Sibling squabbles are a reality of life in the Philippines – and not just in rich families. The property in question could be a small residential lot in a province somewhere, some farmland or a business even. The size and value often doesn’t matter.
Ariel Martinez, a taxation and estate lawyer of more than 15 years, calls money a “blood thinner.” He said it could cause siblings to forget they grew up together. Martinez has the admirable trait of going straight for the jugular and it’s not difficult to imagine that he does as he claims: devote some time scolding clients during their first few meetings.
“I couldn’t help it,” he said. “I would tell them ‘Di ba kayo nahihiya, di matatahimik sa puntod ang nanay ninyo. Even if you go to the judge now to plead your case, sasabunin din kayo nun!”
But for all his no-nonsense way with words, Martinez has helped quite a lot of families come to an agreement on how to divvy up estates. Instead of waiting for the courts to have all the time in the world to decide on the legitimacy of a will, he recommends donating properties while alive.
“A will is just one of the tools in advance personal planning, there are many others. Less than one percent of Filipinos write wills, even the ultra rich don’t,” he said.
One of the greatest considerations in estate planning is the huge estate tax levied by the government. For estates P10 million and above, the government will require a tax payment of P1.215 million plus 20 percent of the excess. Look at the estate tax table here. By contrast, the donor’s tax is only two percent to 15 percent. Look at the tax table here.
There are many cases where the estate languishes for many, many years with not a single heir benefiting from it because the tax cannot be paid – the money is tied up in the property. It’s a tough situation for families to find themselves in. A good way to get out of the situation would be to avail of the voluntary assessment of the Bureau of Internal Revenue. Applying for voluntary assessment can cancel the penalties.
There’s nothing wrong with wanting to write a will too, especially if you want your assets to be distributed in a distinctive kind of way (like giving some to charity). Philippine courts accept holographic wills, meaning it’s handwritten and written in any language or dialect, or notarial where you need to sign it in the presence of three witnesses and a lawyer.
An article in the Personal Finance section of Inquirer.net posted today also discusses the benefits and pitfalls of helping your children why you are still alive. The article was written in response to this question from one of our readers:
“Sorry if I sound morbid, but I’ve been thinking of what will happen to my family when I die. I just turned 60 and have four grown children, three of whom are married. Should I start distributing my assets to them? My friends have warned me against this, saying that I may end up living longer and short on resources if I give away my money so soon. — Name withheld upon request”
- November 2009 (2)
- October 2009 (1)
- September 2009 (4)
- August 2009 (5)
- July 2009 (2)
- June 2009 (4)
- May 2009 (1)
- April 2009 (5)
- March 2009 (15)
- February 2009 (19)
- January 2009 (19)
- December 2008 (23)
- November 2008 (19)
- October 2008 (24)
- September 2008 (23)
- August 2008 (13)
- July 2008 (21)
- June 2008 (16)
- May 2008 (15)
- April 2008 (23)
- March 2008 (16)
- February 2008 (26)
- January 2008 (15)
- December 2007 (12)
- November 2007 (20)
- October 2007 (23)
- September 2007 (20)
- August 2007 (27)
- July 2007 (28)
- June 2007 (15)
- May 2007 (22)
- April 2007 (21)
- March 2007 (15)
- alternative investments (2)
- banking (36)
- blog manners (3)
- blogging (3)
- bonds (10)
- books (2)
- budgeting (45)
- buying tips (23)
- career (12)
- charity (4)
- consumer issues (6)
- corporate governance (2)
- credit cards (32)
- customer service (1)
- debt (16)
- economy (38)
- education (3)
- Educational plan (1)
- emergency planning (3)
- entrepreneurship (8)
- estate planning (4)
- family finance (99)
- Financial Planning (84)
- food (4)
- forex (15)
- Frugality Week (23)
- Gifts (3)
- Government (2)
- Guest Posts (3)
- Holidays (12)
- insurance (22)
- Investing (143)
- kids and money (20)
- Lifestyle (5)
- Marriage (3)
- memorial plans (1)
- men and finance (1)
- Millionaires (75)
- Money Makeover (15)
- Money Myth Busters (23)
- MoneySense (4)
- Mutual Funds (8)
- network marketing (1)
- OFW (34)
- Plain Vanilla/CFA (3)
- poverty (6)
- Pre-Need (12)
- Pre-need industry (1)
- Quiz (1)
- Quotes (12)
- real estate (5)
- remittance (1)
- retirement (19)
- Saving money (67)
- scams (20)
- shopping (24)
- Smart Habits (8)
- So What Chocnut? (67)
- spending habits (57)
- SSS/GSIS (2)
- stock market (25)
- subprime (15)
- taxes (5)
- uitfs (1)
- Uncategorized (4)
- vacations (5)
- wala lang (6)
- weddings (1)
- weekly roundup (2)
- who's who in personal finance (1)
- women and finance (11)
- Word of the Week (4)
- Workplace (3)
12 Feedbacks on "Estate planning is not just for the rich"
pinoy investor
If you want to minimize taxes, do a property for stock swap, it’s tax free except for DST and transfer tax. It’s good to do estate planning early. My parents transferred most of their estate to me and my siblings before they turned 60. This prevents possible conflict among siblings later on. We formed a corporation, put all the assets in the corporation, and all the siblings are stockholders. That’s as fair as you can get.
salve
hi pinoy investor, that IS as fair as you can get. would you mind explaining the details of the property for stock swap?
INQUIRER.net Blogs » Network Highlights
[...] Money Smarts: Estate planning is not just for the rich [...]
pinoy investor
salve, by fair, i mean the siblings will get equal share of all the assets.
you can exchange property for shares of stock. this transaction is subject only to dst and transfer tax. don’t tell this to anyone. bir might plug the loophole.
gregorio m. elep
Its better to donate the properties that will be left behind…so that siblings would not be fighting for it later. But leave something for your own old age survival.
pinoy investor
Estate planning is not just for the rich. Even if you don’t have real property, you can create an estate. Life insurance and pre-need plans are instant estates. They serve the same purpose of giving wealth and security to the heirs of the deceased.
Mr. Benjie Chan
Can u pls. help me to find the whereabouts of Atty. A. Martinez. He’s my long time friend, I don’t quite recall where I’ve met him but for sure we’ve met somewhere before. Probably, I will need him someday when I retire in Manila. Thank u and God Bless. Mr. Benjie Chan of England.
mikoy
hi salve,
i’m an ofw software engr currently in singapore.
first, let me praise the arcticles and comments in your blog. i learn a lot everyday.
i think it’s a responsibility of parents to their children to prepare a will or a plan for their assets. it has to be in legal writing. parents should not rely on verbal agreements between their children. if only my grandparents left some sort of legal document for my father and his 10 siblings.. imagine 14 years na of court hearings and still ongoing. haay.
Salve
hi pinoy investor, will try my best to keep my mouth shut hahaha. yes, insurance policies are also tools for estate planning. im glad that lately, insurance companies are more and more into customizing these policies for their clients.
hi mr. elep, most of the queries i get are from retirees who also want to know how to make sure they don’t outlive their money. people are realizing that making sure the principal grows even after requirement is a big part of the equation.
mikoy, thank you for your complement. thats a sad reality, court hearings really last a long time. I hope there will be developments on your case soon.. So do you have a will now for your children?
flexy
just a caveat on donations…it is also subject to tax - donor’s tax in particular depending on the amount to be donated. can go as high as 15%. Plus, donor’s tax is paid “today” and not years after. Hence, the opportunity to earn money from the donor’s tax amount is lost.
Also, you cannot get back what you have donated if ever you change your mind in the future. = )
yna
Hi.I also have a question.My aunt died 12 years ago and left several properties in the US of which only 1 is still in her name as one of 4 owners(partnership).She subsequently married and divorced with no children, although her ex has kids.Since she had no will,how can we establish our rights as heirs?My parents are also both deceased.Thanks for any help.The other partners are thinking of selling the property but we dont want to sign a power of attorney.
Thanks,
Yna
EJ
Hi I am an OFW dependent here in the PHilippines. My family is in the U.S., they’re a citizens there. I receive monthly remittance from them because my father is paralyzed for 18 years already and is left with me to take care of.
My question is, do have to pay taxes for the remittances they give me?
If they send me money so I can buy a second hand car, do i have to pay donor’s tax for them?
If they send me money to build a house and have it under my name do i have to pay donor’s tax for them?
They have no plans of living here in the Philippines as of the moment. They like it there despite of the crisis.
The OFW tax exemption law is just not very concise. It just said that money from outside is not taxable.
Please advise me. Malaki pong tulong.
Thanks
Please Leave a Comment!