IBP Davao Corner: Death and Taxes

This health pandemic has made death a somewhat common happenstance for all of us. This reminds me of the story of a grieving mother who asked Buddha to revive her dead son. Buddha answered he would only do so if she could find a person who had not experienced death in his/her family. The grieving mother knocked on every door of the village but could not find that one person and by then she understood death’s role – an inevitable natural phenomenon.

With the advent of the Tax Reform for Acceleration and Inclusion Law (TRAIN Law), Estate Tax Rate right now is reduced to 6% starting January 1, 2018. On the other hand, for those who died in 2017 and earlier, there is an ongoing Estate Tax Amnesty until June 14, 2023. This means that in the event the heirs file the Estate Tax Return before the deadline, the Bureau of Internal Revenue (BIR) will waive the interest and penalty for the Estate Tax.

Although the Estate Tax rate of 6% is now the same as the Capital Gains Tax (for transfer of real property), it is still best to draw up a Last Will and Testament to ensure the proper disposition of our properties once we leave this world. Other than our properties, we can also draw up a Living Will, where we can leave instructions on what our heirs will do once we succumb into serious illness and unable to communicate. Through the Living Will, we can say that we prefer to donate our viable organs or not; or whether we prefer our deceased body to be cremated or buried; or whether we prefer to be resuscitated or not. Making final instructions on these important questions regarding our respective bodies will save our family members from making these heart-wrenching decisions on their own during those stressful times.

Due to the sensitivity of the matters addressed by Last Will and Testament and the Living Will, it is best that the drafting and finalization of these documents are handled by a lawyer. These documents will remain confidential and kept safely by your lawyer or appointed administrator until this certain event happens.

It is also worthy to note that under BIR Revenue Regulation 8-2019, the bank, upon knowing the death of its depositor, shall allow the withdrawal from the decedent’s bank deposit within one year from the date of death, subject to a final withholding tax of 6% on the amount withdrawn.

Socrates wrote that “death may be the greatest of all human blessings.” Although All Soul’s Day already passed and we are already entering the festive Christmas season, it is still not too late to prepare for what is inevitable.

(IBP Davao Corner is a weekly column of Integrated Bar of the Philippines- Davao Chapter, giving legal advice as part of its legal aid program. You may send your comments and questions to ibpdavao@gmail.com.)