SUCCESSION

(Art 774 NCC)

Audrey B. Reaño
 Succession and Transfer Taxes
The modes and mechanics of acquiring ownership and other real rights over property are fairly complex. One
can gain, transfer and lose ownership on a number of ways.
Under the New Civil Code (NCC), ownership may be acquired through:
1. Occupation
2. Intellectual creation
3. Law
4. Donation
5. Tradition
6. Contract
7. Prescription
8. Succession
 Transfer Taxes and Succession Defined

Transfer Taxes are taxes imposed upon the gratuitous disposition of private properties or right. Gratuitous
transfer is one that neither imposes burden nor requires consideration from transferee or recipient. The
transfer of ownership is free because of the absence of financial consideration. Hence, gratuitous transfers are
essentially donations. The reserve side of gratuitous transfer is onerous, one where the transferee gives
consideration in return for the property or rights received. However, onerous transfers are subject to business
taxes instead of transfer taxes.
Gratuitous transfer or donation may take effect at the time of death of the donor or during the lifetime of
both the donor and the donee. The former is known as “donation mortis causa” subject to estate tax while the
latter is known as “donation inter vivos” subject to donor’s tax. Consequently, transfer taxes, which are typically
assessed on the net value of the taxable assets transferred, fall into two basic categories; estate tax and donor’s
tax.
 Transfer Taxes and Succession Defined
Succession is a mode of acquisition by virtue of which, the property, rights and obligations to the extent of
the value of the inheritance, of a person are transmitted through his death to another or others either by his
will or by operation of law. The inheritance includes all the property, rights and obligations of a person which
are not extinguished by his death. The rights to the succession are transmitted from the moment of death of
the decedent, notwithstanding the postponement of the actual possession or enjoyment of the estate by the
beneficiary. The “heirs succeed immediately to all the property of the deceased ancestor at the moment of
death as completely as if the ancestor had executed and delivered to them a deed for the same before his
death.
Nature of transfer taxes
The subject matter of a matter of a transfer tax is the privilege of the transferor to gratuitously transfer
property or rights which takes effect at the date of death of the transferor or during the lifetime of the donor
and the donee. Although the amount of transfer tax is based on net estate or net gifts, it shall not be construed
as a property tax. On this basis, transfer tax is classified as “excise tax” or privilege tax imposed on the act of
passing the ownership of property and not on the value of the property or right.
 Transfer Taxes and Succession Defined

The Law that Governs the Imposition of Estate Tax

It is a well settled rule that estate taxation is governed by the statute in force at the time of death of the
decedent. The estate tax accrues as the date of death of the decedent and the accrual of the tax is distinct from
the obligation to pay the same. Upon the death of the decedent, succession takes place and the right of the
State to the tax the privilege to transmit the estate vests instantly upon death. In the Philippines, succession
itself (excluding the tax aspect) is governed by the new civil code.
Illustration :
Nathan suffered an unexpected heart attack causing death on November 1, 2018. His estate composed of the following:
Cash in bank P1,000,000
Commercial building 5,000,000
Cars 1,000,000
House and Lot 3,000,000
Raf is the only heir of the decedent. Nathan’s remains were cremated on November 8, 2018. The executor of Nathan’s estate
filed the estate tax return and paid the corresponding estate tax on October 31, 2019. The properties left by the decedent
were finally distributed to Raf on December 14, 2019. Assume the following:
Question 1: When will the transfer of ownership from the decedent to the heir take effect?
Question 2: When should the estate tax accrue?
Question 3: Assume that Nathan’s total outstanding liabilities as of the time of his death amounting to P12,000,000. How
much of the outstanding liabilities of the decedent should be assumed by Raf?
 Kinds of Succession

1. Testamentary or testate succession

- A type of succession that results from the designation of an heir, made in a will executed in the form
prescribed by law.

2. Legal or intestate succession

- A type of succession which is effected by operations of law (based on the provisions of the civil code
regarding succession) since the decedent did not execute a will or if the last will and testament
executed by him is void.

3. Mixed succession
- A type of succession which is effected partly by “will” and partly by operation of law.
Causes of Legal Succession or Intestacy:
1. If a person dies without a will, or with a void will, or one which has subsequently lost its validity.
2. When the “will” does not institute an heir.
3. Partial institution of heir. Consequently, intestacy takes place as to the undisposed portion.
4. When the heir instituted is incapable of succeeding.
5. Other causes such as:
a. Non-fulfillment of the suspensive condition attached to the institution of heir. Suspensive condition is a condition depending upon the
happening of an uncertain even which must be fulfilled before an obligation arises.
b. Preterition (omission in the testator’s will of one, some or all of the compulsory heirs in the direct line which has the effect of
annulling the institution of heir)
c. Fulfillment of “resolutory condition”. A resolutory condition refers to a condition whereby, upon fulfillment terminates an already
enforceable obligation.
d. Expiration of term or period of institution
e. Non-compliance or impossibility of compliance with the will.
f. Repudiation of the instituted heir.
 Elements of Succession
a. Decedent – the general term applied to the person whose property is transmitted through succession,
whether or not he left a will. If he left a will, he is called a testator.
Executor is a person designated in the last will and testament to carry out the provision of the decedent’s
will. He also performs a fiduciary duty such as taking care of the decedent’s estate prior to final disposition to the
heirs.
Administrator is a person appointed by the court and performs the same duty, in lieu of an executor, if the
latter refused to accept the appointment, failed to qualify under the law or the last will and testament did not
appoint one.
b. Inheritance or Estate – include all the property, rights and obligations of a person which are not extinguished
by death and all which have accrued thereto since the opening of succession. Rights which are purely personal
are not transmissible for they are extinguished by death.
c. Successors – person who is called to the succession either the provision of a will or by operation of law.
Devisees and Legatees are persons to whom gifts of real and personal property are respectively given by
virtue of a will.
 Classification of Successors
a. Compulsory Heirs – those who succeed by force of law to some portion of the inheritance, in an amount
predetermined by law, known as the legitime. They succeed whether the testator likes it or not. They
cannot be deprived by the testator of their legitime except by disinheritance properly effected.
Kinds of Compulsory Heirs
1. Primary – those who have precedence over and exclude other compulsory heirs.
2. Secondary – those who succeed only in the absence of the primary compulsory heirs.
3. Concurring – those who succeed together with the primary or secondary compulsory heirs.
Primary Compulsory Secondary Compulsory
a. Legitimate children and their legitimate d. Legitimate parents and legitimate
descendants ascendants (They inherit only in default of “A”)
b. Surviving spouse e. Illegitimate parents (no other descendants).
They inherit only in default of “A” & “C”
c. Illegitimate children and their descendants,
legitimate or illegitimate
 Classification of Successors

b. Voluntary Heirs – those instituted by the testator in his will to succeed to the inheritance of the portion
thereof of which the testator can freely dispose. Free portion refers to the portion or value left in the estate
after deducting the legitimes of the compulsory heirs. A voluntary heir is determined through last will and
testament.

c. Legal or Intestate Heirs – those who succeed to the estate of the decedent by operation of law (decedent
died without a valid will or his estate was not entirety disposed of by will)
 Composition of Gross Estate
The gross estate is divided into two main categories for succession purposes, the legitime and free portion
as shown below:

Compulsory Heirs:
Legitime - This portion of the estate is reserved by law specifically to
(75% of the compulsory heirs, regardless of whether or not a last will and
estate) testament was prepared.

Compulsory Heirs and/or Voluntary Heirs:

- As provided in the last will and testament
Free Portion
- In the absence of a will, this portion of the estate shall be
(25% of the
distributed to “intestate heirs” based in the order of
estate)
priority.
Legitime is part of a testator’s property which he cannot dispose of because the law has reserved it for certain heirs who
are, therefore, called compulsory heirs. The compulsory heirs cannot be deprived of their legitime by the testator except
by disinheritance properly effected.

Free Portion is that portion of the estate which the testator can freely dispose of. Hence, anyone may inherit from free
portion. Nonetheless, voluntary heirs will not inherit anything. In such cases, the free portion shall be disposed of to
intestate heirs based in the order of priority:
a. Legitimate children or descendants
b. Legitimate parents or ascendants
c. Illegitimate children or descendants
d. Surviving spouse
e. Brothers and sisters, nephews and nieces.
f. Other collateral relatives within the 5th degree
g. State
Collateral Relatives

Consanguinity is the relation of persons descending from the same stock or common ancestors. These
persons are known as blood relatives, and are said to be related by blood or consanguinity. It may be lineal or
collateral.

Lineal consanguinity, which may be descending or ascending , is that which subsists between persons of
whom one is descended in a direct line from the other.

Collateral consanguinity is that which subsists between persons who have the same ancestors, but who
not descend one from the other. Proximity of relationship is determined by the number of generations. Each
generation forms a degree.
Determining Blood Relationship
Marites

Marisol Tolits

Marilou Marisa Marife Maris

Mariposa Maribeth
Wills
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. It is a document whereby a person, called the
“testator”, disposes of his or her properties or “estate” to take effect upon his or her death.
The making of a will is a strictly personal act. It cannot be left in whole or in part of the discretion of a third
person, or accomplished through the instrumentality of an agent or attorney. All persons who are not expressly
prohibited by law may make a will. The persons prohibited by law to make a will are those below 18 years old and
those who are not of sound mind at the time of its execution.
The law presumes that every person is of sound mind, in the absence of proof to the contrary. The burden of
proof that the testator was not of sound mind at the time of making his dispositions is on the person who
opposes the probate of the will. If the testator, one month, or less, before making his will was publicly known to
be insane, the person who maintains the validity of the will must prove that the testator made it during a lucid
interval. Supervening incapacity does not invalidate an effective will, nor is the will of an incapable validated by
the supervening of capacity. A married woman may make a will without the consent of her husband, and without
the authority of the court. A married woman may dispose by will of all her separate property as well as her share
of the conjugal partnership or absolute community property.
Kinds of Wills:
1. Notarial or Ordinary or Attested Will – is one which is executed in accordance with the formalities
prescribed by Art 804 to 808 of the New Civil Code.
Requisites for a Valid Notarial Will
a. It must be in writing and executed in a language or dialect known to the testator.
b. It must be subscribed at the end thereof by the testator himself or by the testator’s name written by
some other person in his presence and by his express direction.
c. It must be attested and subscribed by three or more credible witnesses in the presence of the testator
and of one another.
The following are disqualified from being witnesses to a will:
a. Any person not domiciled in the Philippines
b. Those who have been convicted of falsification of a document, perjury, or false testimony.
Kinds of Wills:
2. Holographic Will – is a written will which must be entirely written, dated and signed by the hand of the
testator himself. It subject to no other form and it may be made in or out of the Philippines and need not be
witnessed. In case of any insertion, cancellation, erasure, or alteration in a holographic will, the testator must
authenticate the same by his full signature.
Codicil is a supplement or addition to a will, made after the execution of a will and annexed to be taken as
a part thereof, by which any disposition made in the original will is explained, added to or altered. In order that
a codicil may be effective, it shall be executed as in the case of a will.
Foreign Wills
The will of an alien who is abroad produces effect in the Philippines if made with the formalities
prescribed by the law of the place in which he resides, or according to the formalities observed in his country,
or in conformity with those which the Philippine civil code prescribes. A will made in the Philippines by a citizen
or subject of another country, which is executed in accordance with the law of the country of which he is a
citizen or subject, and which 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 Philippines.
Revocation of wills and testamentary dispositions
A will may be revoked by the testator at any time before his death any waiver or restriction of this right is void. A
revocation done outside the Philippines, by a person who does not have his domicile in the Philippines, is valid when
it is done according to the law of the place where the will was made, or according to the law of the place in which the
testator has his domicile at the time and if the revocation takes place the Philippines when it is in accordance with
the provisions of the new civil code.

Modes of Revoking a Will:

a. By implications of law
b. By some will, codicil, or other writing executed as provided in case of wills
c. By burning, tearing, cancelling, or obliterating the will with the intention of revoking it, by the testator himself, or
by some other person in his presence, and by his express direction. If burned, torn, cancelled, or obliterated by
some other person, without the express direction of the testator, the will may still be established, and the estate
distributed in accordance therewith, if its contents, and due execution, and the fact of its unauthorized
destruction, cancellation, or obliteration are established according to the Rules of Court.
Institution of Heir
It is an act by virtue of which a testator designates in his will the person or persons who are to succeed
him in his property and transmissible rights and obligations. A will shall be valid even though it should not
contain an institution of an heir, or such institution should not comprise the entire estate, and even though the
person so instituted should not accept the inheritance or should be incapacitated to succeed. In such cases the
testamentary dispositions made in accordance with law shall be complied with and the remainder of the estate
shall pass to the legal heirs.
A compulsory heir may, in consequence of disinheritance, be deprived of his legitime, for causes expressly
stated by law. Disinheritance can be effected only through a will wherein the legal cause therefore shall be
specified. The burden of proving the truth of the cause for disinheritance shall rest upon the other heirs of the
testator, if the disinherited heir should deny it.
Disinheritance
Is a testamentary disposition by which a compulsory heir is deprived of, or excluded from the inheritance
to which he has a right. Disinheritance is not applicable to voluntary heirs.
Requisites for Disinheritance
a. Effected only through a valid will
b. For a cause expressly stated by law
c. Cause must be stated in the will itself
d. Cause must be certain and true
e. Unconditional
f. Total
g. The heir disinherited must be designated in such a manner that there can be no doubt as to this identity
Common Causes For Disinheritance of children or descendants, parents or ascendants, and spouse:
a. When the heir has been found guilty of an attempt against the life of the testator, his/her descendants or
ascendants, and spouse in case of children and parents.
b. When the heir has accused the testator of a crime for which the law prescribes imprisonment for 6 years or
more, of the accusation has been found groundless.
c. When the heir by fraud, violence, intimidation or undue influence cause the testator to make a will or to
change one already made.
d. Refusal without justifiable cause to support the testator who disinherits such heir.
Peculiar Causes of Disinheritance
1. Children/Descendants
a. When the child or descendant has been convicted of adultery or concubinage with the spouse of the testator
b. Maltreatment of the testator by word or deed by the child/descendant
c. When the child or descendant leads a dishonorable or disgraceful life.
d. When the child or descendant is convicted of a crime which carries with it a penalty of civil interdiction’

2. Parents/Ascendants
a. When the parents have abandoned their children or induced their daughters to live a corrupt or immoral life, or attempted against
their virtue
b. When the parent or ascendant has been convicted of adultery or concubinage with the spouse of the testator.
c. Loss of parental authority for causes specified in the Civil Code.
d. Attempt by one of the parents against the life of the other, unless there has been reconciliation between them.

3. Spouse
a. When the spouse has given cause for legal separation
b. When the spouse has given grounds for loss of parental authority.
Right of Representation
It is a “right” created by fiction of law where the representative is raised to the place and degree of the person
represented, and acquires the right which the latter would have if he were living or could have inherited. Representation may
arise either because of:
a. Death
b. Incapacity
c. Disinheritance
The law further provides that “representation” is not available to:
a. As to compulsory heirs: in case of repudiation, the one who repudiates his inheritance cannot be represented. Their
own heirs inherit in their own right.
b. As to voluntary heirs
c. Voluntary heirs, legatees and devisees who
1. Predecease the testator
2. Renounce the inheritance cannot be represented by their own heirs, with respect to their supposed inheritance.