Special when market conditions

Topic 6 change.
While alternative investments share
WHAT ARE ALTERNATIVE these key traits, they're also a diverse
INVESTMENTS? asset class. Here are seven types of
alternative investments everyone should
Alternative investments are asset know, what makes them unique, and
classes that aren’t stocks, bonds, or how to think about them as investment
cash. These kinds of investments differ opportunities.
from traditional investment types
7 TYPES OF ALTERNATIVE
because they aren’t easily sold or
INVESTMENTS
converted into cash.
1. Private Equity is a broad category that
One of the most dynamic asset classes, refers to capital investment made into
alternatives cover a wide range of private companies, or those not listed on
investments with unique characteristics. a public exchange, such as the New
Many alternatives are becoming York Stock Exchange. There are several
increasingly accessible to retail, or subsets of private equity, including:
individual, investors—making knowing ● Venture capital, which
about them increasingly important for all focuses on startup and
types of investors and industry early-stage ventures
professionals. ● Growth capital, which helps
more mature companies
expand or restructure
These types of investments can vary
● Buyouts, when a company or
wildly in their accessibility and structure,
one of its divisions is
but they share a few key characteristics:
purchased outright
● They're more lightly regulated
An important part of private equity is the
by the US Securities and
relationship between the investing firm
Exchange Commission (SEC)
and the company receiving capital.
than traditional investments.
Private equity companies often provide
● They're illiquid, meaning they
more than capital to the firms they invest
can’t be easily sold or
in; they also provide benefits like
otherwise converted to cash.
industry expertise, talent sourcing
● They have a low correlation to
assistance, and mentorship to founders.
standard asset classes,
meaning they don’t 2. Private debt refers to investments that
necessarily move in the same are not financed by banks (i.e., a bank
direction as other assets loan) or traded on an open market. The
“private” part of the term is important—it
refers to the investment instrument of the asset, which is called capital
itself, rather than the borrower of the appreciation.
debt, as both public and private
As with other real assets, valuation is a
companies can borrow via private debt.
challenge in real estate investing. Real
Private debt is leveraged when estate valuation methods include
companies need additional capital to income capitalization, discounted cash
grow their businesses. The companies flow, and sales comparable, with each
that issue the capital are called private having both benefits and shortcomings.
debt funds, and they typically make To become a successful real estate
money in two ways: through interest investor, it’s crucial to develop strong
payments and the repayment of the valuation skills and understand when
initial loan. and how to use various methods.

3. Hedge funds are investment funds 5. Commodities are also real assets
that trade relatively liquid assets and and mostly natural resources, such as
employ various investing strategies with agricultural products, oil, natural gas,
the goal of earning a high return on their and precious and industrial metals.
investment. Hedge fund managers can Commodities are considered a hedge
specialize in a variety of skills to execute against inflation, as they're not sensitive
their strategies, such as long-short to public equity markets. Additionally,
equity, market neutral, volatility the value of commodities rises and falls
arbitrage, and quantitative strategies. with supply and demand—higher
demand for commodities results in
Hedge funds are exclusive, available
higher prices and, therefore, investor
only to institutional investors, such as
profit.
endowments, pension funds, and mutual
funds, and high-net-worth individuals. 6. Collectible

4. Real Estate There are many types of Collectibles include a wide range of
real assets. For example, land, items such as:
timberland, and farmland are all real
● Rare wines
assets, as is intellectual property like
● Vintage cars
artwork.
● Fine art
In addition to its size, real estate is an ● Mint-condition toys
interesting category because it has ● Stamps
characteristics similar to ● Coins
bonds—because property owners ● Baseball cards
receive current cash flow from tenants
Investing in collectibles means
paying rent—and equity, because the
purchasing and maintaining physical
goal is to increase the long-term value
items with the hope the value of the boomed before the crisis. When housing
assets will appreciate over time. prices declined, those who had invested
in these products suffered extreme
These investments may sound more fun
losses.
and interesting than other types, but can
be risky due to the high costs of
acquisition, a lack of dividends or other
Topic 7
income until they're sold, and potential
destruction of the assets if not stored or Wealth Management
cared for properly. The key skill required
in collectibles investment is experience; Wealth Management is it's a strategic
you have to be a true expert to expect approach to managing your financial
any return on your investment. well-being. This is where your financial
dreams are nurtured, protected, and
7. Structured Products usually involve
grown. In this comprehensive guide,
fixed income markets—those that pay
we'll explore what is wealth
investors dividend payments like
management, how it works, its benefits,
government or corporate bonds—and
key strategies, and even help you
derivatives, or securities whose value
distinguish between wealth managers
comes from an underlying asset or
and financial planners.
group of assets like stocks, bonds, or
market indices. Examples of structured What is Wealth Management?
products include credit default swaps
(CDS) and collateralized debt Wealth management meaning, at its
obligations (CDO). core, is the comprehensive
management of an individual's financial
Structured products can be complex
life. Wealth management represents a
and sometimes risky investment
strategic and comprehensive process,
products, but offer investors a
intricately weaving together various
customized product mix to meet their
financial facets. It encompasses the art
individual needs. They're most
of financial planning, skillful investment
commonly created by investment banks
management, astute tax optimization,
and offered to hedge funds,
meticulous estate planning, and the art
organizations, or retail investors.
of risk management. These elements
Structured products are relatively new to are meticulously customized to cater to
the investing landscape, but you’ve individuals' and families' unique financial
probably heard of them due to the needs and aspirations.
2007–2008 financial crisis. Structured
products like CDO and When you embark on a wealth
mortgage-backed securities (MBS) management journey, a skilled wealth
became popular as the housing market manager becomes your trusted guide.
They craft a strategic financial plan that
outlines how to achieve these a personalized financial plan is crafted,
objectives, considering the client's risk incorporation values and aspirations.
tolerance and unique circumstances.
● Custom Strategies: The plan
Wealth management offers a outlines tailored strategies to achieve
personalized, all-encompassing strategy financial objectives and navigate the
to ensure financial goals are achieved complexities of the financial landscape.
and financial resources are efficiently
managed. It provides peace of mind, 3. Investment Management
professional expertise, and a roadmap
● Diversified Portfolio: A
to financial prosperity tailored to the
well-balanced investment portfolio is
client's unique circumstances.
designed, considering the specific
How Wealth Management Works? dynamics of the Indian market. It
leverages various assets, including
Wealth management embodies a holistic stocks, bonds, real estate, and more,
approach meticulously tailored to cater focusing on diversification.
to the distinctive financial needs of each
individual, all within the rich tapestry of 4. Tax Optimization
the Indian financial landscape. Let's
● Minimizing Tax Liability: Wealth
delve into a comprehensive breakdown
managers employ tax-efficient strategies
of how this intricate process unfolds.
to help clients minimize their tax burden,
1. Financial Assessment ensuring they keep more of their wealth
for investment and spending.
● Deep Dive: Wealth managers
assess the client's financial situation, 5. Risk Management
including assets, liabilities, income,
● Protective Measures: Strategies
expenses specific factors like family
are implemented to safeguard the
responsibilities and cultural values.
client's wealth from Indian market
● Goal Setting: With the client, volatility and unforeseen events. This
clear financial goals are established, often involves insurance, contingency
often encompassing milestones like plans, and other protective measures.
retirement, children's education, and
6. Ongoing Monitoring and
preserving wealth for future generations.
Adjustments
2. Personalized Financial Plan
● Dynamic Approach: The financial
● Strategic Blueprint: Based on the world constantly changes. Wealth
client's unique goals and risk tolerance, managers continuously monitor the
portfolio's performance and adjust to
keep clients on track toward their Knowing that your financial future is in
financial goals. capable hands can provide tremendous
security and peace of mind.
Benefits of Wealth Management
6. Time Savings
Let's explore the numerous advantages
of embracing wealth management: By delegating the intricacies of financial
management to experts, you free up
1. Holistic Financial Guidance time for the things that matter most to
you.
Wealth managers take a 360-degree
view of your financial life. They consider 7. Legacy and Estate Planning
your current situation, future goals, and
personal values. This holistic approach Wealth managers can assist in
ensures your financial plan aligns with preserving your wealth for future
your life vision. generations, ensuring your legacy lives
on.
2. Expertise and Experience
8. Risk Mitigation
Wealth managers are highly trained
professionals with years of experience. A well-structured wealth management
Their expertise helps you make plan includes strategies to mitigate
informed financial decisions and financial risks, protecting you from
navigate complex financial markets. unexpected setbacks.

3. Personalized Investment Strategies Wealth Management Strategies

Your portfolio is tailored to your unique The strategies used in wealth

goals and risk tolerance. This management are as diverse as the
personalization allows you to maximize clients they serve. Here are some
returns while managing risk effectively. common approaches:

4. Tax Efficiency ● Diversification: Spreading your

investments across different asset
Wealth managers use tax-efficient classes reduces risk.
strategies to reduce your tax burden,
allowing for more investment and ● Asset Allocation: The art of
spending opportunities. balancing stocks, bonds, and assets in
your portfolio for optimal returns.
5. Peace of Mind
● Tax-Efficient Investing: Utilizing
tax-advantaged accounts and strategies
to minimize tax liability.
● Retirement Planning: Ensuring and guardians for minor children, or
you have the financial resources for a directions for your funeral and burial.
comfortable retirement.
A will must be signed and witnessed as
● Estate Planning: Structuring your required by state law. Its implementation
estate to maximize inheritance and requires a legal process. It must be filed
minimize taxes. with the probate court in your jurisdiction
and carried out by your designated
● Insurance Management: executor.
Assessing your insurance needs and
ensuring you're adequately covered. A will must be signed and witnessed as
required by state law. Its implementation
● Charitable Giving: Implementing requires a legal process. It must be filed
strategies for philanthropic endeavors with the probate court in your jurisdiction
that align with your values. and carried out by your designated
executor.2 The document is publicly
● Debt Management: Evaluating
available in the records of the probate
and optimizing your debt situation to
court which oversees its execution and
reduce interest payments.
has jurisdiction over any disputes.
● Risk Management: Implementing
Trusts
strategies to protect wealth from market
volatility and unexpected events. Trusts are legal arrangements that
provide for the transfer of assets from
Topic 8
their owner, called the grantor or trustor,
Wills vs. Trusts: An Overview to a trustee. They set the terms for the
trustee’s management of the assets, for
Trusts are legal arrangements that distributions to one or more designated
protect assets and direct their use and beneficiaries, and for the ultimate
disposition in accordance with their disposition of the assets. The trustee is
owners’ intentions. a fiduciary obligated to handle the trust
assets in
Wills
accordance with the terms of the trust
A will is a document that directs the document and solely in the best
distribution of your assets after your interests of the beneficiaries.
death to your designated heirs and
beneficiaries. It also can include your Unlike wills which take effect upon
instructions for matters that require death, trusts become effective upon the
decisions after your death, such as the transfer of assets to them. A “living trust”
appointment of an executor of the will can be created during a grantor’s
lifetime.
Revocable Trust protect the assets from the grantor’s
creditors.
In addition, trusts can be created to
serve a variety of purposes, both before Special Purpose Trusts
and after the death of the grantor.
During their lifetimes, grantors can In addition to providing for your heirs,
create revocable trusts which they can estate plans often involve arrangements
alter, amend, or terminate at any time. A to support charitable purposes or
grantor of a revocable trust can serve as address special family circumstances.
its trustee. The grantor effectively Federal and state laws establish rules
continues as the owner of the trust for creating trusts for specified
assets for tax purposes. The trust purposes. Charitable trusts and “special
document can provide for a successor needs trustsLinks to an external site.”
trustee, for example, upon a are two types of trusts generally
grantor-trustee’s death or disability, and established during their grantors’
include instructions for the subsequent lifetimes.
management and transfer of the trust
Charitable Trusts
assets. Assets in a revocable trust pass
outside of probateLinks to an external The tax law provides special benefits for
site.. However, because the grantor certain irrevocable trusts that benefit
retains control of the trust while alive, charities while providing some economic
the assets are included in the grantor’s return to their grantor or beneficiaries.
taxable estate. Charitable lead trusts and charitable
remainder trusts that meet the tax
Irrevocable Trust
code's technical requirements can serve
On the other hand, grantors give up these
their ownership rights to assets when
dual purposes. These trusts' creation,
they transfer to them an irrevocable
management, and termination are
trustLinks to an external site., i.e., one
subject to complex tax law
which they do not control and cannot
requirements.
alter. Irrevocable trusts are managed by
a trustee who is not the grantor. CharitableLinks to an external site. lead
Provided the grantor has given up all trusts are established for the life of one
control and beneficial interest in the trust or more individuals or a specified term
assets, the income from the trust assets of years. The grantor transfers assets to
is not included in the grantor’s taxable the trust, supporting regular payments to
income nor are the assets included in charities. When the charitable lead
the grantor’s estate. If properly trust's term ends, the remaining assets
structured, the transfer of assets from are distributed to the noncharitable
the grantor to the irrevocable trust may beneficiaries, for example, the grantor's
family members. These trusts can be consulted to ensure that their formation
set up during the grantor's lifetime or and operation will not disqualify the
according to a will. Depending on the beneficiary from public assistance.9
trust structure, it may afford the grantor
a partial tax deduction upon its creation, Considerations for Estate Planning
provide estate and gift tax benefits, or, in
Although estate planning often is viewed
some cases, realize taxable income for
as a concern for older individuals with
the grantor.
substantial means, it is a subject that
A charitable remainder trust is an almost everyone needs to address.
irrevocable trust that provides current Even if your assets are limited to a
income to the grantor or other residence, bank accounts, and perhaps
designated noncharitable beneficiaries an IRA or 401(k) account, you want to
and a partial tax deduction based on the be sure that the people you wish to
valuation of the contributed assets. The receive them do indeed become their
contributed assets are distributed to one owners and that your plans are
or more charities upon expiration of the executed with the greatest efficiency
trust's term, which may be a term of no and least expense possible.
more than 20 years or a term based on
If you have complicated personal
the life of one or more noncharitable
relationships, for example, children from
beneficiaries.
more than one marriage, a dependent
Special Needs Trusts parent or relative, or offspring whose
financial resources vary greatly, leaving
Persons concerned about the financial clearly expressed, and in the
needs of individuals with disabilities (i.e., circumstances, clearly explained
“special needs” that prevent or limit their directions for distributing your assets
ability to provide their economic might prevent potential disputes among
support), can create “special needs your heirsLinks to an external site..10
trusts.” Special needs trusts are legal
arrangements that enable such Many online willmakersLinks to an
individuals to receive financial support external site. offer tools for generating
from the trust for particular purposes legal forms and documents that can
without jeopardizing their eligibility for introduce you to estate planning options.
federal and state public assistance However, experts recommend
programs, such as Supplemental consulting legal counsel and other
Security Income (SSI)Links to an appropriate experts, as needed, to take
external site. and other benefits. into account your estate planning needs.
Because these trusts must meet
Considerations for Making a Will
complex requirements set by federal
and state laws, legal experts should be
The idea of making a will frequently can and divide the remainder equally among
raise an uncomfortable awareness of your children. They do not consider
death. But it also should prompt factors that might influence you to divide
consideration of your responsibilities to your estate unequally among your heirs.
your survivors and, if your financial
position permits, your charitable or Your surviving spouse or a qualified
community interests. In directing the adult relative or friend may apply to the
disposition of your assets and court to be appointed as the
expressing your intentions, a will administrator, but their appointment is
provides your survivors'Links to an not certain. Moreover, intestacy entails
external site. guidance for handling your probate court processes, time, and
estate and lessens the possibility of professional fees, which could be lower
disputes. In your will, you can designate if you die leaving a will and
an executor whom you consider well-designed estate plan.11
competent and trustworthy.
Accordingly, making a will that appoints
If you die intestate (without a will), the your executor, determines who will
probate court takes jurisdiction over receive your assets, and expresses your
your estate, appoints an administrator, intentions on guardianshipsLinks to an
and determines what happens to your external site., charitable contributions,
property, bank accounts, securities, funeral, and burial should not be a
assets, and even the guardianship of late-in-life decision. Even if you are
your minor children based on the young, once you have assets and
intestacy laws in your state. It can lead responsibilities to a spouse, children,
to long court battles, delay property and other dependents, you should have
distributions, and result in substantial a will or other legal arrangement to
expense for your heirs and determine the distribution of your assets
beneficiaries. and to help your survivors make
decisions about other matters. You can
If You Die Without a Will revise a will during your lifetime as your
personal or financial situation evolves or
If you die without a will, the post-mortem if changes in the law affect your
management and distribution of your planning.
assets, the handling of your debts, and
the care of your minor children and Disinheritance
other dependents will be dependent
upon your state’s intestacy law and an Although children (natural or adopted)
administrator appointed by the probate have a statutory right to inherit, a will
court to manage your estate. Generally, allows you to disinherit a child if you
these laws allocate a significant portion choose to do so. To be effective,
of the estate to your surviving spouse provisions for disinheritance must
comply with state lawsLinks to an keep the differing values of assets
external site. whose requirements vary. passed down to different heirs
In states with community property laws, confidential. Trusts are also used to
varying and detailed rules enable a ensure privacy for family businesses
person to disinherit a spouse. So you and real estate held through entities not
need to be aware of your state's publicly identified with their owners.
laws—whether it is a common-lawLinks Ensuring privacy for family businesses
to an external site. state, a community and real estate held through entities not
propertyLinks to an external site. state, publicly identified with their owners.
or an equitable distributionLinks to an
external site. state.12 Will, Trust, or Both

Trusts, Retirement Accounts, In approaching estate planning, wills

Lifetime Gifts and trusts are generally not an either/or
question. For small estates with easily
You should be aware of other legal transferred assets and simple bequests,
arrangements that can facilitate a will may be the least expensive and
transferring assets directly to your heirs. most efficient choice. However, a trust
These can include a trust that holds without a will can present problems
your assets and provides for future concerning assets outside the trust that
transfers, beneficiary designations for become subject to intestacy laws.
retirement and other financial accounts, Larger and more complex estates may
and gifts of funds and other assets benefit by using both arrangements.
during your lifetime. These
arrangements transfer property without Even if most of your assets are held in
the assets going through probate. And, ways that avoid probate, it usually is
you may transfer ownership during your advisable to have a will. With a carefully
lifetime through gifts.13 drafted will, although your estate will be
subject to probate, the cost may be less
Considerations for Using Trusts than setting up and managing a trust.
For individuals of means, and those with
Trusts are frequently used in estate privacy concerns, a trust, and a will can
planning. "Living trusts" created in the complement each other, allow swift
grantor's lifetime facilitate the transfer of asset transfers, maintain confidentiality
assets to heirs without the cost and concerning sensitive assets and
publicity of probate. Transfers by a trust directives, and prevent intestacy
can usually be quicker and more concerning estate assets whose
efficient than transfers by will. Such trust disposition is not governed by a trust or
transfers enable grantors to maintain other arrangement.
privacy concerning the nature and value
of their assets. They can be used to
A will can distribute any assets that do could face potential discrimination from
not transfer automatically, such as trust outside family members, and without a
property or retirement accounts with will, state laws may favor blood relatives
designated beneficiaries and provide for over partners.
late-acquired, directly owned assets in
the estate. In some cases, a pour-over For example, if you die without a will,
will can create a testamentary trust to your state's intestate succession laws
hold and manage assets for the benefit will determine who inherits your
of designated heirs, for example, for belongings, including your home. If your
minor children until they reach maturity. partner is not on the mortgage or lease,
With a will, the estate avoids intestacy Creating an estate plan with your
and potentially costly and contentious partner can help ensure your
legal proceedings to identify and appoint relationship status is legally recognized
an estate administrator and allocate by the state if one of you dies.16
your remaining assets.
The goal is to ensure that the surviving
Your decision about using a will or trust partner can access all the legal
or both should depend on the nature benefitsLinks to an external site.,
and value of your assets, the age and despite not being legally married.
capabilities of your heirs, tax planning Making a will or trust, writing out a
considerations, and the complexity of power of attorney document and health
your bequests. Ultimately, to protect the care proxy, and naming a financial
value of your assets and to realize your power of attorney, are all ways to ensure
intended benefits for your heirs, you or your spouse's plans for your
thoughtful estate planning is essential. estate are carried out. If one of you has
underage children but your spouse has
Importance of Wills and Trusts for not legally adopted them, it is critical to
Same-Sex Couples list their guardianshipLinks to an
external site.. Otherwise, the courts may
If you are part of an LGBTQ+ legally decide who raises them.17
married couple, then estate planning will
essentially be the same for you for Justia. "GuardianshipsLinks to an
married straight couples. However, external site.."
estate planning for unmarried couples,
LGBTQ+ or straight, is essential, Which Is Better, a Trust or a Will?
especially for long-term partners. If you
Whether a trust or will is better for an
are in a partnership but not legally
individual will depend on the family and
married and die intestate (without a will),
financial circumstances. In general, wills
your partner could find themselves
are less expensive to write and easier to
fighting with family or others over the
implement, although they can be
departed's assets. LGBTQ+ couples
contested in probate court. Wealthy
individuals seeking to avoid probate and estate. This meant that higher-value
minimize estate tax exposure could be estates were taxed at a higher
better off with an irrevocable trust. An percentage than lower-value estates.
irrevocable trust essentially transfers
assets out of one's name, but these are
more expensive to draw up and
In 2018, under the TRAIN law [Republic
implement, require naming a trustee,
Act (RA) No. 10963] (2Links to an
and cannot be changed once in effect.
external site.), the Philippines adjusted
Topic 9 the estate tax rate to a flat rate of 6%.
The flat rate applies to a net estate over
What is Estate Tax in Philippines Php 200,000. If the net value of the
estate is less than or equal to 200,000
Estate tax is a kind of tax that where you Philippine Pesos, then no estate tax is
pay for the opportunity or the process of imposed. This means the heirs or
transferring cash or physical properties. beneficiaries will receive the entire
The Bureau of Internal Revenue legally estate without any amount being
describes it as the tax on the properties deducted for estate tax purposes.
of a deceased person. The tax is to be
paid by the beneficiaries of the
deceased.
The TRAIN Law implemented in the
Estate tax in the Philippines is a tax on Philippines on January 1, 2018. If
the right of the deceased person to someone received an inheritance before
transmit their estate to their lawful heirs the TRAIN Law was enacted, their
and beneficiaries at the time of death. estate would be subject to the previous
The estate tax is levied on the net tax laws in effect at the time of their
estate, which is the gross estate less death.
allowable deductions.
Standard Deduction in Estate Tax
Estate Tax Law in Philippines
The “standard deduction” is a fixed
The estate tax in the Philippines is amount that can be automatically
governed by the Republic Act No. 8424 deducted from the gross estate of the
(1Links to an external site.), also known deceased person, regardless of actual
as the Tax Reform Act of 1997. expenses or losses. In the context of the
Philippines’ estate tax, the standard
Before the Tax Reform for Acceleration deduction under the TRAIN Law is Php
and Inclusion (TRAIN) law in 2018 the 5 million.
estate tax in the Philippines was applied
at a rate that varied between 5% and This means that, when calculating the
20% based on the value of the net net estate (the value of the estate that
will be subject to the estate tax), one estate tax, you only take into account
can automatically subtract Php 5 million the net value.
from the gross estate (the total value of
the deceased’s assets), without needing What Objects Fall under the
to provide any proof of expenses or Philippine Estate Tax
losses.
In the Philippines, estate tax is levied on
For example, if the gross estate was the net estate of a deceased person,
worth Php 10 million, after the standard which can include a variety of assets.
deduction of Php 5 million, the net Not all properties are taxable. The main
estate would be Php 5 million. The classifications of properties that can be
estate tax would then be calculated on considered an estate are:
this net amount.

The standard deduction is part of the

1.Real Estate: This includes land,
government’s effort to simplify the
houses, condominiums, and any other
taxation process and lessen the tax
type of real property located in the
burden on heirs.
Philippines.
What is the Difference Between
2.Cash and Bank Deposits: All cash,
Gross Estate and Net Estate?
savings, checking accounts, and time
Rate of estate tax in the Philippines deposits in Philippine and foreign
currencies are included.
Gross estate means or refers to the
total value of the properties of the 3.Stocks: Stocks in any corporation,
person who died. This value includes all both Philippine and foreign, are subject
the liabilities, and also the taxes, the to estate tax.
deceased should have paid.
4.Personal Property: This can include
Net estate refers to the value after the vehicles, jewelry, furniture, artworks,
liabilities and taxes have been paid. For antiques, and other valuable personal
example, let us say that the value of the items.
car that the deceased left is ₱1 million.
5.Retirement Benefits: Retirement
However, he owes ₱400,000 to the car
benefits received from the government
dealer because he bought it in
and private institutions are part of the
installments.
gross estate.
The gross value of the car, as an
6.Life Insurance Policies: The
estate, is ₱1 million. The net estate,
proceeds of life insurance policies are
however, is ₱600,000. In paying the
subject to estate tax, depending on who
the beneficiaries are and who paid the Who has the Obligation to pay
premiums. the Estate Tax?

7.Business Interests: Ownership The children or heirs of the deceased

stakes in businesses, partnerships, or are the ones who must pay the estate
corporations are included in the estate tax because the dead cannot do it.
for tax purposes. These individuals will take on the roles
of executor and administrator. Their
8.Other Financial Investments: This main duty is to pay for the estate taxes
could include bonds, mutual funds, of the deceased property owner.
foreign investments, etc..
In the Philippines, the responsibility for
In the Philippines, there are certain paying the estate tax generally falls to
assets and properties that are the following individuals or entities:
exempt from estate taxes:
● Executor or Administrator:
● Family Home: If a family home The executor of the will or the
is included in the estate, an administrator of the estate usually
amount of up to Php 10 million is has the primary responsibility to
exempt from estate tax. pay the estate tax. An executor is
● Medical Expenses: Medical someone who has been
expenses incurred within one designated in the will to
year prior to the decedent’s death administer the estate. If there is
are deductible from the gross no will or no executor named in
estate, up to Php 500,000. the will, the court may appoint an
● Funeral Expenses: These can administrator.
be deducted from the gross ● Heirs: If there’s no executor or
estate up to an amount of Php administrator, or if the executor or
200,000. administrator is unable or
● Accidental Insurance Benefits: unwilling to pay the tax, then the
Accidental insurance benefits are responsibility can fall on the
not included in the gross estate heirs. They are liable to the
and are therefore not subject to extent of the value of their
estate tax. inherited portion of the estate.
● Amounts Received by Heirs ● Beneficiaries of the Estate: In
Under RA No. 4917 (3Links to the absence of an executor or
an external site.): Amounts administrator and if the heirs
received by the heirs under RA cannot pay, the beneficiaries who
No. 4917 are exempt from estate received properties, rights, or
tax provided the requirements assets from the deceased are
under the law are complied with. liable to pay the estate tax.
 ● Transferees of Properties: Step 2: Apply Allowable Deductions –
These are individuals who Subtract all allowable deductions from
receive properties from the estate the gross estate to calculate the net
by way of contracts or estate.
agreements.
● Donees: Donees refer to the
recipients of a gift. They are liable
Step 3: Calculate the Net Taxable
if the property was transferred to
Estate – The net taxable estate is the
them before the death of the
gross estate minus all allowable
decedent to evade the payment
deductions.
of the estate tax.

Inheritance Tax vs Estate Tax in

Philippines Step 4: Apply the Tax Rate – A flat tax
rate of 6% is applied to a net estate over
Estate tax is an obligation to the
Php 200,000.
government that you pay for
TRANSFERRING assets to a different How to Compute Estate Tax in the
person or owner after the original Philippines
owners die. Inheritance Tax and Estate
Tax are the same thing. Other countries Suppose a decedent leaves a gross
treat these two separately. In the estate worth Php 15 million. The
Philippines, you do not make double tax allowable deductions total Php 6 million.
payments. The estate tax calculation would be as
follows:
Estate Tax Computation in the
Philippines ● Gross Estate: Php 15,000,000
● Allowable Deductions: Php
The computation of estate tax in the 6,000,000
Philippines involves several steps, as ● Net Taxable Estate: Php
outlined in the National Internal 15,000,000 – Php 6,000,000 =
Revenue Code and the provisions of the Php 9,000,000
TRAIN law. Here’s how you can ● The Net taxable estate is above
compute the estate tax: Php 200,000, so the flat estate
tax rate of 6% applies:
Step 1: Determine the Gross Estate –
● Estate Tax Due = Net Estate *
The gross estate comprises all the
Estate Tax Rate
property, wherever situated, which the
decedent owned or had interest in at the
time of their death.
● Estate Tax Due: Php 9,000,000 *
0.06 = Php 540,000. Therefore,
 the estate tax due would be Php
540,000.
Sometimes, people who inherit lands
are going through hardships. If the BIR
Commissioner finds that this is the case,
Ноw to File a Return for Estate Tax in he may extend the tax period up to five
Philippines years if settled in court. Outside court
settlement, the Commissioner can
Filing an estate tax is simple. The first
extend it up to two years.
thing you have to do is prepare the
affidavit, then the documents. After that, Some people who really have no
you can visit your BIR RDO office. The financial means to pay the tax can opt to
BIR person-in-charge will tell you which sell the property. However, this will result
government department you need to in another tax. This kind of tax is what
consult with, such as the Engineering we call capital gains tax.
office, for property value assessment.
Documents and Requirements for
Where to Pay the Estate Tax? Paying Estate Tax in the Philippines
You will pay in the Regional District There are several documents that you
Office (4Links to an external site.) of the need to prepare to pay estate taxes in
respective BIR office where the the Philippines. These documents vary
deceased lived. This BIR office is also according to your situation.

📝 Here are the basic requirements:

called RDO.

You must register and process the

estate tax that you must pay within a ● Estate Tax Return Form (BIR
year, or you will suffer penalties. In Form 1801) (8Links to an
addition to this, you must file the tax in external site.)
Office of the Commissioner at RDO No. ● Death Certificate – this must be
39, South Quezon City if the deceased an original copy with a
has no residence in the country. certification
● The tax identification number of
When should you File the Estate the dead person and the heirs
Tax? ● Any of the these:
According to BIR, you must file your – Affidavit of Self Adjudication
document and pay the estate tax within
a year after the death of the owner. In – Deed of Extra-Judicial Settlement of
special cases, the BIR Commissioner the Estate
can extend this period. However, this
extension cannot exceed 30 days. – Court order if settled judicially
– Sworn Declaration of all properties of ● Certificate of No Improvement
the Estate issued by the Assessor’s Office
where declared properties have
● Certified copy of the schedule of no improvement.

🔍 For personal properties, you need

partition of the land
● Proof of Claimed Tax Credit
● CPA Statement on the itemized to prepare:
assets of the decedent like
jewelry
● Certification of the Barangay
● Certificate of Deposit/
Captain for the claimed Family
Investment/ Indebtedness owned
Home
by the decedent and the surviving
● Duly notarized Promissory Note
spouse.
for “Claims Against the Estate”
● Photocopy of Certificate of
arising from Contract of Loan
Registration of vehicles
● Accounting of the proceeds of
● Proof of valuation of shares of
loan contracted within three (3)
stock at the time of death, if
years prior to death of the
applicable
decedent;
● For shares of stocks not listed/not
● Proof of the claimed “Property
traded – the Latest Audited
Previously Taxed”
Financial Statement of the
● Proof of the claimed “Transfer for
issuing corporation with
Public Use”
computation of the book value
● Copy of Tax Debit Memo used as
per share
payment, if applicable
● For shares of stocks listed/traded
You must prepare the original copy – Price index from the PSE/latest
and two photocopies for each FMV published in the newspaper
document. at the time of transaction.
● For club shares – Price published
in newspapers on the transaction

🏠 If the property is real estate, you date or nearest to the transaction

date.
must prepare the following: ● Photocopy of certificate of stocks,
if applicable
● Certified true copy of the
● Proof of valuation of other types
Transfer/Original/ Condominium
of personal property, if applicable
Certificate/s of Title of real
property/ies Finally, the BIR may ask you for special
● Certified true copy of the Tax power of attorney and also some
Declaration of real properties at documents like a map of the plot of land.
the time of death, if applicable