Succession – it is a mode of transmission of the ownership, rights and interests and obligations over property by reason of death of the owner in favor of certain persons designated by the owner himself or by operation of law.
Elements of Succession
Decedent – the person who dies and whose properties, rights, ownership, interest, obligations are transmitted. If he left a will called a testator.
Successors – persons to whom the properties, rights and obligations of the decedent will pass.
Kinds of Succession:
Testate or voluntary – carried according to the wishes of the testator or expressed in a will executed in the form prescribed by Law.
Intestate, involuntary, or legal. A succession with an invalid will or without a will, thus giving rise to a succession by operation of law.
Estate – the properties, rights and obligations which are the subject matter of the succession. It sometimes called inheritance.
It is a tax on privilege of the decedent to transmit his estate at death to his lawful heirs or beneficiaries.
Composition of Gross Estate
- In the case of a Citizen or Resident Alien Decedent:
a. Real property within and without the Philippines.
b. Tangible personal property within and without the Philippines.
c. Intangible personal property within and without the Philippines.
2. In the case of non-resident alien decedent:
a. Real property within the Philippines.
b. Tangible personal property within the Philippines.
c. Intangible personal property within the Philippines unless there is Reciprocity in which case it is not taxable.
Rule of Reciprocity:
- rule applies to transmission of intangibles of non-resident alien decedent. There is a reciprocity if the foreign country in which the decedent was a citizen and resident at the time of his death.
- Did not impose a transfer tax.
- Allowed similar exemption from transfer tax in respect of intangible personal property owned by citizens of the Philippines not residing in the foreign country.
Properties Excluded from Gross Estate of Citizen or Resident Alien decedent:
- Proceeds of irrevocable life insurance policy payable to beneficiary other than estate, executor or administrator.
- Proceeds of GSIS policy.
- Separate property of the surviving spouse.
- Benefits received from GSIS.
- Benefits received from SSS.
Valuation of the Estate:
- Usufruct – to determine the value of usufruct, use or habitation as well as that of annuity, there shall be taken into account the probable life of beneficiary in accordance with the latest Basic Standard Mortality Table.
- Properties. The estate shall be appraised at it’s fair market value as of the time of death. However, the appraised value of real property as of the time of death shall be whichever is higher of:
a. Fair market value as determined by the commissioner.
b. Fair market value as shown in the schedule of values fixed by the Provincial or City Assessors.
Fair Market Value defined as the price at which the property would change hands between a willing seller and willing buyer, neither of whom is under compulsion to buy or sell.