See - https://business.inquirer.net/283722/is-estate-planning-necessary
"x x x.
Is estate planning necessary?
By: Efren Ll. Cruz - @inquirerdotnet
Philippine Daily Inquirer / 04:09 AM November 20, 2019
Question: I am in my early 40s. I believe I have adequately provided for my wife and two children. I have been hearing though that estate planning should be included in my personal financial planning. Is that necessary as we are not in the same level as the super-rich? Asked at “Ask a Friend, Ask Efren” FREE service at www.personalfinance.ph, SMS and Facebook
Answer: A good friend who happens to be an excellent lawyer told me that planning for the estate of the super-rich can really provide a lot of good script material for movies with all of the intricacies and drama involved.
The not-so-rich may not have the same intricacies with their estate but they can still have the drama. In addition, people may have been lulled into complacency with the lower inheritance tax of 6 percent and higher deductions afforded by the TRAIN law.
The tax benefits brought by the TRAIN law cannot be underestimated. It seems that among the three common modes of transferring wealth (i.e. sale, donation and inheritance), inheritance is coming out to be the cheapest. This is because while the tax rates for the said three modes are all now at 6 percent, only inheritance tax is subject to huge deductions against the estate for tax computation purposes (i.e. P5 million in standard deduction and up to P10 million for the family home).
In addition, frozen funds in bank accounts that are part of the estate can now be withdrawn by the heirs provided the 6-percent estate tax is paid on the amounts withdrawn.
But estate planning goes beyond tax computations and continues on to the equitable distribution and control of the estate among the heirs. This is where the professional estate planners come in.
The TRAIN law did not amend the types of (natural) heirs. Children and descendants are the primary compulsory heirs. The surviving spouse and illegitimate children are the concurrent compulsory heirs. Parents and ascendants of the decedent are the secondary compulsory heirs. Collateral heirs are relatives of the decedent within the fifth degree of consanguinity. The state is the final heir in the absence of all other heirs.
The sharing in the estate among the foregoing heirs is complex and is dependent on whether the transfer of the estate is done via a will or without a will (i.e. intestate succession) and whether the share in the estate is a legitime or part of the “free portion.” Legitime refers to the portion of the estate reserved for a compulsory heir.
In transferring the estate via will, for example a person can “will” most of his estate to be in the hands of his most responsible heir by giving more of the free portion to that heir provided the legitime for the other compulsory heirs is met. The trick is to find out what the legitime is for each heir. And while money is easily divisible, real properties are not.
At the Personal Finance Advisers, we were able to computerize the legitime tables (under succession via will and intestate succession) but not after we were almost hospitalized. That’s how complex the legitime tables are.
In the case of wills, there are two kinds, holographic and notarial. A holographic will is handwritten by the testator who is of sound mind at the time the will is written. A notarial will has many rules as to form. Experts on estate planning are terrific guides on will preparation.
The thing with estate planning is that it does not even end with the equitable distribution and control of the estate. Once everything is written and done, you will now need to focus on creating, growing and preserving your estate, in other words the real CD-RW (cash, debt, risk and wealth) management. We will talk about CD-RW management in succeeding articles.
For now, know that estate planning is an essential part of anyone’s personal finances, whether or not you are super-rich.
x x x."
Read more: https://business.inquirer.net/283722/is-estate-planning-necessary#ixzz67rFFqdiN
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook
Philippine Daily Inquirer / 04:09 AM November 20, 2019
Question: I am in my early 40s. I believe I have adequately provided for my wife and two children. I have been hearing though that estate planning should be included in my personal financial planning. Is that necessary as we are not in the same level as the super-rich? Asked at “Ask a Friend, Ask Efren” FREE service at www.personalfinance.ph, SMS and Facebook
Answer: A good friend who happens to be an excellent lawyer told me that planning for the estate of the super-rich can really provide a lot of good script material for movies with all of the intricacies and drama involved.
The not-so-rich may not have the same intricacies with their estate but they can still have the drama. In addition, people may have been lulled into complacency with the lower inheritance tax of 6 percent and higher deductions afforded by the TRAIN law.
The tax benefits brought by the TRAIN law cannot be underestimated. It seems that among the three common modes of transferring wealth (i.e. sale, donation and inheritance), inheritance is coming out to be the cheapest. This is because while the tax rates for the said three modes are all now at 6 percent, only inheritance tax is subject to huge deductions against the estate for tax computation purposes (i.e. P5 million in standard deduction and up to P10 million for the family home).
In addition, frozen funds in bank accounts that are part of the estate can now be withdrawn by the heirs provided the 6-percent estate tax is paid on the amounts withdrawn.
But estate planning goes beyond tax computations and continues on to the equitable distribution and control of the estate among the heirs. This is where the professional estate planners come in.
The TRAIN law did not amend the types of (natural) heirs. Children and descendants are the primary compulsory heirs. The surviving spouse and illegitimate children are the concurrent compulsory heirs. Parents and ascendants of the decedent are the secondary compulsory heirs. Collateral heirs are relatives of the decedent within the fifth degree of consanguinity. The state is the final heir in the absence of all other heirs.
The sharing in the estate among the foregoing heirs is complex and is dependent on whether the transfer of the estate is done via a will or without a will (i.e. intestate succession) and whether the share in the estate is a legitime or part of the “free portion.” Legitime refers to the portion of the estate reserved for a compulsory heir.
In transferring the estate via will, for example a person can “will” most of his estate to be in the hands of his most responsible heir by giving more of the free portion to that heir provided the legitime for the other compulsory heirs is met. The trick is to find out what the legitime is for each heir. And while money is easily divisible, real properties are not.
At the Personal Finance Advisers, we were able to computerize the legitime tables (under succession via will and intestate succession) but not after we were almost hospitalized. That’s how complex the legitime tables are.
In the case of wills, there are two kinds, holographic and notarial. A holographic will is handwritten by the testator who is of sound mind at the time the will is written. A notarial will has many rules as to form. Experts on estate planning are terrific guides on will preparation.
The thing with estate planning is that it does not even end with the equitable distribution and control of the estate. Once everything is written and done, you will now need to focus on creating, growing and preserving your estate, in other words the real CD-RW (cash, debt, risk and wealth) management. We will talk about CD-RW management in succeeding articles.
For now, know that estate planning is an essential part of anyone’s personal finances, whether or not you are super-rich.
x x x."
Read more: https://business.inquirer.net/283722/is-estate-planning-necessary#ixzz67rFFqdiN
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook
