“A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.” (Proverbs 13:22)
Both as a lawyer and a pastor, I have come across several people who are having problems with disposing certain properties which are still under the name of their long-deceased relative. The relative is usually a parent, a grandparent, an uncle, an aunt, or even a sibling. In other cases, I also encounter siblings quarrelling amongst each other or even with their surviving parent. Such situations are truly heartbreaking to say the least. These kinds of problems usually arise due to the failure of the surviving relatives, who are more often than not the legal heirs, to pay the necessary estate tax and settle the estate of the decedent. However, are the heirs the only ones to blame? Definitely not. The decedent, while living, likewise has a part, if not more parts, to play in ensuring that his descendants or heirs do not have a difficult time in acquiring the inheritance he had left for them to enjoy. Now, this is where sound estate planning comes in.
Before going any further, it is imperative that we first clarify some key terms because most people are confused between “estate” and “real estate.” On the one hand, an “estate” is the accumulation of all the property, real or personal, tangible or intangible, wherever situated, of a person at the time of his death (Sec. 85, National Internal Revenue Code). On the other hand, “real estate” is property consisting of land and anything permanently fixed to it, including buildings, trees, sheds and other items attached to the structure (Art. 415, Civil Code of the Philippines). Hence, from the above definitions, we can infer that “real estate tax” is different from “estate tax.”
Contrary to what most people think, estate planning is not only for the rich and famous. For as long as you own something, anything, you have an estate! Most of the time, family members don’t even fight among themselves over a piece of expensive property but over those which have sentimental value such as trinkets, paintings, jewelry, books, etc. As a famous saying goes: “There are only two certain things in life, death and taxes.” Of course, in reality, there are more than those two. Still, for some people, when they hear of estate planning, what comes to mind is the Last Will and Testament. Although indispensable thereto, the latter is merely one of the tools used in estate planning. Simply put, Estate Planning is basically transferring your properties to your heirs in the best way possible while avoiding unnecessary costs, especially on taxes.
It is never too early to start planning your estate. Death comes like a thief in the night, to borrow Jesus’ words. Therefore, in order to avoid the hassles and problems that you may leave your loved ones as illustrated by the true to life cases given above, show them that you care by planning ahead. Remember, failing to plan is planning to fail! In the following weeks, I will be sharing more real life horror stories of people who failed to plan their estates resulting in heart-wrenching family feuds or squabbles. So what are you waiting for? Consult your lawyer, accountant or financial planner today!