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Modes of Acquiring Ownership Succession

1. Occupation – when ownership is acquired by Kinds of succession T-L-M
occupation, the property seized is without 1. Testamentary or testate – is that which
known owner. results from the designation of an heir, made in
2. Intellectual Creation – by intellectual a will executed in the form prescribed by law.
creation, the composer owns his musical 2. Legal or intestate – is the effected by
compositions while the authors own his operations of law since the decedent did not
literary, legal, historical, scientific or other execute a will.
work. 3. Mixed – is that effected partly by will and
3. Donation –it is an act of liberality whereby a partly by operation of law
person disposes gratuitously of a thing or right Elements of Succession D-I-S-A
in favor of another, who accepts it. 1. Death of the decedent
4. Succession – it is a mode of acquisition by  Decedent – a person whose property
virtue of which the property rights and is transmitted through succession,
obligations to the extent of the value of the whether or not he left a will.
inheritance, of a person are transmitted  Testator or Testatrix – if a person
through his death to another or others either left a will.
by his will or by operation of law. The rights to 2. Inheritance
the succession are transmitted from the - it includes all the property, rights and
moment of the death of the decedent. obligations of a person which are not
5. Prescription – one acquires ownership and
extinguished by his death.
other real rights through the lapse of time in
the manner and under the conditions. - A personal right cannot be inherited
 Devise – is a testamentary
Concept and Nature of Transfer Taxes disposition of real estate.
 In succession, estate tax is levied on the  Legacy – is a gift or bequest by
transmission of property from a prior decedent will of personal property.
to his heirs. 3. Successors
 In donation, donor’s tax is imposed as - Heirs, devisees and legatees are
ownership of the property passes from the all successors.
donor to the donee.  Heirs – is a person called to the
 Estate tax and donor’s tax are the two transfer succession either by the provision of
taxes under our laws. a will or by operation of law.
 -both are excise taxes  Voluntary heirs id by will
 -both are imposed upon the  Legal or intestate heirs if
right of a person to transfer by operation of law.
his property that may take  Devisees - are persons to whom gifts
effect during his lifetime or of real property are given by virtue of
upon his death. a will.
 Legatees - are persons to whom gifts
 Transfer taxes - are taxes imposed upon the of personal property are given by
gratuitous disposition of private property. virtue of a will.
 It is gratuitous when there is no consideration 4. Acceptance
for the transfer  Express acceptance – may be
 It is onerous when a consideration is received. made in a public or private
 Tacit acceptance – is one resulting
from acts by which the intention to
accept is necessarily implied, or
which one would have no right to do
except in the capacity of an heir.
 Executor – is a person appointed by testator  A child already conceived at the time of the
to carry out the directions and requests in his death of the decent is capable of succeeding
will, and to dispose of the property according provided it be born later.
to his testamentary provisions after his death.
 Administrator – is a person appointed by the  A will may be revoked by the testator at any
court to administer the assets and liabilities of time before his death.
a decedent.
 Institution of an heir is an act by virtue of
Testamentary succession which a testator designates in his will the
 Will is an act whereby a person is permitted, person or persons who are to succeed him in
with formalities prescribed by law, to control his property and transmissible rights and
to a certain degree the disposition of his estate obligations.
to take effect after his death.
 Testacy - if a person dies leaving a will, the  Legitime is that part of the testator’s property
person is said to have died testate. which he cannot dispose of because the law has
 Codicil – is an instrument that amends the reserved it for certain heirs, called compulsory
provisions of a will. heirs.
 Probate of a will – a court procedure by which
a will is proved to be valid or invalid.  The following are compulsory
 Holographic Will - is a will written entirely by heirs:
the testator with his own hand and not 1. Legitimate children and descendants, with
witnessed or attested. respect to their legitimate parents and
 The will of an alien who is abroad produces ascendants
effect in the Philippines if made with the 2. In default of the foregoing, legitimate
formalities by the law of the place in which he parents and ascendants, with respect to
resides, or according to the formalities their legitimate children and descendants
observed in his country, or in conformity with 3. The widow or widower
those which the Civil Code prescribes. 4. Acknowledged natural children, and
natural children by legal fiction
 A will made in the Philippines by a citizen or
5. Other illegitimate children.
subject to another country, which is executed
in accordance with the law of the country of Legitimate Legitimate Surviving Illegitimate Free
which he is a citizen or subject, and which Children/ Parents/ Spouse Children/ Portion
Descendants Ascendants Descendants
 might be proved and allowed by the law of his
own country, shall have the same effect as if
executed according to the laws of the a. excluded Same as 12 the Varies
Philippines. ½ the legitime legitime of a
of a legitimate
legitimate child
 Persons of either sex under eighteen years of child
age cannot make a will. b. None None None
 In order to make a will, it is essential that the surviving ½ surviving surviving ½
testator be of sound mind at the time of its
c. None None
execution surviving ½ ¼ surviving ¼
 The law presumes that every person is of sound
d. None None None
min, in absence of proof to the contrary.
surviving surviving ½ surviving ½
 The Instrument Is Not A Will
o when someone who signs an e. None None 1/3 1/3 1/3
instrument did not know what the surviving surviving
instrument said at the time of signing,
o when one who signs an instrument id
forced to sign it “against his will”

 Persons not incapacitated by law may succeed

by will or ab intestato.
The Following Shall Be Sufficient Causes For The Disinheritance Of:
1 when a child or descendant has been found guilty of when the spouse has been convicted of an attempt against
an attempt the life of the testator, his or her spouse, the life of the testator, his or her descendants, or ascendants
descendants or ascendants
2 when a child or descendant has accused the testator when the spouse has accused the testator of crime for which
of a crime for which the law prescribes imprisonment the law prescribes imprisonment for six years or more, and
for six years or more, if the accusation has been found the accusation has been found to be false
3 when a child or descendant has been convicted of when the spouse by fraud, violence, intimidation, or undue
adultery or concubinage with the spouse of the influence cause the testator to make a will or t change one
testator already made
4 when a child or descendant by fraud, violence, when the spouse has given cause for legal separation
intimidation or undue influence causes the testator to
make a will or to change one already made
5 a refusal without justifiable cause to support the when the spouse has given grounds or the loss of parental
parent or ascendant who disinherits such child or authority
6 maltreatment of the testator by word or deed by the Unjustifiable refusal to support the children or other spouse.
child or descendant
7 when a child or descendant leads a dishonorable or
disgraceful life
8 Conviction of a crime which carries with it the penalty
of civil interdiction.

Leal or Intestate Succession  Consanguinity

 Intestacy – if a person dies without leaving a - is the relation of persons descending
will, the person is said to be died intestate. from the same stock or common
 In this case, the government provides a ancestor.
default estate plan under which the - these persons are known as blood
decedent’s estate is disposed. Legal or relatives.
intestate succession take place:  Lineal consanguinity - which may
1. If a person dies without a ill, or with a void be descending or ascending, is that
will, or one which has subsequently lost its which subsists between persons of
validity whom one is descended in a direct
2. When the will does not institute an heir to, like from the other, as between son,
or dispose of all the property belonging to father, grandfather, great-
the testator. In such case, legal succession grandfather, and so upwards in the
shall take place only with respect to the direct ascending line or descending line.
property of which the testator has not Example: father and son
3. If the suspensive condition attached to the  Collateral consanguinity – is that
institution of heir does not happen or is which subsists between persons who
not fulfilled, or if the heir dies ebfore the have the same ancestors, but who not
testator, or repudiates the inheritance, descend (or ascend) one from the
there being no substitution, and no right other.
of accretion takes pace Example: uncle and nephew
4. When the heir instituted is incapable of
succeeding, except in cases provided in the
Civil Code.
 Representation – is a right created by fiction persons who have the same
of law, by virtue of which the representative is father, but not the same
raised to the place and degree of the person mother, or the same
represented and acquires the rights which the mother, but not the same
latter would have if he were living or if he could father.
have inherited.
 It takes place in the direct descending Order of Intestate Succession
line, but never in the ascending. 1. Descendants direct line (legitimate children/
 In the collateral line, it takes place descendants
only in favor of the children of 2. Ascending direct line (legitimate parents/
brothers or sisters, whether they be of ascendants)
full or half blood. 3. Illegitimate children/ descendants
-full blood relationship is 4. Surviving spouse
that existing between 5. Collateral relatives within the 5th degree
persons who have the same 6. The State
father and the same mother
-half blood relationship is
that existing between

Legitimate Legitimate Illegitimate Collateral
Surviving Sisters
Children/ Parents/ Children/ Relatives State
Spouse /Nephews
Descendants Ascendants Descendants w/in 5th
none none
a entire excluded excluded excluded excluded
surviving surviving
b 1/2 if only child excluded
surviving ½ excluded excluded excluded

1/3 each if 2 none

c excluded 1/3 excluded excluded excluded
children surviving
none none none
d entire excluded excluded excluded
surviving surviving surviving
surviving ½ 1/4 ¼ excluded excluded excluded

none none
surviving surviving ½ ½ excluded excluded excluded

none none none None

g entire excluded excluded
surviving surviving surviving surviving
none none none
surviving surviving surviving ½ ½ excluded excluded

none none none none

i entire excluded excluded
surviving surviving surviving surviving
none none none none none
j entire excluded
surviving surviving surviving surviving surviving
none none none none none none
k entire
surviving surviving surviving surviving surviving surviving
 The executor or judicial administrator has the there is a more equitable
task of making sure that the estate tax has been distribution of wealth in the
paid before he delivers a distributive share to society.
any party interested in the estate. Law that governs the imposition of estate tax

 In estate taxation, the gross estate of citizens Gross estate

and residents include all their property - All property, wherever located,
wherever situated. in which the decedent owned
beneficial interest at the time of
 This gross estate is allowed deductions under death.
the tax law; the difference called the next - It include any right to income
taxable estate is the basis of the estate tax to that had accrued, but had not yet
be imposed. been received as of the date of
the decedent’s death
- It does not include mere
 Once the estate is closed and a final
expectancy such as an expected
distribution of assets is made to the
beneficiaries, the executor transfers the assets
to be held in trust to the trustee.
Resident Citizen, Non-Resident Citizen and
Resident lien Decedents
- Shall include all his properties
CHAPTER 3 and interests therein wherever
GROSS STATE situated.
 The ff. shall comprise his gross estate:
Estate tax 1. A. Tangible personal property –
-is the tax on the right to transmit property at personal property that can be seen and
death and on certain transfers which are made touched.
by law the equivalent of testamentary B. Intangible personal property –
dispositions. personal property that cannot be seen and
-its object is to tax the shifting of economic touched.
benefits and enjoyment of property from the 2. Real or immovable property – anything
dead to the living. attached to the soil with permanence.
Purposes of estate tax 3. Taxable Transfers – inter vivos in form but
 Benefit-received theory mortis causa in substance
- It recognizes the role of the State a. Transfer in contemplation of
in the distribution of the estate death
of a decedent to the heirs  Donation mortis causa is
whether it be in accordance with a transfer in contemplation
the decedent’s will or by of death.
operation of law. - it takes effect upon or after
 Privilege theory or state partnership theory the donor’s death.
- Since inheritance is a privilege Factors to consider are the ff.:
granted by the State and since  Age and state of health of
estate acquired and accumulated the decedent at the time of
is under the State’s protection, it the gift
is but righteous that the State  Length of time between the
collect its share. gift and the death.
 Ability to pay theory  Execution of a will within a
- It asserts that the heirs because short time of the making of
of the inheritance they received the gift.
are able and capable to pay the b. Revocable transfer
taxes due the State. - Is a transfer by trust or otherwise
 Redistribution theory where the decedent my revoke,
- It reduces the property received alter, amend or terminate the
by the heirs through taxes hence
terms of enjoyment of the The values to include in the gross estate shall be in
property. accordance with the ff. rule:
- Trust is the legal relationship  If the transfer was in the nature if a bona fide
created when a grantor known as sale for an adequate and full consideration in
the trustor, transfers property money or money’s worth, no value shall be
with the intention that it can be included in the gross estate.
managed by a trustee for the  If the consideration received on the transfer
benefit of a beneficiary or was less than adequate and full, the value to
beneficiaries. include in the gross estate be the excess of the
- Proceeds of Life Insurance, fair market value of the property at the time of
often described as an insurance the decedent’s death over the consideration
policy, is a common will-related received.
document.  If there was no consideration received on the
Proceeds of insurance under policies taken out by the transfer as in donation mortis causa, the value
decedent upon his life shall constitute part of the gross to include in the gross estate shall be the fair
estate if the beneficiary is: market value of the property at the time of the
- The estate of the decedent, his decedent’s death.
executor or administrator
- -a third person other than the Non-Resident Alien Decedent
estate, his executor, or - only his property located in the
administrator and the Philippines shall form part of his
designation of the beneficiary is gross estate.
revocable.  Gross estate shall include the ff.:
 Under the Insurance Code, 1. Franchise which must be exercised in the
a designation of beneficiary Philippines
is revocable unless stated 2. Shares, obligations or bonds issued by any
expressly as irrevocable. corporation or sociedad anonima
c. Transfer under a general power of organized or constituted in the Philippines
appointment in accordance with its laws
 Power of appointment –is the 3. Share, obligations or bonds issued by any
right to designate the person/s who foreign corporation 85% of the business
will succeed the property of a prior of which is located in the Philippines.
decedent. 4. Shares, obligations or bonds issued by any
 General power of foreign corporation if such shares,
appointment – is on which obligations or bonds have acquired a
authorizes the donee of the business situs in the Philippines
power to appoint any person 5. Shares or rights in any partnership,
to possess or enjoy the property business or industry established in the
 Limited or special power Philippines.
of appointment – is one  Fair market value – is the price which a
which authorizes the donee property will bring when it is offered for sale
of the power to appoint only by one who desires, but not obliged to sell, and
from among a designated is bought by one who is under no necessary of
class or group of persons buying it.
other than himself. o Real property
 Donor of the power – the person  FMV(zonal value) as
who creates the power of determined by the
appointment. Commissioner
 Done of the power (decedent) –  FMV as shown in the
the person who is given the right to schedule of values fixed by
exercise the power the provincial and city
 Appointed property – the subject assessors, whichever is higher.
of the power of appointment which o Share of stock
is the property being transferred  Unlisted shares
 Common- Book Other exemptions:
value 1. Benefits received by members from the GSIS
 Preferred- Par and SSS because of death.
value 2. Amounts received from the Philippine and U.S
 Listed shares – between governments for damages during the last war.
the highest and lowest 3. Benefits received by Philippine residents under
quotation at date nearest laws administered by the U.S. Veterans
the date of death, if none is administration
available on the death itself 4. Bequests, legacies or donations mortis causa to
o Right to usufruct, use or social welfare, cultural or charitable
habitation, annuity – value shall be organizations.
determined takin into account the 5. Grants and donations to the Intramuros
probable life of the beneficiary in Administration
accordance with the latest basic 6. Proceeds of group insurance policy taken out
standard mortality table, to be by the company for the benefit of its
approved by the Secretary of Finance, employees.
upon recommendation of the 7. Proceeds of accident insurance
Insurance Commissioner. 8. All grants, endowments, donations or
contributions used actually, directly and
Situs of Property exclusively for educational purposes.
 Real property – the place where it is situated
 Tangible personal property – where such is
actually located at the time of the decedent’s
 Intangible personal property – is the
domicile or residence of the owner
 Accounts Receivable –residence of the
 Bank Deposit- Location of depository bank
 Copyright, trademark, patent & franchise –
place or country where the intangible is used or

Exemptions from Estate Tax

1. The merger of usufruct in the owner of the
naked title.
2. The transmission or delivery of the inheritance
or legacy of the fiduciary heir or legatee to the
3. The transmission from the first heir, legatee or
done in favor of another beneficiary, in
accordance with the will of the predecessor.
4. All bequests, devices, legacies or transfers to
social welfare, cultural and charitable
institutions no part of the net income of which
insures to the benefit of any individual,
provided that not more than 30% of the said
bequests, legacies or transfers shall be used by
such institutions for administration purposes.
5. Separate property of the surviving spouse (
capital for the husband or paraphernal for the
6. Proceeds of life insurance where the
beneficiary is irrevocably designated.