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During the Lenten season, the whole of Christendom celebrates the Passion of our Lord, starting from the Last Supper with Christ’s Apostles on Holy Thursday, to the suffering, crucifixion and death of our Lord on Good Friday, and culminating with the Resurrection of Jesus on Easter Sunday.
For a great number of Filipinos, this Passion play is somewhat replicated on a regular basis, not in terms of events that arise, but in terms of the anguish and suffering encountered. We are too familiar with the drama that arises with the death of a member of the family. Though the suffering may not be comparable with how Jesus Christ agonized, the loved ones of a deceased person will not only grieve because of the loss of a precious relative, but also will suffer because of the inheritance and tax problems that will arise instantaneously at the time of bereavement.
In the Philippines the death of a person oftentimes will result in the remaining members of the family dealing with the contentious issues on inheritance and settlement of the estate tax. The situation becomes quite complicated, especially if the deceased person is affluent or failed to plan for these realities of death.
Inheritance issues include the legal if not equitable legal process of distributing the properties to the heirs; establishing the wish of the departed one, who may or may not have a last will and testament; dealing with the expectations, if not demands, of legitimate as well as “illegitimate” heirs; and zillions of details that need to be addressed urgently even while the successors are bereaving.
Equally problematic are the tax concerns that will definitely arise. The old Tax Code before the onset of the current Tax Reform for Acceleration and Inclusion law imposed an inheritance top tax rate of 20 percent and a whole set of complicated rules to compute and pay the estate tax. The new tax laws, which took effect in 2018, somewhat simplified the tax system and reduced the estate tax to a lower rate of 6 percent. But even with this simplification, a tax is a burdensome and complicated item to deal with, especially if the surviving heirs have never discussed or planned for this inevitability.
And more often than not, this state of unpreparedness is the situation that most of my acquaintances and clients experience at the hour of death of a loved family member. I have been involved in the business of tax for over 35 years and I continue to hear these hardship stories from the spouse, sons and daughters who were left behind to address these inheritance woes and tax problems.
The explanation oftentimes given why these issues were not addressed and resolved during the lifetime of the deceased is that it was perceived that discussing the topic of inheritance and estate tax planning was taboo if not disrespectful. “Why do you want to discuss your inheritance? Do you want me dead already so that you can get your share of the properties that I had worked so hard to accumulate?” These are the thoughts or sentiments of the elderly head of the family, real or otherwise, perceived by the younger members of the family that hinder or prevent these conversations on timely estate tax planning and transfer of properties.
Will this familiar Passion play on the lives of the typical Filipino family never change?
Joel L. Tan-Torres is the chairman of the Professional Regulatory Board of Accountancy. He is a Certified Public Accountant who placed No. 1 in the May 1979 CPA Board Examinations. He was the former Commissioner of the Bureau of Internal Revenue from 2009 to 2010.
This column accepts contributions from accountants, especially articles that are of interest to the accountancy profession, in particular, and to the business community, in general. These can be e-mailed to boa.secretariat.@gmail.com.