Planning before and beyond the grave

(First in a series)

We work, not only for ourselves, but most especially for our loved ones.

The wealth we may have acquired should therefore be not a source of pain, but joy. The topic of planning wealth distribution should not be considered taboo, but a necessity to ensure generational peace and prosperity.

Donation

Wealth can be distributed during the lifetime of the owner. Donation is a mode of acquiring ownership. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.

The following are the essential characteristics of a donation: (1) the necessary form, (2) consent or acceptance by donee during donor’s lifetime. (3) irrevocability, (4) intent to benefit the donee; and the (5) resultant decrease in the assets or patrimony of donor.

Generosity, however, is not without limits. One such limitation is that there are certain persons who cannot be the recipient of liberality as the donation made in their favor is void.

Also, the donations are deemed void: (1) those made between persons who were guilty of adultery or concubinage at the time of the donation; (2) those made between persons found guilty of the same criminal offense, in consideration thereof; (3) and those made to a public officer or his wife, descendants and ascendants, by reason of his office.

In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donor and donee may be proved by preponderance of evidence in the same action.

Controlling disposition

If you do not wish to part with your properties during your lifetime, you may, to a certain extent, control the disposition of your properties even beyond the grave.

It is important to consider estate planning for the following reasons: (1) You may be able to minimize taxes. A tax-free exchange where property is transferred to a corporation that the transferor gains control of would enable that; (2) continuity and smooth transition of business operation may be assured even after your death; (3) to a certain extent, you can control the disposition and distribution beyond the grave; (4) estate planning may provide your loved ones the financial buffer needed to ensure the quality of life your family can enjoy even after your demise; (5) it may be the means to eliminate family squabbles by naming the beneficiaries and specifying their inheritance which can minimize disagreements between family and relatives; and (6) a good night rest for you may be assured knowing the future of your loved ones is safe and secure.

The decedent’s death, whether actual or presumed, is the moment the heirs acquire the right to the inheritance.

The transmission of the estate to the heirs is automatic, although the identification of the heirs and distribution of the estate may be delayed by the settlement proceedings.

Notwithstanding the heirs’ acquisition of ownership of the estate, the recognition of their right to property inherited may be subject to special legal requirements, such as registration (e.g., registration of inherited shares of stock with the corporate secretary of the issuing corporation).

Hereditary estate

The decedent’s hereditary estate (i.e., assets minus liabilities) is determined as of the decedent’s death; but the actual distributive shares of the heirs are determined only after the payment of all outstanding debts and charges.

Pending the physical partition of the estate, the heirs are co-owners of the inheritance.

They have full ownership of their respective undivided shares therein. They may alienate such undivided shares, subject to the right of redemption of other co-heirs; but they may not, without court approval, alienate a specific property or portion thereof prior to the dissolution of the co-ownership through partition.

Succession

Succession may be (1) testamentary; (2) legal or intestate; or (3) mixed.

In testamentary succession requires the execution of a duly probated 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 his estate, to take effect after his death.

The characteristics of a will are: (1) it is statutory right, not a natural right; (2) it is unilateral act—does not require the consent of the beneficiaries; (3) it is formal act—requires compliance with the prescribed legal formalities; (4) effective upon death; (5) it is essentially ambulatory; (6) it is a free act—the testator’s consent must be free from vice of consent; and (7) it is a personal act—the testamentary dispositions personally made by the testator.

Who may make a will? (1) All persons who are not expressly prohibited by law may make a will; (2) persons of either sex under eighteen years of age cannot make a will; and (3) testator of sound mind at the time of its execution.

To be of sound mind, it is not necessary that the testator be in full possession of all his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or other cause.

It shall be sufficient if the testator was able at the time of making the will to know the nature of the estate to be disposed of, the proper objects of his bounty, and the character of the testamentary act. (To be continued)

Sources:

The laws on donation and succession, Civil Code of the Philippines: Jurisprudence: Heirs of Reyes vs. Calumpang, G.R. No. 138463, October 30, 2006; Ramirez vs. Baltazar, No. L-25049, 30 August 1968, 24 SCRA 918.), Puno vs. Puno Enterprises, Inc., G.R. No. 177066, 11 September 2009, 599 SCRA 585; Vda. de Gil vs. vda. de Murciano, No. L-3362, March 1951, 88 Phil 260, 269; Salvador vs. Sta. Maria, No. L- 25952, 30 June 1967, 20 SCRA 603; Dizon-Rivera vs. Dizon, No. L-24561, 30 June 1970, 33 SCRA 554; Heirs of Sandejas vs. Lina, G.R. No. 141634, 5 February 2001, 351 SCRA 183; Blas vs. Santos, No. L-14070, 29 March 1861, 1 SCRA 899; Uson vs. del Rosario, No. L-4693, 29 January 1953, 92 Phil 530.

Special thanks to Professor Avelino V. Sebastian for his notes and book entitled Wills and Succession.

On line articles: Manulife. https://www.manulife.com.ph/about- us/blog/5-reasons-why-estate-planning-is-important.html

The Philippine Estate Planning Primer. Lawyers in the Philippines. https://lawyerphilippines.org/the-philippine-estate-planning primer- everything-and-the-kitchen-sink/

The author is Dean, College of Law at Lyceum of the Philippines University; Chairman of Philippine Association of Law Schools; and Founder of Mawis Law Office