What happens to your properties when you die?

We've seen it so many times in movies and TV shows: someone dies, and their family gathers around the table with a lawyer reading a last will and testament.

More often than not, the division of property causes misunderstandings among family members, with some claiming they should receive more than what the deceased wrote in the will.

But what really happens to the property you own when you die? Do your spouse and children automatically receive what you left behind? 

Below is a general guide to how properties are divided in the event of death. For specific cases and inquiries, we advise you to get in touch with a lawyer.

Do spouses and children automatically inherit a deceased’s properties?

Short of the long: Yes, the spouse and children of the deceased will automatically inherit his/her properties.

Says Atty. Kris Quimpo of GSE Law, “upon death, properties of the decedent (the person who died), will go to his or her compulsory heirs such as the spouse and children. They will automatically inherit the estate of the decedent.”

According to BatasNatin, compulsory heirs are generally the spouse, children, and even the parents if the decedent does not have any children. 

Now, if the deceased left a last will and testament, other beneficiaries may also inherit a portion of the estate. It may sound simple, but after the lawyer has read the last will and testament, several processes are necessary to transfer the properties to the heirs and beneficiaries.

"This is often referred to as the estate settlement process, which may be either judicial — involving court proceedings — or extra-judicial, depending on the circumstances," says Quimpo.

According to Atty. Paolo E. Abarquez of VAL Law, an extra-judicial settlement (EJS) is when "the family, the heirs would execute a document where they would say, 'kami 'yong heirs, ito yung division na gusto namin.'" It usually just contains a list of real properties, or properties that require registration like vehicles.  

He adds an EJS will require a process of publication — "Kailangan ma-publish sa newspaper with general publication for three consecutive weeks [saying] na nag-execute kayo ng EJS, " he says — and will require the heirs to submit it to the Register of Deeds.

"When you submit the EJS sa Register of Deeds, you are required to furnish a bond that's equivalent to the personal properties — or properties that don't have a registration, like art or jewelry — with a two-year time frame," Abarquez adds, saying "the real properties na nalipat sa children and spouse, may annotation din duon na within two years, pwede mag-claim."

About conjugal properties and a decedent's estate

Quimpo emphasizes that a deceased person's estate only covers their share in conjugal properties. This means that for those who got married on or after the Family Code took effect on August 3, 1988, the Absolute Community of Property regime governs their assets.

Under this regime, all property owned by either spouse becomes conjugal property after marriage. Meaning for example: that car that you bought while you were still single will legally become your spouse’s car too, after you marry. 

When one spouse dies, half of the conjugal property will belong to the surviving spouse, and only the deceased's share in the conjugal properties — remember, this is now only 50% because the other half is owned by the spouse — becomes the estate that can be transferred to and divided among the heirs upon death. 

You might be wondering about those married before August 3, 1988. They are governed by the Conjugal Partnership of Gains. Under this arrangement, only properties owned or acquired during the marriage are equally owned by the spouses.

How are the properties divided between the spouse and children?

Splitting the estate can become a source of dispute among heirs. After all, shouldn't the estate be divided equally between the spouse and children?

According to Quimpo, it depends on whether the deceased left a will or not. If there's no will, the entire estate will be divided between the spouse and children, with the spouse receiving a share equal to that of one legitimate child.

For example, if there's only one legitimate child, the spouse and the child will split the estate 50-50. If there are two legitimate children, the three heirs will divide the estate equally into thirds.

“But if the decedent left a will (testate succession), there is a portion of the estate that cannot be disposed freely," Quimpo clarities. "This is reserved for certain heirs who are classified as compulsory heirs. This reserved part of the decedent’s property is called a ‘legitime.’ Whatever is left after allocation of the legitime is called the ‘free portion’ and can be bequeathed to others.” 

The calculation of a legitime depends on the number of children the deceased has and whether they are legitimate or illegitimate.

According to Quimpo, "Legitimate children are entitled to half of the estate, divided equally among them.”

Illegitimate children meanwhile are entitled to half of a legitimate child's share, provided their parentage is proven, the lawyer continues.

So if the deceased left behind a spouse, two legitimate children, and one illegitimate child, the legitime or reserved part of the compulsory heirs would be: one-fourth of the entire estate for each legitimate child, one-fourth, or equivalent to the share of a legitimate child for the spouse, and one-eighth of the estate, which is half of a legitimate child's share, for the illegitimate child.

Warns Abarquez, "kung maraming illegitimate children, pwedeng lumiit yung share nila. Hindi mababawasan 'yong sa legitimate. Kasi may legitime sila." 

With the properties divided, who then pays the estate taxes?

Quimpo explains that estate tax is a tax on the right of the deceased to transmit their estate to lawful heirs and beneficiaries at the time of death.

This tax is shouldered by the heirs, with the estate tax return filed by the executor or administrator of the estate, if there is one, or by any legal heir. Before the properties can be transferred to the heirs, the estate tax must be paid first as part of the estate settlement proceedings.

The lawyer adds that the heirs can agree on how to settle the estate tax. It can be paid from the cash or other properties of the estate or advanced by the heir or heirs subject to reimbursement during the distribution of the estate.

Settling estate taxes is another process that heirs need to go through and it involves keeping in mind fees and surcharges that may arise if the taxes remain unpaid. Should you need specific legal advice, it’s best to get in touch with a lawyer.

Is having a last will and testament detailing the division of properties sufficient?

We've seen too many dramas depicting a last will as a coveted document, with family members wanting to take a peek even before the official reading of the will.

Quimpo advises that if you want to leave specific instructions on who gets what, it's recommended to execute a will.

"By default, if there's no will, the heirs will inherit the estate as a whole and will become co-owners of each property according to their shares. They would have to agree separately on dividing the properties or swapping properties if they want to own a particular property exclusively," the lawyer explains.

In essence, a will acts as a guide on how the estate will be distributed among the heirs and beneficiaries, as long as the share or legitimes of the compulsory heirs are not reduced or impaired.

"A will is also necessary if the decedent wants to disinherit a compulsory heir for reasons allowed by law," the lawyer added.

— LA, GMA Integrated News