Succession & Estate Law in the Philippines

[jrlee183]

Morning All,

Ok, so I suppose this post could technically be viewed as an advert but it isn't intended as such ..... am just trying to share some valuable information here and to create some awareness to members here as alot of people simply aren't aware of the laws on this topic here.

As part of my day job, one of my specialist areas is trust and estate planning (mostly in the UK, but internationally as well).  Last year, I became the first and only foreigner in the Philippines to qualify as a Chartered Trust and Estate Planner here (I believe this is still the case).   I have been holding webinars over the past six months specifically on this topic. 

I dont have any more of these webinars scheduled at the moment, but I would be happy to to host one for members of this forum if I can get enough interest in it.  I have all of the slides done already so not a huge amount of work on my side, and I really feel this topic would benefit members who have family and/or own assets in the Philippines. 

Main topics covered are as follows:

What happens when you die in the philippines  (e.g. bank accounts getting frozen etc)

Forced heirship laws

Wills, and how to do one without getting a lawyer involved

Estate taxes & Donors taxes

Estate Planning tools

I promise there is no selling angle here or anything like that.  Im just looking to share some valuable info.  I have had really positive feedback on these webinars so if anyone thinks they would benefit from this info then please reply to this post and I can set aside an hour or so one lunchtime or in the evening to host this. 

Jamie

 

[Dave Hounddriver]

It is great to have a resident expert on hand because all of us will experience this event at some time.  Perhaps we could "sticky" this thread and keep it on topic (yes that is hard for some of us) so you could give specific answers to questions that affect all of us?

The one that comes up a lot, and really needs an expert to weigh in on, is the topic of bank accounts when living with or married to a filipina.  Most of us foreigners will die before our partners.  We want them to be able to get at our remaining cash and it is a time when they will need it most.  Most of us know that bank accounts get locked at the time of death until BIR gets some money and it is determined who should get the rest.

So the question to the expert is:  What is the best way to set up a Philippine bank account so that the surviving filipina can get to the money as quickly as possible in the event we die OR are in a coma/incapacitated.  We need answers for the legally married guys and for the "living-as-married" guys.  Can you sum up this one in one post?

[jrlee183]

45 minutes ago, Dave Hounddriver said:

So the question to the expert is:  What is the best way to set up a Philippine bank account so that the surviving filipina can get to the money as quickly as possible in the event we die OR are in a coma/incapacitated.  We need answers for the legally married guys and for the "living-as-married" guys.  Can you sum up this one in one post?

 

The short answer is this; you cant!  The BIR will freeze the bank account (even if it is held in joint names).  It will only be unfrozen when the estate taxes have been paid.  This applies regardless of whether you are married or not.

What you can do is plan for this eventuality.  I cover this in more detail in the webinar, but for the benefit of everyone I have outlined some solutions below:

1. Blank Checks/Access details -  I keep four signed blank checks made out to my partner in my vault in my house.  I also have my bank account log in details sealed in an envelope in my vault.  The theory behind this is that it will take a few days for the BIR to be notified of death and instruct the bank to freeze the account.  This would allow your family time to access the cash.  Its not without the obvious risk of having your bank login details documented on paper.

2. Overseas bank account - you can set up an offshore bank account (again in joint names with your wife/partner) that the BIR would not have any authority to freeze.  I personally do all my banking in the Isle of Man.  However particularly for the US citizens among us, this is no longer that easy to set up.

3. Irrevocable bank trust - you can 'donate' P100K per annum into an irrevocable trust without paying donors tax (most banks offer this).  This would be exempt from estate tax on death and as such is immediately available.   You need to ensure when making the 'donation' that you respect the legitime/forced heirship laws otherwise you will be hit with a 30% tax. 

4. PERA - 'Personal Equity And Retirement Account' - the BIR have ruled these as exempt from estate taxes. 

5.  Life insurance - you can set this up quite easily.  Most banks here will only allow you to nominate your wife as a beneficiary.  Note: the beneficiary needs to be irrevocably nominated for this to be exempt from estate tax.    Alot of life companies wont allow you to nominate a common law partner as a beneficiary so for those of us in a common law relationship (myself included) then an offshore/international life insurance policy is the answer. 

Ultimately, there is not alot you can do to circumvent the estate laws in the philippines.  There is even a clause in the tax code to say that any measures taken to avoid estate taxes are not allowed.  The key to estate planning in the Philippines is ensuring that there is sufficient liquidity in place to take care of your loved ones after your death.

Hope this helps.

Jamie

 

[Jack Peterson]

35 minutes ago, jrlee183 said:

It will only be unfrozen when the estate taxes have been paid. 

Ok, so this I understand so far but what if it is just my bank account? my wife is my sole Dependent on this and would I assume inherit

Now as we know, we own and can own nothing here in the Estate issue, so what would a sole account (Mine) be liable for, she has her own bank account and all dealings with the House and Land are geared through That. I can Understand if (God Forbid) she went first  her Bank account would be Frozen until all was settled but without any real ownership per-say here my question is;

Would our personal Bank account be Frozen on our Deaths (The Foreigner that is)?

One other thought. On my Death, would ALL the bank accounts here be Frozen? 

[Snowy79]

I'm single but having dealt with transferring large sums between UK and the Philippines recently one way if you have an HSBC account in the UK and the Philippines is to globally link them. You can transfer up to $200,000 each day between accounts for only $7. Once the money is transferred unlink the accounts then the Philippines have no access to the UK side.

[OnMyWay]

It sounds like many of us could benefit from the webinar.  I am interested!

[RBM]

5 hours ago, jrlee183 said:

 

6 hours ago, Dave Hounddriver said:

So the question to the expert is:  What is the best way to set up a Philippine bank account so that the surviving filipina can get to the money as quickly as possible in the event we die OR are in a coma/incapacitated.  We need answers for the legally married guys and for the "living-as-married" guys.  Can you sum up this one in one post?

 

The short answer is this; you cant!  The BIR will freeze the bank account (even if it is held in joint names).  It will only be unfrozen when the estate taxes have been paid.  This applies regardless of whether you are married or not.

 

 

5 hours ago, jrlee183 said:

 

The short answer is this; you cant!  The BIR will freeze the bank account (even if it is held in joint names).  It will only be unfrozen when the estate taxes have been paid.  This applies regardless of whether you are married or not.

 

Interesting, if I am reading  this correctly even if the foreigner whom name does not appear on the title, how ever has a joint account. The account is frozen, surly not, how can this effect estate duties when all he is done, in most cases is pay for the house and support.

[intrepid]

42 minutes ago, OnMyWay said:

It sounds like many of us could benefit from the webinar.  I am interested!

CMI,(Count Me In),  Evenings around 7PM would be good for me.  However, although I am old, I'm flexible!

[jrlee183]

20 hours ago, Jack Peterson said:

Ok, so this I understand so far but what if it is just my bank account? my wife is my sole Dependent on this and would I assume inherit

Now as we know, we own and can own nothing here in the Estate issue, so what would a sole account (Mine) be liable for, she has her own bank account and all dealings with the House and Land are geared through That. I can Understand if (God Forbid) she went first  her Bank account would be Frozen until all was settled but without any real ownership per-say here my question is;

Would our personal Bank account be Frozen on our Deaths (The Foreigner that is)?

One other thought. On my Death, would ALL the bank accounts here be Frozen? 

All bank accounts are frozen on death, regardless of whether Filipino or Foreigner.

You mention your wife is the sole beneficiary on your bank account.  Im unsure of whether or not you have children, but you should be sure that you have provision in your will that your estate follows the legitime here.  E.g. lets say you are married with, for example, two legitimate children.  Your will would have to state that your children are entitled to 50% of your estate (i.e. 25% each) and your wife is entitled to the same share as one legitimate child (so also 25%) the balance you can leave to whoever you like. 

 

 

[jrlee183]

18 hours ago, Snowy79 said:

I'm single but having dealt with transferring large sums between UK and the Philippines recently one way if you have an HSBC account in the UK and the Philippines is to globally link them. You can transfer up to $200,000 each day between accounts for only $7. Once the money is transferred unlink the accounts then the Philippines have no access to the UK side.

Interesting, and thats a cheap transfer too.  I think it is unlikely that the BIR would have access to the UK side simply due to UK data protection law.  But no harm in being 'belt and braces' about it.