Asset Inventory (Real Property)
ESTATE PLANNING AND SETTLEMENT SERIES
As part of our efforts to make legal knowledge more accessible, we are launching a special series on the topic of estate planning and settlement. In the coming weeks, we will be posting articles explaining the differences between estate planning and estate settlement, how to prepare for planning and settlement, and the best ways to manage an estate's assets, among other things. If you have any questions regarding the topic, please send us an email at batocabeandpartners@gmail.com and we’ll try our best to answer.
PART III - Asset Inventory (Real Property)
In Article 415 of the Civil Code, the term “real property”, also referred to as “immovable property”, includes land, buildings, roads, constructions adhered to the soil, trees, plants while they are attached to the ground, machinery for an industry which may be carried on inside a building or land, and analogous or similar properties.
A person obtains ownership over real property through sale, donation, or through testamentary disposition.
Whatever the mode of acquisition of property is, the following documents are necessary when real property is transferred to implement the estate plan or to settle an estate: 1. Certificates of Title; 2. Tax Declarations; 3. Official Receipts for the real property tax payments; 4. Tax Clearance Certificate or Certification of Non-Delinquency of real property tax payments; 5. Transfer Tax Receipts; 6. Bureau of Internal Revenue (BIR) Certificate Authorizing Registration (CAR) of the immediately preceding transfer of the property; 7. Certificate of Landholdings; and 8. Appraisal made by a reputable, professional, and disinterested third party.
Since land registration in the Philippines is under a Torrens System, ownership of real property is evidenced by certificates of title which may be referred to as either an Original Certificate of Title (OCT), an Transfer Certificate of Title (TCT), or a Condominium Certificate of Title (CCT).
A Tax Declaration is a document issued by the Provincial or City Assessor where the property is located which indicates the assessed value and the market value of the property as determined by the City Assessor. If there are improvements on the property, there are usually two tax declarations – one for the land itself and the other for improvements such as a house or a building. If real property is not yet titled under the Torrens System, ownership may be evidenced by a Tax Declaration.
Real property taxes, a type of local government tax also known as “amilyar”, are paid to the province or city where the real property is located. The tax declarations serve as the basis for the imposition of real property taxes. The official receipts for real property tax payments, tax clearance certificates or certifications of non-delinquency are documents that evidence payment thereof.
Real property tax is a tax on the value of a real estate property and is imposed by the province or city where the real property is located. It is not the same as estate taxes which is a tax on the right of the deceased person to transmit their estate to their lawful heirs and beneficiaries at the time of death and on certain transfers and is imposed by the National Government and therefore should be paid to the BIR.
With respect transfers through donation or testamentary dispositions, transfer taxes, in the form of donor’s tax or estate tax, must be paid first to the BIR before any transfer may be done – proof of which is the CAR. There are other documents which may also be required to be submitted to the BIR such as, notice of death, tax return, TIN Verification, extrajudicial partition, etc., but these other documents are secured only after the death of the decedent.
A Certificate of Landholdings is a document which certifies that based on the records of the Provincial or City Assessor, only the properties listed in the document are registered in the name of the decedent. It is obtained from the City or Provincial assessor and is only required only in cases of estate settlement. This document is required to be submitted to the BIR to make sure that all properties registered in the name of the decedent in a particular city or province are declared in the decedent’s estate tax return and that none are omitted.
An appraisal made by a reputable, professional, and disinterested third party should be done prior to a distribution under an estate plan, or prior to the partition of the estate among the heirs. An appraisal is not required to be submitted to the BIR but if there is a plan to distribute the assets pursuant to an estate plane, or if the net assets of the estate are being partitioned among the heirs as a consequence of death, then an appraisal should be made for all the properties of the decedent.
In order to avoid problems in the future, it is important to obtain a Certified True Copy of the Title with the Land Registration Authority or the City Assessor’s Office of the local government unit and to verify the following entries:
TITLE:
Title Number
Registered Owner(s)
Name and spelling of the registered owner(s)
Civil Status of the registered owner(s)
Percentage of ownership
Area of the property
Annotations on the Title, if any
Latest certified true copy of the Title
TAX DECLARATIONS:
The name and spelling of the registered owner(s) onb the Tax Declaration should match the name and spelling of the registered owner(s) indicated on the Title.
The lot number stated in the Tax Declaration should match the lot number described in the first line of the Title.
The real property taxes are current and updated
Latest certified true copy of the Tax Declaration
The next topic in this series will be a discussion on the common problems encountered when transferring property.
