WHEN people ask me what specific area of law I engage in practice in, I reply that among the areas of practice in law that I engage myself in is estate planning. I often get a quick reply, “So you focus on real-estate practice?”
While estate planning to a certain extent does involve handling real estate, it is definitely not all about real estate; in fact, it has little to do with real estate itself. Misconceptions about estate planning do not surprise me. Considering the low awareness of personal financial planning in this country, awareness about estate planning is equally as low or even lower. Most Filipinos do not even have personal financial plan or even a simple retirement plan, so it is expected that most do not have an comprehensive estate plan.
An estate plan is simply a plan for the disposition of whatever an estate owner leaves behind, taking into consideration several factors such as the estate owner’s goal, the payment of estate taxes, the proper distribution to the estate owner’s heirs in accordance with his or her desires and what the law requires among other things.
Among the problems pointed out by estate planners that may arise because of the lack of estate planning are strained relations among family members, shrinkage of the estate due to estate taxes, penalties and litigation expenses, the nonfulfillment of the wishes of the estate owner, properties become unutilized because of quarrels and litigation among the heirs and lose of ownership and control of the estate owners.
Personal financial planners consider on one hand an estate plan as separate and distinct from a comprehensive personal financial plan, but, on the other hand, one cannot construct a “comprehensive financial plan” without taking into consideration certain aspects of estate planning.
Estate planning can be divided into two parts, “Estate protection” and “Estate control and distribution.”
Estate protection deals with protecting the estate in case of death or disability of the estate owner. In estate protection, a key question that is answered is, in case the estate owner passes away how much estate taxes should be paid. To determine this, the property relations between husband and wife is considered. Other key questions that need to be answered in estate protection in case of death or disability of the estate owner include answering key questions on what are the family needs that must be met, such as educational needs and living expenses. Other
expenses that must be considered in case the estate owner passes away include hospital expenses, funeral expenses and debt and settlement expenses. Estate protection is the part of estate planning that is usually included in the comprehensive personal financial plan.
Estate control and distribution first of all answers the question of how the estate should be distributed. To determine this, family composition, legitime, the desires and wishes of the estate owner and the intricacies of testate and intestate succession need to be considered. A second question is the extend of control and the enjoyment of the estate owner of his property in case the property that is made subject to estate planning is distributed while the estate owner is alive. Last, the preservation of the estate and the perpetuation of the legacy of the estate owner need to be considered. Estate control and distribution is too complex and complicated to be included in a comprehensive financial plan, hence this requires a separate plan, which is referred to as the “comprehensive estate plan.”
Since estate planning requires certain knowledge of the law, some people assume that lawyers are in the best position to draft a comprehensive estate plan. While in some sense this is true, unfortunately, law practice in the country is more reactive rather than preventive and most lawyers only enter the scene when conflict arises. Further, estate planning does not only require knowledge of the law; a thorough knowledge about personal finance is required, as well.
Only a few lawyers in this country focus on estate planning. Lawyers and even non-lawyers who engage in this practice of estate planning usually take certificate courses that cover the subject of personal finance, investments and estate planning. These certificate courses usually lead to a designation after passing an exam and a case study subject to approval by a panel in order to exhibit one’s thorough knowledge about estate planning.
Zigfred Diaz, RFP, is a registered financial planner based in Cebu. He is director at CERTA Inc., a personal-finance advisory firm. To learn more about estate planning, attend the 17th Chartered Trust and Estate Planner (CTEP) program this October 2018.
To inquire, e-mail info@rfp.ph or text <name><e-mail> <RFP> at 0917-9689774.
