3. It must be attested and subscribed by three or more credible witnesses in the presence of the testator and of one another. Atty. Manzanares Kinds of Wills Holographic Will One which is entirely written, dated, and signed by the hand of the testator himself. It is subject to no other form and it may be made in or out of the Philippines and need not be witnessed. In case of any insertion, cancellation, erasure or alteration in a holographic will, the testator must authenticate the same by his full signature. Atty. Manzanares Institution of Heir An act by virtue of which a testator designates in his will the person or persons who are to succeed him in his property and transmissible rights and obligation. Disinheritance Is a testamentary disposition by which a compulsory heir is deprived of , or excluded from the inheritance to which he has a right. Atty. Manzanares Requisites for Disinheritance 1. Effected only through a valid will 2. For a cause expressly stated by law 3. Cause must be stated in the will itself 4. Cause must be certain and true 5. Unconditional 6. Total (no partial disinheritance) 7. The heir disinherited must be designated in such a manner that there can be no doubt as to his identity. Atty. Manzanares  THE END T H A N K Y O U ! ! ! Atty. Manzanares