A Definitive Guide in Settling The Estate of a Deceased Person

I - FIRST THINGS FIRST. Submit Notice of Death to the BIR within 2 months after death. The Notice of Death must be accompanied with Certified Copy of Death Certificate.

Take note that the Notice of Death must be filed with the BIR having jurisdiction over the residence of the deceased as indicated in the Death Certificate. Thus, even if the decedent is registered in Makati but he resides in Pasig, he must submit the Notice of Death in Pasig. Failure to pay Notice of Death within the required period will result in penalty which may amount to Php 50,000.

The BIR does not prescribe any form for the Notice of Death. Here is a sample one:

NOTICE OF DEATH

THE REVENUE DISTRICT OFFICER

Bureau of Internal Revenue,

RDO No. 52,

Paranaque City

DEAR SIR:

           

I am giving notice of the death of my husband, MR. JUAN DELA CRUZ, who died on February 14, 2016. Mr. Dela Cruz's residence address is at  No. 143 Love Street, Barangay Don Bosco, Paranaque City, within the jurisdiction of RDO No. 52 of Paranaque City. His TIN is 143-888-911.

           

A certified copy of his death certificate is attached herewith for your reference.

           

This Notice is given to the Bureau of Internal Revenue this 14th day of March, 2016 at Paranaque City, in compliance with Section 89 of the National Internal Revenue Code of the Philippines and for whatever legal purpose this may serve.

                                                                                                    INDAY DELA CRUZ

                                                                                                    Legal Heir/Wife

                                                                                                    No. 143 Love Street,

                                                                                                    Brgy. Don Bosco,

                                                                                                    Paranaque City

                                                                                                    Tel No. (02) 911-1111

II - DOCUMENTARY REQUIREMENT. This entails the preparation of mandatory documentary requirements to be submitted to the BIR for the settlement of a deceased. While the mandatory requirements are almost the same with all RDO, it is still wise to proceed to the BIR and specifically inquired about the supporting documents that they will require for the settlement of estate and the eventual issuance of Certificate Authorizing Registration. Obtain a checklist of documentary requirements from the ONETT Officer or the Officer of the Day.

Here are the list of mandatory requirement that BIR require:

a) Notice of Death duly stamped received by BIR within 2 months from death.

b) TIN of ESTATE. This is different from the TIN issued to the decedent while he was still alive. You get this from the same RDO where you submitted the Notice of Death. This is done by filling-out BIR Form 1904 or Application for Registration. You need to fill-out the following:

1. Taxpayer Type - Check ONETT Filipino Citizen

5. Taxpayer Name - Write ESTATE of Juan Dela Cruz

7. Date of Birth - write the date of death of the deceased

14. Preferred Contact Type - Check your choice and write the number or e-mail

15. Local Address - Write the residence address

25. Purpose of Registration - Check Transfer of Properties by Succession

26. Tax Type - Check Estate Tax

33. Declaration -Taxpayer/Authorized Representative - Sign

You may omit some other information that are not needed by the BIR.

Submit the application to the TIN Issuance section of the BIR and you will get the TIN of the Estate right there and then. The BIR officer in charge shall write the TIN in the BIR Form 1904 itself (in the space provided in the upper right portion of the form) so be sure to have the form with you.

c) Any of the following: (a) Affidavit of Self Adjudication; (b) Deed of Extra-Judicial Settlement; (c) Court Order (d) Sworn declaration of all properties of the Estate.

d) For Real Properties, you need to present the following:

1. From Assessor's Office, a Certified True Copy of the latest Tax Declaration, Certificate of Property Holdings and Certificate of No Improvement, if applicable. You can usually get this on the day of request.

2. From the Registry of Deed - Certified true copy of Transfer Certificate of Title, Condominium Certificate of Title or Original Certificate of Title. Be sure to also have the original owner's copy of the Title for presentation purpose and authentication. Based on my experience, you can get this as early as the next day upon request to as much as five days after request.

3. Sworn Declaration of No Improvement by at least one of the transferees. You may use this sample:

SWORN DECLARATION OF NO IMPROVEMENT ON REAL PROPERTY

I, INDAY DELA CRUZ of legal age, widow, and presently residing No. 143 Love Street, Barangay Don Bosco, Paranaque City, under oath state that:

            In accordance with existing rules and regulations of the Bureau of Internal Revenue, I am executing this sworn statement under penalties of perjury, to attest to the truth of the declaration and for the purpose of stating the true conditions of the properties described below that they have no existing improvement whatsoever as of February 14, 2016 duly verified by me:

TCT No.	Tax Declaration No.	Classification	Area	FMV/TD
TCT 1234	A-003-01112	Residential Lot	250 sqm	500,000.00
-	A-003-01113	Residential Home	-	500,000.00

           

I hereby authorize the Commissioner of Internal Revenue or his duly authorized representative to verify the above information.

            IN WITNESS WHEREOF, I have hereunto set my hands this _____________in ______________.

                                                                                                    INDAY DELA CRUZ

                                                                                                                Affiant

            SUBSCRIBED AND SWORN to before me this _______________ at ____________ affiant exhibited to me her TIN ID 222-101-888.

Doc. No._____

Page No.____

Book No.____

Series of 2016

e) For Personal Properties, if any or should you NEED to declare, you need to present the following:

1. Certificate of Deposit/Investment/Indebtedness duly signed by the Bank Manager;

2. Certificate of Registration of Motor Vehicle together with official receipt. You also need to present cost of acquisition for the purpose of applying the 20% annual depreciation rate.

3. Proof of valuation of shares of stock at the time of death.

f) CPA Statement on the itemized assets of the decedent, itemized deductions from gross estate and the amount due if the gross value of the estate exceeds two million pesos, if applicable.

g) Certification of Barangay Captain for claimed Family Home

h) Other requirements as may be required by BIR. In some RDO they require authenticated marriage certificates and birth certificates of heirs and photocopies of valid IDs. If you are a representative of the heirs, some BIR require Special Power of Attorney or Authorization Letter.

III - COMPUTATION OF ESTATE TAX DUE. Once you presented the documents to the BIR, the ONETT Officer shall compute your tax due. It is wise though to know how the estate tax is computed and to know the basis for such computation. In some instances, your Accountant will help you in computing the estate tax due but in most instances, your Accountant will play it safe and ask you to let the BIR compute it first.

In any case, it would be beneficial if you know how to compute for the tax due. A very useful reference is BIR Revenue Regulation No. 2-2003 which will guide you in determining the value of the gross estate, computation of net estate and the tax due.

1. Valuation of Gross Estate

The properties comprising the gross estate shall be valued based on their fair market value as of the time of death.

If the property is a real property, the fair market value shall be the Zonal Value as determined by the Commissioner or the assessed value as shown in the Tax Declaration, whichever is higher. You can check the Zonal Value of the real property in the BIR Website.  

In the case of shares of stocks, the fair market value shall depend on whether the shares are listed or unlisted in the stock exchanges. Unlisted common shares are valued based on their book value while unlisted preferred shares are valued at par value. In determining the book value of common shares, appraisal surplus shall not be considered as well as the value assigned to preferred shares, if there are any. For shares which are listed in the stock exchanges, the fair market value shall be the arithmetic mean between the highest and lowest quotation at a date nearest the date of death, if none is available on the date of death itself.

2. Computation of Net Estate

The value of the net estate of the deceased shall be determined by deducting from the Gross Estate the following allowable deductions:

a) Expenses, losses, indebtedness and taxes. - This includes:

- Funeral Expenses - 5% of gross estate but not to exceed Php 200,000 and must be supprted by receipts;

- Judicial Expenses such as attorney's fees, accountant's fees and cost of preserving and distributing the estate. This must also be supported by receipts or sworn statement if still unpaid.

- Claims against the Estate which must be substantiated by documents.

- Claims of the deceased against insolvent persons where the value of the decedent's interest is included in the value of the Estate.

- Unpaid mortgages, taxes and casualty losses

b) Property previously taxed and proof thereof.

c) Transfers for public use which must be duly substantiated by a deed.

d) Family Home - This is where the Barangay Certificate above is required.

e) Standard Deduction of Php 1,000.000.

f) Medical Expenses which must be supported by receipts and must not exceed Php 500,000.

g) Net Share of Surviving Spouse in the Conjugal or Community Property. After deducting the allowable deductions appertaining to the conjugal or community properties included in the gross estate, the share of the surviving spouse must be removed to ensure that only the decedent’s interest in the estate is taxed.

After you have computed the Net Estate, you may use the table below to compute the Tax Due:

Over	But not over	The tax shall be	Plus	Of the excess over
0	200,000	Exempt
200,000	500,000	0	5%	200,000
500,000	2,000,000	15,000	8%	500,000
2,000,000	5,000,000	135,000	11%	2,000,000
5,000,000	10,000,000	465,000	15%	5,000,000
10,000,000	And Over	1,215,000	20%	10,000,000

IV - PAYMENT OF ESTATE TAX DUE

Since manual forms are no longer accepted. You need to fill out the Estate Tax Return or BIR Form 1801 thru the BIR's e-form facility. You may download the BIR's e-form package from the BIR Website. Once you filled-out the BIR Form 1801, you need to pay the amount to an accredited bank by presenting the print-out of the form together with the validation that BIR will send in your e-mail.

V - SUBMISSION OF ALL DOCUMENTS TO BIR AND WAIT FOR ISSUANCE OF CERTIFICATE AUTHORIZING REGISTRATION

Upon submission of the requirements and proof of payment, the ONETT Officer will issue a Claim Stub with a reference number. When you follow up if the CAR has already been issued then you only need to give the reference number.  

Lastly, BIR has recently issued Revenue Memorandum Order No. 41-2016 which states that CAR must be issued within 5 days from receipt of complete documents. Tell me if this is true :)