Estate Planning
What the domain tests
Estate planning tests succession law, legitime, wills, estate tax, and the use of insurance and transfers to meet family goals.
Core rules
- Compulsory heirs, including the spouse, legitimate children, illegitimate children, and ascendants, are protected by legitime.
- Testate succession uses a will; intestate succession follows the Civil Code.
- Estate tax: 6% of net estate; standard deduction P5,000,000; family home deduction up to P10,000,000.
- Donor's tax: 6% on gifts over P250,000 per year.
- Life insurance proceeds can provide liquidity, but beneficiary designation cannot defeat legitime.
Worked example
An estate has P8,000,000 gross assets and P500,000 allowable deductions, leaving P7,500,000. Apply the P5,000,000 standard deduction: taxable net estate P2,500,000. Estate tax = 6% × P2,500,000 = P150,000. Reasoning: deductions reduce the base before the flat 6% rate; the family home deduction is separate and capped.
Traps
Assuming a will can disinherit compulsory heirs; forgetting estate tax deadlines; naming the estate as beneficiary and losing control; ignoring business valuation; using donations without donor's tax.