Do you need to bother with Estate Settlement if a loved one left a relatively small inheritance?
One of the questions we usually hear is "Attorney... our parent died recently, but there was just a small amount in the bank account and a small lot in the province. Do we still need to do Estate Settlement for this? They seem so small and I don't want to go through the hassle, the trouble and the expense." If you can relate to this stay tuned. The answer to this may surprise you.
This video was brought to you by the Estate Settlement Guide. The fastest way to orient surviving family members when a loved one passes away. It will guide you through the next steps your family needs to take so you don't incur penalties and you transfer the property to the heirs properly. Go to info.legalguide.ph/estate to learn more.
Welcome to Legal Guide Philippines where we simplify the law to help you make better choices, I'm Attorney Erwin Zagala and I'm with my partner Attorney Ramon Ramirez.
What is Estate Settlement?
So today we're talking about estate settlement. Let's start by teaching you what that is.
So generally speaking, it is a process that you do when someone dies to take care of their remaining assets and you do this and you do this with three things.
- First, if you determine what assets were owned by the deceased.
- Second, you decide how to distribute the assets to the heirs.
- Last, you distribute the property through the proper channels.
Now, when we teach clients and students in our Estate Settlement Guide, we call this the 3D process for Estate Settlement.
Why this is important even if the inheritance is small?
Now, let's talk about why you should pay attention to doing this even if you think the property is small. And I can name 3 reasons.
First, it's required by the law to be done. There is no exemption under the law where it says there's a threshold that exempts you from doing estate settlements. You still have to file the papers.
Now, you may be thinking, "Attorney,I heard that there was a threshold!" Yes, there is a threshold, but that pertains to estate tax payments. For the computation on how much you should pay the government.
That threshold does not excuse you from filing the papers and notifying the government in the first place.
Again, just to be clear: whether or not you file ISN't dependent on the amount of assets left... everyone is required to do estate settlement on estates.
Now you may still be thinking, "Attorney... I get that, but I still FEEL it is impractical to file. Maliit lang yung property. Ok... if you still FEEL that way, I think the best thing to do would be to consult a lawyer so you are aware of the risks in case you choose not to file.
And now let's go to the second reason.
Second reason is you may insist, "But Attorney, what if it's such a small property? Is it really still worth it?"
You know what? That doesn't matter. Without settlement of estate, you won't be able to transfer it or make full use of it down the line.
Without transferring it to yourself, you won't be able to transfer it further to your heirs. So basically, you know what, you're creating problems for them in the future.
And we've seen this happen so many, so many times. I don't think you want to do that.
Also, you won't be able to make full use of it as an owner. You won't be able to sell it (well, not immediately) or you won't be able to mortgage it if you want to take out a loan.
Finally, if you don't do it, you may be subjected to a penalty. It will get bigger. So if the past reasons were not able to convince you, I think this will.
Even if it's such a small amount that you have to pay the government or in some cases, you don't even need to be because the amount... the assets left is small...
In case there are penalties that gets interest so it will get bigger the longer you put it off.
How to do estate settlement
Now, let's talk about estate settlement and how you do it. "Attorney Erwin, you've been successful... You and Atty. Ramon were able to convince me to take a look at this."
Now, let us give you the broad strokes of estate settlement.
As discussed by Atty. Ramon earlier, first, you have to find out what properties have to be accounted for and included.
Again, this is the DETERMINE PHASE. Next, after you determine what is included you then decide how you want to distribute.
There are 2 general ways of doing it, judicial or extra judicial settlement. If you listened to our workshop, of course, we recommend extrajudicial.
Now, here, there's another decision point that you have to make. You have to decide who gets which property. Again, this is Phase number 2... the DECIDE phase.
Finally, once you determine... once you've decided, you then get to distribute. So in the DISTRIBUTE PHASE, you then get in touch with the different government agencies so you get to transfer the titles to the designated heirs.
If you want to learn more, you can always enroll in the Estate Settlement Guide or you may consult a legal team of your choice.
They would be a good starting point and get started with handling this.
How can estate settlement make your life better?
So what happens if you follow this process? Well, for land, you get the titles in the name of the heirs and they can enjoy it fully.
And obviously there will be no penalties and there is a chance that we can minimize their taxes.
Now, to recap, you have to do estate settlement no matter how small the inheritance is. It is required by law.
And we also discussed our three phases for estate settlement. What is it again? Determine, Decide and Distribute.
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So wasn't that simple? Now go make better choices.
If you have more questions about Estate Settlement, here’s an additional resource
I hope the article was able to help you out, but chances are you may have more questions about Estate Settlement. Please check out this additional resource and see if it can help you. Go to info.legalguide.ph/estate to learn more.