GROSS ESTATE

PROPERTY RELATIONS

System of Property Relations: What shall govern depends upon the marriage settlements that the
spouses have executed before the celebration of marriage. In the absence of such settlement or what has
been agreed upon is void, refer to Numbers 1 and 2.

*Common, Community or Conjugal properties mean that ownership is equally shared by the spouses

1. Absolute Community of Property Regime (ACOP): On or after August 3, 1988

Used by default and consists the following properties:

a. Property owned by the spouse at the time of the celebration of the marriage; and

*Assuming Gerry, single, was able to amass P10M worth of assets. One day, he
married Gina, which resulted to having the tile/ ownership of the P10M assets
divided between Gerry and Gina

b. Properties acquired after the marriage

*While married, Gerry and Gina, managed to acquire P100M worth of assets and
ownership shall belong to them equally

EXCLUSIVE PROPERTIES (Ownership retained by either the spouse):

i. Acquired during the marriage by gratuitous title by either spouse including fruits and
income thereof, if any, unless otherwise expressly provided by donor, testator or grantor.

*Tom donated (or inherited) a vacation house to his son on account of marriage. If
there is not clause that says that it shall belong to both the spouses, the vacation
house shall be considered as an exclusive property of the son.

ii. For personal and exclusive use of either spouse except jewelry

iii. Acquired before the marriage by either spouse who has legitimate descendants by a
former marriage including fruits and income thereof.

*Tom has been married for 30 years (from 1980 to 2010) until his wife died. Tom
had four children and was able to accumulate P100M worth of assets. If Tom is to
remarry, the P100M shall be considered as P100M, which shall benefit his four
children.

Donation of community property:

a. May dispose by will his/ her interest

b. Neither may donate without consent of the other
c. Moderate donations for charity or on occasion of family rejoicing/ distress is permitted.

2. Conjugal Partnership of Gains (CPOG): Prior to August 3, 1988

Consists the following properties:

a. Properties acquired DURING the marriage including acquired by chance (gamble) except
losses, which is exclusive
b. Fruits from both common and exclusive properties
c. Hidden treasure in owned property
 d. Livestock in excess of those brought into marriage upon dissolution

EXCLUSIVE PROPERTIES:
i. Brought to the marriage as his/ her own [refer to 1(a) except that the title to the P10M shall
remain to Gerry]

ii. Acquired during the marriage by gratuitous title (Donation or inheritance)

iii. That which is acquired by right of redemption, by barter or by exchange with property
belonging to only one of the spouses
iv. That which is purchased with exclusive money of the wife/ husband

Property bought on installments (Partly from exclusive & conjugal fund)

It shall belong to:

a. Buyer(s) if ownership was vested before marriage

Pepe paid P700,000 out of the P900,000 price for the Honda City he bought. He then
married Petra and monthly amortizations were paid out of the conjugal funds. If Pepe
died and the car was valued at P750,000 at the time of his death, exclusive property
shall amount to P750,000 but subject to P200,000 claims against the estate.

b. The conjugal partnership if vested during marriage

Based on the preceding problem, conjugal property shall amount to P750,000 and
subject to P700,000 claims against the estate

*Amount advanced by the partnership or by either spouse shall be reimbursed by the owner(s)
upon liquidation of the partnership.

**It is important to identify when the ownership was actually vested.

Ownership of credit (receivable) payable within a period of time

Whenever an amount or credit payable within a period of time belongs to one of the
spouses, the sums which may be collected during the marriage in partial payments or by
installments on the principal shall be the exclusive property of the spouse except, interest on
principal falling due during the marriage.

*Tomas, single, extended a loan to Tommy amounting to P100,000 on January 1, 2018 with 12%
annual interest payable in two years. Nine months later, he married Tiffany on October 1, 2018
under the CPOG regime. Supposing Tomas died January 1, 2020, how much is the exclusive and
conjugal properties?

EXCLUSIVE CONJUGAL
Principal Amount P100,000
Interest – Exclusive (P100K x 9,000
12% x 9/12 January to
September)
Interest – Conjugal (P100k x 15,0000
12% x 15/12 October 1, 2018
to Jan. 1, 2020)
TOTALS P109,000 P15,000
 Ownership of improvements on a separate property

Improvements made at the expense of the partnership or through the acts or efforts of
either or both spouse shall pertain to the conjugal partnership or to the original owner-spouse
subject to the following:
i. If the cost of improvement (made by the partnership) resulted in increase in value higher
than the value of such property at the time of improvement, the entire property shall belong
to the conjugal partnership, subject to reimbursement of the value of such property at the
time of improvement; otherwise

ii. Ownership shall be retained by the spouse subject to reimbursement of the costs of
improvement

*Ownership vested upon reimbursement or at the time of liquidation of conjugal partnership

3. COMPLETE SEPARATION OF PROPERTY

If the spouses agree that their property relations during the marriage shall be governed by
this regime. Both spouses shall bear the family expenses in proportion to their income, or in
case of insufficiency or default thereof, to the current market value of their separate properties.

Liability of the spouses to creditors for family expenses shall be solidary.

*Properties acquired during or before marriage by either spouse’s exclusive properties shall
remain exclusive.

4. OTHERS

a. Property regime of unions without marriage

When a man and a woman live together as husband and wife, but they are not
married, or their marriage is void from the beginning, the property acquired by either or
both of them through their work or industry or their wages and salaries shall be governed
by the rules on co-ownership. (Art 144).
In the absence of proof to the contrary, properties acquired while they lived
together shall be presumed to have been obtained by their joint efforts, work or industry,
and shall be owned by them in equal shares.

A party who did not participate in the acquisition by the other party of any property
shall be deemed to have contributed jointly in the acquisition thereof if the former’s efforts
consisted in the care and maintenance of the family and of the household.

*Neither party can encumber or dispose by inter vivos the share in the property during the
cohabitation and owned in common, without the consent of the other, until after termination
of cohabitation.
 *Neden, single and capacitated (no impediments) to marry, lived with Jane without the benefit of
marriage (live-in), died and the couple left the following:
AMOUNT COMPUTATION GROSS ESTATE
Earnings from Salary of the Couple P250,000 (250,000/2) P125,000
Interest on earning from deposited in the bank 3,000 (3,000/2) 1,500
Car 550,000 (550,000/2) 225,000
House and lot 2,000,000 (2,000,000/2) 1,000,000
Jewelries inherited by Jane from mother 300,000 Not Considered
Lot owned by Neden 1,200,000 x 100% 1,200,000
Income from lot 300,000 (300,000/2) 150,000
TOTAL GROSS ESTATE P2,751,500

b. Property regime in cohabitation of spouses who are incapacitated to marry each

other

When common-law spouses (i) suffer from legal impediments to marry or (ii) do
not live exclusively with each other as husband and wife, only the property acquired by
both of them through their actual joint contribution of money, property or industry shall be
owned in common and in proportion to their respective contributions.

In the absence of proof to the contrary, it shall be presumed that shares and
contributions are equal.

The share of any party who is married to another shall accrue to the absolute
community or conjugal partnership, if existing under the valid marriage.

*Rex is legally married to Karen died and had left the following:
AMOUNT COMPUTATION GROSS ESTATE
Conjugal properties with Karen:
Earnings from salary of Rex P120,000 P120,000
Earnings from exercise of Karen’s profession 250,000 P120,000

Joint Property with mistress Eden:

Business interest of couple (70% by Rex) 800,000 (800,000x70%) 560,000
Income from business 140,000 (140,000x70%) 98,000
H&L inherited by Eden from her parents 1,500,000 Not considered
Time deposit (unknown contribution) 200,000 (200,000/2) 100,000
Appliances (60% by Rex) 150,000 (150,000x60%) 90,0000

Exclusive Properties:
Rex 500,000 500,000
Karen 400,000
TOTAL GROSS ESTATE P1,718,000
CLASSIFICATION OF PROPERTIES

1. Acquisition by gratuitous tile (Donation/ Inheritance)

REGIME Before Marriage During Marriage

CPOG - Principal Exclusive Exclusive
- Fruits Conjugal Conjugal
ACOP - Principal Community Exclusive
- Fruits Community Exclusive

2. Properties brought into/ acquired during the marriage

REGIME Before Marriage During Marriage

CPOG - Principal Exclusive Conjugal
- Fruits Conjugal Conjugal
ACOP - Principal Community Community
- Fruits Community Community

DISSOLUTION OF ACOP AND CPOG

1. Upon death of either spouse
2. When there is decree of legal separation
3. When marriage is annulled or declared void
4. In case of judicial separation of property during the marriage under Art. 134 to 138 of the Family
Code

Charges Upon and Obligations

The community or conjugal property shall be liable to the following: ACOP CPOG
1 The support of the spouses, their common children, and legitimate
children of either spouse; however, the support of illegitimate children ✓ ✓
shall be governed by the provisions of the Family Code on Support
2 All debts and obligations contracted during the marriage by the
designated administrator-spouse for the benefit of the community, or by ✓ ✓
both spouses, or by one spouse with the consent of the other
3 Debts and obligations contracted by either spouse without the consent
of the other to the extent that the family may have been benefited ✓ ✓

4 All taxes, liens, charges and expenses, including major or minor repairs,
upon the community property ✓ ✓

5 All taxes and expenses for mere preservation made during marriage
upon the separate property of either spouse used by the family ✓ ✓

6 Expenses to enable either spouse to commence or complete a

professional or vocational course, or other activity for self-improvement ✓ ✓

7 Ante-nuptial debts (debts contracted before the marriage) of either

spouse insofar as they have redounded to the benefit of the family ✓ ✓

8 The value of what is donated or promised by both spouses in favor of

✓ ✓
their common legitimate children for the exclusive purpose of
 commencing or completing a professional or vocational course or other
activity for self-improvement

9 Ante-nuptial debts of either spouse other than those falling under No. 7
above, the support of illegitimate children of either spouse, and liabilities
incurred by either spouse by reason of a crime or a quasi-delict, in case
of absence or insufficiency of the exclusive property of the debtor-
✓ ×
spouse, the payment of which shall be considered as advances to be
deducted from the share of the debtor-spouse upon liquidation of the
community

10 Expenses of litigation between the spouses unless the suit is found to be

✓ ✓
groundless
*Property regime can be agreed upon by the spouses despite their marriage date

*Cory, married to Noy, died leaving the following:

AMOUNT CLASSIFICATION GROSS
ESTATE
Car purchased 3 years prior to marriage P250,000 EXCLUSIVE P250,000
H&L acquired during marriage from conjugal
800,000 CONJUGAL 800,000
funds
Savings deposit with BDO from Noy’s income 90,000 CONJUGAL 90,000
Pangasinan fishpond acquired through Cory’s
200,000 CONJUGAL 200,000
previous business
Lotto winning by Noy 5,000,000 CONJUGAL 5,000,000
Motorcycle bought by Cory out of her exclusive
50,000 EXCLUSIVE 50,000
property
Riceland brought into marriage by Noy EXCLUSIVE –
200,000
NOY
Shares of stock inherited by Cory from her mother
63,000 EXCLUSIVE 63,000
who died 2 weeks ago
GROSS ESTATE P6,453,000
 EXCLUSIONS/ EXEMPT FROM GROSS ESTATE

EXEMPT TRANSMISSIONS (SEC. 87 of the Tax Code)

Common Requisites for the first three:

1. There must be two transmissions of the same property or a portion thereof
2. Transfer from the prior decedent must be testamentary in character
3. First transfer is subject to estate tax, while the second transfer is exempt

1. The merger of usufruct in the owner of the naked title;

Usufruct is a real right, of temporary nature, which authorizes its holder to enjoy all the
benefits which results from the normal enjoyment of another’s property, with the obligation to return,
at a designated time, either the same thing or, in special cases, its equivalent.

Claimants in Usufruct:
a. Usufructuary – has the right to enjoy the property with respect to its use and the receipt of its
fruits only

b. Owner of the naked title – can exercise all the rights of ownership consistent with the enjoyment
of the thing by the usufructuary

*If Pam Mathay died leaving a will indicating that the usufruct of her land shall be given to her
eldest, Dina Mathay while the title of the same land, to her next daughter, Mah Mathay, shall be
subject to estate tax. If there shall be a merger of the naked title and usufruct by the same person,
that is, either Dina or Mah shall die and that no other beneficiary will claim, such merger is deemed
exempt.

2. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to
the fideicommissary

Fideicommisary substitution us that by virtue of which a testator institutes a first heir and
charges him to preserve and transmit the whole or part of the inheritance later on to a second heir.
The first (fiduciary) and second (fideicommisary) heir must have one degree of relationship such
that of a parent and child or vice-versa

*Sam died leaving a will appointing his son, Tony, as the fiduciary heir on the vacation house
located in Tagaytay and requires that it must later on be transferred to Tony’s son, Slick. Sam’s
transfer to Tony is subject to estate tax while the transfer from Tony to Slick shall be exempt should
the former dies. If Slick dies ahead of Tony, Slick’s heir shall have the right to claim, which shall
also be exempt from estate tax

3. The transmission from the first heir, legatee or donee in favor of another beneficiary, in
accordance with the will of the predecessor; and

*Sam died leaving a will indicating that a 5,000 sqm mansion shall belong to his son, Tony until
such time that Slick, the grandson, shall reach the age of majority and get married.

4. All bequests, devises, legacies or transfers to social welfare, cultural and charitable
institutions (duly accredited*) no part of the net income of which inures to the benefit of any
individual; Provided, that not more than 30% of the said bequests, legacies or transfers shall
be used by such institutions for administration purposes.
 *We have Philippine Council for NGO (Non-Governmental Organization) Certification registering
non-profit, non-stock foundations.

**Sam, in his will, bequeathed P500,000 to Kapamilya Foundation, an accredited foundation, shall
be exempt from estate tax if only up to P150,000 shall be used for administration purposes.

SUMMARY OF EXEMPTIONS UNDER SPECIAL LAWS:

1. GSIS proceeds/ benefits
2. Accruals (benefits) from SSS
3. War damage payments

4. Proceeds of life insurance under a group insurance taken by employer (not taken out upon his life)
5. Transfer of property to the National Government or to any of its political subdivisions
6. Separate property of the surviving spouse

INHERITANCE BY THE STATE – A person dies intestate without any heir within the 5th degree of collateral
or a person by law entitled to inherit to the properties of the decedent, the State shall inherit the whole
estate (escheat)