CHAPTER 4: PROPERTY RELATIONS, and Property for exclusive personal use, except jewelry*

CHAPTER 5: ESTATE TAX CREDIT AND DISTRIBUTABLE ESTATE - Under ACP, properties for the exclusive personal use of each
spouses are always exclusive property whether they are acquired
Pre-nuptial Agreement before or during marriage
- Also called “Pre-marital Agreement” or “Ante-nuptial Agreement” - Exception: Jewelry. Jewelry acquired before marriage will
- Philippine Laws do not require the agreement to be registered in a become common property.
government office to be binding
- Must be recorded in the following as security: Fruits, Income, or Gains
1. Local civil registry where the marriage is celebrated 1. Fruits of labor and industry
2. Register of deeds where the affected property is located - Common property
- Must be in writing 2. Fruits of properties
- Expected prior to celebration of marriage - Follows the rule: “Fruits follow Principal”
- Signed by future spouse - Fruit of separate property = separate property
- Any amendment may only be allowed before the celebration of the - Fruit of conjugal property = conjugal property
marriage
Properties acquired DURING marriage
PROPERTY RELATIONS • Community Property under ACoP
- Applicable only to married persons 1. Properties acquired during marriage by onerous title using the
- Used to distinguish a conjugal or community property from an common fund or from income of either of the spouse
exclusive property 2. Family Home, in general
• Exclusive property used as family home → exclusive
Property Relationship shall be governed in the following order: 3. Proceeds from life insurance
1. Marriage Settlements executed BEFORE marriage • Exclusive Property: Premium was paid from exclusive
2. Provisions of Law funds
3. Local Custom • Community Property: Premium was paid from conjugal
funds
TYPES OF PROPERTY RELATIONS 4. Claim against insolvent persons
1. Absolute Community of Property (ACoP) • Either exclusive or community
2. Conjugal Partnership of Gains (CPG)
3. Complete Separation of Property • Exclusive Property under ACoP
4. Any other regime 1. Property acquired gratuitously by any of the spouse, unless
expressly stated otherwise
If a couple had not adopted or agreed upon a system before the 2. Fruits of an exclusive property
marriage… 3. Properties for exclusive and personal use of any spouse
DATE OF MARRIAGE PROPERTY RELATIONSHIP
Before August 3, 1988 Conjugal Partnership of Gains Summary of Rules: Absolute Community of Property
On or before August 3, 1988 Absolute Community of Property Properties Acquired Before After
Marriage Marriage
- If a decedent is married with a surviving spouse, property must be From gratuitous acquisitions Communal Exclusive*
classified into conjugal or exclusive property From fruit of industry Communal Communal
• Conjugal → Owned by both spouses From fruit of property:
• Exclusive → Owned by either husband or wife ➢ Separate property Communal Exclusive
➢ Conjugal property Communal Communal
o Capital – Owned by the husband
o Paraphernal – Owned by the wife For exclusive use of either spouse:
➢ Jewelry Communal Communal
LAW GOVERNING PROPERTY RELATIONS ➢ Non-Jewelry Exclusive Exclusive
- Irrespective of the place of residence or the celebration of *Communal if designated to both spouses
marriage, the following laws shall govern the property relations:
• New Family Code – Marriage was on/after August 3, 1988
• Civil Code – Marriage was before August 3, 1988 B. CONJUGAL PARTNERSHIP OF GAINS (CPG)
- Property relation under which the husband and wife place in a
- Stipulations in the settlements or contracts for a future marriage is common fund the proceeds, products, fruits, and income from
VOID if marriage did not take place their separate properties and those acquired by either or both
- Stipulations that do not depend upon the celebration of the spouses through their efforts or by chance
marriages shall be VALID - This property relation views marriage as a partnership of gain
- Upon dissolution of the marriage or of the partnership, the net
gains or benefits obtained by either or both shall be divided
A. ABSOLUTE COMMUNITY OF PROPERTY (ACoP) equally between them, unless otherwise agreed in the marriage
- Most common settlements.
- Applied when spouses do not have a valid marriage settlement
- More in keeping with Philippine custom and family unity CPG applies:
- General rule: apply provisions of co-ownership 1. When the future spouses agree to it in the marriage settlement
- Spouses own: 2. To the conjugal partnership of gains already established between
1. All properties brought into marriage spouses before the effectivity of the New Family Code (August 3,
2. All properties acquired by both spouses during the marriage 1988), without prejudice to vested rights
- Rules on co-ownership applies in all matters not provided by the
New Family Code

All properties here are common

All properties here are Exceptions
exclusive Gratuitous acquisitions received
All properties here are common All properties here are common by either spouse
Exceptions Exceptions
Classification
Properties of spouse with Gratuitous acquisitions received
Properties before the marriage Exclusive
descendants in a prior marriage by either spouse
Properties derived during the marriage
Fruits of an exclusive property
➢ From fruits, income, and gains Common
Properties of personal exclusive use of either spouse, except ➢ From gratuitous acquisitions Exclusive
jewelry*
➢ Properties before marriage
Spouses with descendants in prior marriage
• All properties of the spouses before the marriage are their
- Properties, including fruits or income of such property,
exclusive properties because there is no partnership yet
accumulated before the marriage by a spouse with descendants
from prior marriage, are reserved by law as separate or exclusive
➢ Fruits, income, and gains
properties.
• Under CPG, fruits regardless of the source (either form
- Purpose: to protect the interest of descendants which could be
exclusive or conjugal property including fruits from labor) are
prejudice by the new marriage.
classified as conjugal property
➢ Gratuitous acquisitions
• When the property is designated by the donor or predecessor
to both of the spouses, the same shall be a common property.
Exclusive property under CPG
1. That which is brought to the marriage as his or her own
2. That which each acquires during the marriage by gratuitous title
3. That which is acquired by right of redemption or by exchange with
property belonging to only one of the spouses
4. That which is purchased with the exclusive money of the wife or of
the husband
Conjugal property under CPG
1. That which is acquired by onerous title during the marriage at the
expense of the common fund, whether the acquisition be for the
partnership or for only one of the spouses
2. That which is obtained by labor, industry, or work or profession of
either both or of the spouses
3. The fruits received or due during the marriage coming from the
common property or from exclusive property of each spouse
4. The share in the hidden treasure discovered during marriage which
the law awards to the spouses or to either of them as a proprietor
5. Property acquired by occupation such as hunting or fishing by both
spouses or by either of them
6. Improvements on the separate property of the spouses at the
expense of the partnership or through the industry of the spouses
or either of them
• Family home
- When constituted by both spouses → Conjugal
- Exclusive property used as family home → Exclusive
• Proceeds of life insurance policy
- Exclusive Property: Premium was paid from exclusive
funds
- Community Property: Premium was paid from conjugal
funds
• Claims against insolvent person
- Can be conjugal or exclusive depending on whether the
claim is for conjugal or exclusive
8. The value of what is donated or promised by both spouses in
favor of their common legitimate children for the exclusive
purpose of commencing or completing a professional or vocational
course or activity for self-improvement
9. Expenses for litigation between spouses, unless that suit is
found to be groundless.
• Obligations contracted during marriage
- Conjugal deductions
- Presumed to have benefited the family
• Obligations contracted before marriage
- Exclusive deductions
- Except: It is proven to benefit the family
• Share of the surviving spouse, family home, medical expenses,
and standard deduction are deductions to be made from the net
estate (total of net conjugal estate and net exclusive estate) to
arrive at the net taxable estate
• Medical expenses are neither conjugal nor exclusive deductions.
Unpaid medical expenses → cannot be deducted as claims
against the estate
➢ To be deductive:
1. Expenses must be incurred within one year prior to death
2. Supported by receipts
3. Amount must not exceed P500,000.
• Other deductions are either conjugal or exclusive deductions
- Depends on whether chargeable against conjugal property or
exclusive property
- Depends on whether the property to which the deduction is
related is conjugal or exclusive property.

SIMILARITIES AND DIFFERENCES OF ACoP and CPG • Wagering loss during marriage shall be borne by the loser.
Similarities CPG ACop Winnings, however, shall form part of conjugal property.
Property inherited or received as Exclusive Exclusive
donation during marriage
Property acquired during marriage Conjugal Community • Fines and pecuniary damages or indemnities imposed upon
(other than inheritance or donation) either spouse shall be charges against exclusive property.
Property acquired from labor, industry, Conjugal Community
work or profession of the spouses PRO-FORMA COMPUTATION
Fruits or income due or derived during Conjugal Community Conjugal or
Exclusive TOTAL
the marriage coming from the common Community
property GROSS ESTATE:
Personal property for exclusive use Exclusive Exclusive Real or immovable property xx xx
Tangible personal property xx xx
Differences
Intangible property* xx xx
Property before the marriage or brought Exclusive Community
Certain transfers** xx xx
to the marriage TOTAL xx xx xx
Fruits or income due or received during Conjugal Exclusive
the marriage coming from exclusive LESS: ORDINARY DEDUCTIONS
property Taxes (xx) (xx)
Losses (xx) (xx)
Claims against the estate (xx) (xx)
CONJUGAL and EXCLUSIVE DEDUCTIONS Vanishing Deductions*** (xx) (xx)
Whether under CPG or ACP, the following expenses are conjugal Claims against an insolvent person (xx) (xx)
deductions: Unpaid Mortgages (xx) (xx)
1. Funeral expenses Transfer for Public Use --- (xx) (xx)
2. Judicial expenses Net Community/Exclusive before
xx xx
Special Deductions
Other Conjugal Deductions (whether under ACoP or CPG)
1. The support of the spouses, their common children, and legitimate LESS: SPECIAL DEDUCTIONS
children of either spouse Standard Deduction (xx)
Family Home (xx)
RA 4917 (xx)
2. All debts and obligations contracted during marriage by the NET ESTATE before share of
designated administrator – spouse for the benefit of the conjugal surviving spouse xx
partnership, or by both spouses, or by one of them with the consent
of the other. LESS: 1/2 Share of Suriving Spouse
on the net conjugal/community (xx)
property before special deductions
3. Debts and obligations contracted by either spouse without the
consent of the other to the extent that the family may have NET TAXABLE ESTATE Pxx
x Estate Tax Rate 6%
benefited.
ESTATE TAX DUE Pxx
*Intangible properties including rights accruing before death, claims,
4. All taxes, liens, charges, and expenses including major and
against insolvent persons, RA 4917, and receivable as proceeds from
minor repairs upon conjugal property life insurance taken out by the decedent.
**Refer to certain transfers made before death but will take effect upon
5. All taxes and expenses for mere preservation, made during the death (transfer mortis causa) as well as transfer under general power of
marriage, upon the separate property of either spouse. appointment
***Always an exclusive deduction under CPG
- Transfer for public use shall be classified as exclusive deductions
6. Expenses to enable either spouse to commence or complete a
unless expressly provided otherwise
professional, vocational, or other activity or self-improvement - Amount received under RA4917 shall be included in the decedent’s
7. Debts before marriage of either spouse in so far as they have gross estate as part of community or conjugal property.
redounded to the benefit of the family
C. COMPLETE SEPARATION OF PROPERTY
- Technically, all properties of the spouses are separate properties,
except those properties which they may acquire jointly.
- All earnings from the profession, business or industry, and all fruits, versus
natural, industrial, or civil, due or received during the marriage from
the separate property of the spouses shall belong to each spouse. Actual Tax paid, all foreign countries = Pxxx (Actual)
Limit B (lower amount) = Pxxx (Tax Credit)
Family expenses
- Both spouses shall bear the family expenses in proportion to their Step 3 – Choose the lower amount between Limit A and Limit B
income Limit A Pxxx
- In case of insufficiency or default, the current market value of their Limit B Pxxx
separate properties
Allowed Tax Credit (lower amount) Pxxx
Liability to creditors for family expenses
- Spouses are liable solidary NET DISTRIBUTABLE ESTATE
- Net Taxable Estate – the result of the application of the law under
estate taxation
- Net Distributable Estate – the amount arrived at from gross estate
PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE
consisting all properties in the possession and control of the
decedent at the time of death and actual expenses, charges, and
CAPACITATED TO MARRY
payments from the estate
Man and woman who are capacitated to marry each other, live
exclusively with each other as husband and wife without the benefit of
Comparative Schedule of Net Taxable Estate and Net
marriage
Distributable Estate
The following rules shall apply: Net Taxable Distributable
1) Wages and salaries → Equally shared Estate Estate
2) Property acquired by the both of them through labor → governed GROSS ESTATE
by rules on co-ownership Real or immovable property Included Included
3) Neither party can encumber or dispose by act inter-vivos his or her Tangible personal property Included Included
share in the property acquired during cohabitation and owned in Intangible personal property Included Included
common, without the consent of the other, until after the termination Transfers in contemplation of
of cohabitation Included
death Included
• In the absence of proof to the contrary, properties Revocable transfers Included
Included
acquired while they lived together shall be presumed to
Transfers under the general
have been obtained by their joint efforts or labor and Included
power of appointment Included
shall be owned by them in equal shares
• A party who did not participate in the acquisition by the Proceeds of life insurance Included Included
other party of any property shall be deemed to have Exclusions such as SSS,
Not Included
contributed jointly in the acquisition thereof if the GSIS, etc. Included
former’s efforts consisted in the care and maintenance
of the family and of the household ALLOWABLE DEDUCTIONS
Funeral expenses** No longer allowed Actual
INCAPACITATED TO MARRY Judicial** No longer allowed Actual
1. Only the property acquired by both of them through their actual joint Unpaid taxes Actual Actual
contribution of money, property or industry shall be owned in Claims against the estate Actual Actual
common in proportion to their respective contributions. Claims against insolvent
- If silent, assume equal shares Actual
person Actual
Actual (settlement
2. The share of any party who is marred to another shall accrue to the
Losses period) Actual
absolute community or conjugal partnership, as the case may be,
if existing under valid marriage Transfer for public purpose Actual Actual
Vanishing Deduction As computed Not considered
Standard Deduction P1M Not considered
CHAPTER 5: ESTATE TAX CREDIT AND DISTRIBUTABLE ESTATE Family Home With limit Not considered
Medical Expenses** Actual
• Allowable Deductions → deductions from the gross estate No longer allowed
• Tax Credit → deduction from Philippine estate tax itself Amount received under RA
Actual
4917 Not considered
Share of surviving spouse 1/2 net conjugal 1/2 net conjugal
ESTATE TAX CREDIT NET TAXABLE ESTATE Pxxx
- Refers to the taxpayer’s right to deduct from the tax due the ESTATE TAX DUE Pxxx (xxx)
amount of tax it has paid to a foreign country. DISTRIBUTABLE NET ESTATE Pxxx
- The amount could be claimed as a deduction if such taxes pertain **No longer allowed as deductions from gross estate beginning January
to properties which are included in the gross estate for 1, 2018
Philippine estate tax computation
• The rules in classifying property into conjugal and exclusive
- This deduction is allowed by law to lessen the harshness of
property are the same for purposes of computing the net
international double taxation where the same estate is being distributable estate
subject to both the foreign estate tax and the Philippine estate tax
- Nonresident Alien decedents are not entitled to estate tax credit

PHILIPPINE ESTATE TAX DUE

Estate Tax Due (based on estate tax payable) xx
LESS: Tax Credit for foreign estate taxes paid (xx)
Philippine Estate Tax Due Pxx

FORMULA FOR THE COMPUTATION OF ESTATE TAX CREDIT

Limit 1 or Limit A – If there is only one (1) foreign country

versus

Actual Tax paid, foreign country = Pxxx (Actual)

Allowed Tax Credit (lower amount) = Pxxx (Tax Credit)

Limit 2 or Limit B – If there is more than one foreign countries

Step One: Compute for Limit 1 or Limit A per country
Step Two: Compute limit 2 using the following formula: