In Philippine succession law, the question of whether heirs can inherit property originally acquired by a decedent through a Deed of Donation is a common point of inquiry. Under the Civil Code of the Philippines, the answer is generally yes, but the process is governed by specific rules regarding ownership, the nature of the donation, and the protection of "legitimal" rights.
1. Ownership and the Right to Transmit
A donation is an act of liberality whereby a person (the donor) disposes gratuitously of a thing or right in favor of another (the donee), who accepts it. Once a Deed of Donation is executed in proper legal form—specifically a public instrument for real property—and the gift is accepted, the donee becomes the absolute owner.
Under Article 776 of the Civil Code, "the inheritance includes all the property, rights and obligations of a person which are not extinguished by his death." Since property acquired via donation becomes part of the donee's private estate, it is fully transmissible to their own heirs upon their death.
2. The Rule on Collation
One of the most critical aspects of inheriting donated property is Collation (Articles 1061–1077). Collation is the process of bringing back into the mass of the estate the value of properties received by "compulsory heirs" via donation during the lifetime of the decedent.
- Purpose: To determine if the donation exceeded the "free portion" of the estate and impaired the legitime (the portion of the estate reserved by law for compulsory heirs).
- The Valuation: It is usually the value of the property at the time of the donation that is brought into the accounting, not the property itself, unless the donation is totally revoked or reduced as inofficious.
3. Inofficious Donations
A donation is considered inofficious if it exceeds the amount that the donor could have given by will. No person may give or receive, by way of donation, more than what they may give or receive by will.
- Protection of Heirs: If a parent donated a property to one child (or a third party) and that donation leaves nothing for the other compulsory heirs, the heirs can file an action for the reduction or even the revocation of the donation to satisfy their legitimes.
- Order of Reduction: If there are multiple donations, the most recent ones are reduced first.
4. Special Conditions: The "Reserva Troncal"
A rare but significant exception to the general rule of inheritance is the Reserva Troncal (Article 891). This applies if:
- A person (the descendant) inherits property from an ascendant or sibling via donation or title.
- That person dies without issue (children).
- The property is then inherited by another ascendant (usually a parent) by operation of law.
In this specific case, the parent (the reservista) is obliged to reserve the property for the benefit of relatives who are within the third degree and who belong to the line from which said property came.
5. Requirements for Valid Transmission
For heirs to successfully consolidate their title over a property inherited from a donee, several steps must be taken:
- Settlement of Estate: The heirs must undergo either an Extrajudicial Settlement (if there is no will and no debts) or a Judicial Settlement.
- Payment of Taxes: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR). It is important to note that the original Donor’s Tax must have been settled when the property was first donated; otherwise, the title may not have been properly transferred to the decedent, complicating the inheritance.
- Registration: The Certificate Authorizing Registration (CAR) from the BIR must be presented to the Register of Deeds to issue a new Transfer Certificate of Title (TCT) in the names of the heirs.
Summary Table: Donation vs. Inheritance
| Aspect | Deed of Donation | Inheritance (Succession) |
|---|---|---|
| Timing | Effective during the donor's lifetime (Inter Vivos) | Effective upon the decedent's death (Mortis Causa) |
| Basis | Gratuitous contract/liberality | Law or Will |
| Impact on Heirs | Subject to Collation/Reduction | Distribution of the remaining estate |
| Taxation | Donor's Tax | Estate Tax |
While property acquired via donation is fully inheritable, it remains "tethered" to the donor's estate for the purpose of calculating the legal shares of other compulsory heirs. Heirs inheriting such property should ensure that the original donation did not infringe upon the legitimes of others to avoid future litigation.