When a person dies, the real and personal properties they leave behind become part of their estate.
The settlement of an estate involves passing on to and partitioning the ownership of the properties among the deceased’s heirs and any other beneficiaries. All the properties in the estate must be declared and the correct taxes associated with each one must be paid with the BIR. No declared property may be transferred to any heir or beneficiary if its corresponding estate taxes have not been paid.
There are two ways to settle an estate in the Philippines:
Judicial settlement of estate
This type of settlement is more common in the Philippines, where leaving a will is not traditional. In this type of settlement, the heirs and beneficiaries of the deceased reach an understanding on the partitioning of the estate without a will and without going through the courts. A certified affidavit detailing how the estate will be partitioned should be filed by the heirs with the Register of Deeds. A sole heir claiming the entire estate also needs to file a similar affidavit.
Inheritance laws governing partitioning of an estate
Whether or not a person leaves a will, partitioning of their estate must comply with the rules specified in the Inheritance Law of the Philippines.
- A certain portion of the deceased’s properties, known as legitimes, are earmarked by law to compulsory heirs, classified as follows:
- Primary – The deceased’s legitimate children and/or their descendants
- Secondary – The deceased’s legitimate parents and/or their ascendants (grandparents or great-grandparents), as well as illegitimate parents
- Concurring – The surviving spouse, the deceased’s illegitimate children and/or their descendants
Concurring heirs and primary heirs occupy the same rung in the ladder of inheritance, that is, they are all entitled to inherit the deceased’s property. Secondary heirs are entitled to inheritance only in the absence of primary heirs.
- If the deceased leaves a will, the distribution of their properties generally follow these rules:
- Legitimate children are entitled to ½ of the estate, to be divided equally among themselves. The other half is considered the “free portion” of the estate.
- The surviving spouse is entitled to ¼ of the estate if there’s only one legitimate child. If there is more than one legitimate child, the spouse is entitled to the same portion as each legitimate child. The spouse’s inheritance is taken from the free portion of the estate.
- Each illegitimate child is entitled to the equivalent of ½ the legitime of a legitimate child, to be taken from the free portion of the estate. If the total for all illegitimate children is more than the remaining free portion of the estate, the free portion is divided equally among them.
- If there are no legitimate children and descendants, the deceased’s parents or ascendants are entitled to ½ of the estate.
Whatever is left of the free portion of the estate after these legitimes may be disposed of according to the deceased’s will.
- If the deceased doesn’t leave a will (intestate proceeding), the estate will have no free portion and will be divided equally among the surviving spouse and legitimate children. If there are illegitimate children, they are entitled to the equivalent of ½ the share of the legitimate children. However, the legitimes of the legitimate children and the spouse must be fulfilled first. If the balance of the estate is less than ½ the share of the legitimate children, this must be divided equally among all the illegitimate children.
To find out more about partitioning estates in the Philippines, get in touch with the attorneys at Duran & Duran-Schulze here.