How to Avoid Inheritance Tax

How to Avoid Inheritance Tax

images

Just don’t pay! It is as simple as that. This is what most Filipinos do anyway, right? Up until the time comes when the lone heir finally wants to sell the ancestral house, the vintage Mercedes Benz, or probably the farm in Batangas. Or stated differently, when the once so amiable co-heir, who married the coveted starlet of his time, would suddenly demand for liquidation and eventual partition of the assets left by the philanthropic grandfather. Of course, he will be represented by his lawyer, dressed in an Ermenegildo Zegna suit, who acts more like a co-heir than a mere counsel; already counting his success fee.

In the foregoing scenarios, almost always, the ever dependable family lawyer is called upon to facilitate the settlement of the estate of the deceased. And all the time, heirs convulse at the amount of estate or inheritance tax, they would have to pay, after advisement. Unfortunately, what heirs are commonly unaware of is that tax matures through time. Tax which can be likened to a measly house lizard that can easily be stomped upon in its infancy, maturing to a full-grown starving dinosaur after years of neglect, ready to chomp on whatever is left of the estate the heirs are currently enjoying. What is worst is to find out, after some pencil pushing, that not even the entire value of the estate is enough to settle the tax which was reinforced by surcharges, interest and compromise penalty. As a result, a family may even be evicted from the house that has been with them for generations, to give way to foreclosure and auction sale. To contextualize, an estate tax of PhP 10,000.00 due thirty years back, is already PhP 2,373,763.14 today, save the 25% to 50% surcharge plus compromise penalty.

The solution, stomp on the lizard while you still can.

And there is no reason to await this lizard’s mutation for the law does not oblige heirs to pay more than what they will inherit. In fact, the inheritance tax can even be nil if the estate’s value does not reach the threshold of PhP 200,000 after applying the allowable deductions. As regards the debts of the estate, again there is nothing to worry for the same will never become the personal liability of the heirs. This was explained by the Supreme Court in the case of Genato v. Baylon (G.R. No. 171035 citing Estate of Hemady v. Luzon Surety Co., Inc., L-8437, 100 Phil. 388, 1958) where it ratiocinated, thus: “While in our successional system, the responsibility of the heirs for the debts of their decedent cannot exceed the value of the inheritance they receive from him, the principal remains intact that these heirs succeed not only to the rights of the deceased but also to his obligations.”

Obviously, it is always wiser to settle the estate tax within the time prescribed by law; and that is, six (6) months from the decedent’s death, subject to reasonable extension, in meritorious cases, not exceeding an additional thirty (30) days, as per sec. 90 of the National Internal Revenue Code. Moreover, it is also worth noting that the commissioner has the power to further extend payment of estate tax up to two (2) years in case of extrajudicial settlement of estate and five (5) years if judicial. This time, as per sec. 91 of the same code. As regards the rate, the same is provided below, thus, if the net estate is:

Over

But Not Over

The Tax Shall be Exempt

Plus

Of the Excess Over

P         200,000

Exempt

P         200,000

500,000

0

5%

P         200,000

500,000

2,000,000

15,000

8%

500,000

2,000,000

5,000,000

135,000

11%

2,000,000

5,000,000

1,000,000

465,000

15%

5,000,000

10,000,000

And Over

1,215,000

20%

10,000,000

Clearly, with the foregoing information, estate tax can now be viewed in a different light.  Thus, Instead of dreading it, the same should be accepted; for mere apathy will not cause its disintegration. As Benjamin Franklin once said, “The only things certain in life are death and taxes.” And with the thrust of the present commissioner of the Bureau of Internal Revenue (BIR), the tried and tested way of simple neglect may not work anymore. This is because a gentle reproof was already made public in the last quarter of 2013. It was made known to the nation that the BIR’s target is to increase estate tax collection from a measly P1 billion to P50 billion in 2016. Is this too optimistic? Maybe. But believe me when I say that you wouldn’t want to receive a letter from our dear commissioner.



9 Comments

Nice respond in return of this matter with real arguments and
telling everything about that.

Reply

Do you mind if I quote a couple of your posts as
long as I provide credit and sources back to your blog?
My website is in the exact same area of interest as yours and my
users would certainly benefit from a lot of the information you provide here.
Please let me know if this okay with you.
Thank you!

Reply

Thanks for your marvelous posting! I definitely enjoyed reading it, you can be a great author.
I will make sure to bookmark your blog and will eventually come back later on. I want
to encourage you continue your great work, have a nice afternoon!

Reply

I’m not that much of a online reader to be honest but your blogs really nice, keep it
up! I’ll go ahead and bookmark your site to come back later
on. All the best

Reply

Great beat ! I wish to apprentice whilst you amend your web site, how
could i subscribe for a blog web site? The account aided me a applicable deal.
I have been a little bit acquainted of this your broadcast provided vibrant transparent idea

Reply

I am actually grateful to the holder of this site who has shared this impressive paragraph at at this
time.

Reply

Does your site have a contact page? I’m having problems locating it but, I’d like to send you an email.
I’ve got some recommendations for your blog you might be
interested in hearing. Either way, great site and I look forward to seeing it grow over time.

Reply

Peculiar article, totally what I needed.

Reply

This is a topic that’s near to my heart…
Cheers! Where are your contact details though?

Reply

Leave a Reply

Your email address will not be published.

*
*

*