Jamie Lee is Vice President and Director of Globaleye Consulting Inc. based in Makati City, Manila. He is a Trust and Estate Planning Specialist in both the Philippines and the UK.
From investments to insurance, Globaleye’s Wealth Management expertise provides unbiased financial planning solutions for over 15,000 clients worldwide. Established in 1999, Globaleye are an independent firm of advisers who provide unbiased financial solutions to both Corporate and Private Clients.
There are two certainties in this world; death and taxes. When you die in the Philippines (or even outside of the country) you can be sure of two things; 1. Your estate will be distributed according to the law and 2. Your estate will almost certainly be subject to estate tax.
When you die as a resident of the Philippines this is what happens (even if you are a foreigner):
- Your Philippine Bank accounts are immediately frozen:
The moment the BIR find out that you have passed away (and trust me, they will find out quickly), your bank account is immediately frozen and no cash can be withdrawn until the BIR have given their approval. This is usually only after the taxes on your estate have been paid.
No amount of pleading with the bank manager will allow your loved ones access to your account even if the access is required to pay the estate tax.
In addition to the above, bank secrecy laws no longer apply and the BIR have the right to access information on every transaction in your accounts in the five years prior to your death.
- Your assets will be subject to estate tax
Estate tax in the Philippines is as high as 20% (depending on the value of your estate) and this has to be paid before your assets can be unfrozen and probate granted. This tax has to be paid within six months of the date of death, unless the BIR grant your family an extension. The penalties for non payment or late filing are as high as 25%.
- Your estate will be distributed to your ‘compulsory heirs’ regardless of what your will states:
Most people will go through life accumulating assets on the assumption that these assets can be left to whomever they chose. Whilst this may be the case in the majority of the world, in the Philippines this could not be further from the truth.
Even if you have a Will in place, unless this follows the ‘legitime’ (or forced heirship legislation) then your assets will be distributed across your compulsory heirs as dictated by the Philippines succession law. Typically, this favors legitimate children (who usually share 50% of the estate between them) and the spouse (who will normally receive the same share as one legitimate child except in the case where there is only one child in the marriage). Illegitimate children, parents, and siblings are also considered compulsory heirs however their share of the estate will vary.
After the compulsory heirs have been accounted for then anything left is known as the ‘free portion’ and this is the only part of your estate that can be bequeathed to whomever you chose.
- Any ‘gifts’ you have made during your lifetime will be considered part of your estate:
If you have gifted assets or property during your lifetime and did not pay the donors tax then the value of this gift will still form part of your estate. If the gift was made to someone other than a compulsory heir then the descendant has every right to claim his or her share of this gift. As such you cannot simply give away your assets to avoid estate tax.
Ultimately all of these issues will not be your problem as you will be long dead. However, it is your family and loved ones who will be left to pick up the pieces and having witnessed first-hand the heartache that this can cause, most readers would not wish such pain and suffering on their families.
Fortunately, there are measures that can be taken to ease some of the burden and we would like to take this opportunity to invite you to join our Online Masterclass on Wednesday, November 23rd at 12noon or 6pm Manila time. During this webinar we will discuss how you can structure your estate in such a way that it is distributed according to your wishes, how to reduce your estate taxes and provide liquidity for your family to pay estate taxes and to continue day to day life without you.
Join us now by registering at https://www.globaleye.com/events/live-masterclass-trust-and-estate-planning-for-
If you own assets or property in the Philippines then this webinar is essential for you.