The passing of a parent is an emotionally challenging time, compounded by the immediate necessity of managing their worldly affairs. When a parent dies without leaving a valid last will and testament, they die intestate.
In the Philippines, intestate succession and estate settlement are strictly governed by the Civil Code of the Philippines and the Rules of Court, recently streamlined by the Tax Reform for Acceleration and Inclusion (TRAIN) Law (Republic Act No. 10963).
1. Who Inherits? The Rules of Intestate Succession
When there is no will, the law steps in to create a "presumed will" based on affection and proximity of relationship. The estate is distributed to the decedent’s compulsory heirs.
The Order of Concurrence and Shares
Under the Civil Code, the surviving spouse and children are the primary compulsory heirs. Their shares are determined by specific legal proportions:
- Surviving Spouse and Legitimate Children: The surviving spouse inherits a share equal to the share of each legitimate child. For example, if a parent leaves behind a spouse and three legitimate children, the estate is divided into four equal parts.
- Illegitimate Children: Illegitimate children are entitled to inherit, but their share is strictly one-half (1/2) of the share of a legitimate child.
- Surviving Spouse Only: If there are no descendants or ascendants, the spouse inherits the entire estate.
- Parents/Ascendants: Legitimate parents only inherit if the deceased left no children or descendants.
Important Note: In-laws (e.g., sons-in-law or daughters-in-law) are not compulsory heirs and do not inherit any portion of the intestate estate.
2. Modes of Settling the Estate
Before any asset—whether land, vehicles, or bank accounts—can be legally transferred to the heirs, the estate must be formally settled. There are two primary legal paths to achieve this.
A. Extrajudicial Settlement of Estate (EJS)
This is the fastest and most cost-effective method. It is done out of court through a public instrument. However, an EJS can only be utilized if the following strict conditions are met:
- The decedent left no will.
- The decedent left no debts (or all debts have been fully settled).
- All heirs are of legal age, or minors are duly represented by judicial or legal guardians.
- All heirs agree on the division of the properties.
The Process of Extrajudicial Settlement:
- Drafting the Deed: The heirs execute a public instrument called the Deed of Extrajudicial Settlement of Estate. If there is only one heir, an Affidavit of Self-Adjudication is filed instead.
- Publication: The Deed must be published in a newspaper of general circulation once a week for three (3) consecutive weeks.
- Filing: The published Deed, along with proof of publication, is filed with the Register of Deeds where the properties are located.
B. Judicial Settlement of Estate
If the heirs cannot agree on how to divide the property, or if the deceased left unpaid debts, an EJS is impossible. The heirs must file a Petition for the Settlement of Intestate Estate in the Regional Trial Court (RTC) where the decedent resided at the time of death. This process is adversarial, expensive, and can take years to resolve.
3. Legal Realities of Claiming the Deceased Parent's Bank Accounts
A common misconception is that children can immediately withdraw money from a deceased parent’s bank account using their ATM cards or passbooks. Doing so without notifying the bank can expose heirs to legal liabilities, as the account is legally frozen the moment the bank becomes aware of the depositor's demise.
The mechanism for withdrawing these funds depends heavily on compliance with Philippine tax laws.
The Impact of the TRAIN Law (R.A. 10963)
Prior to 2018, freezing accounts was a rigid process, and withdrawing funds required a Certificate Authorizing Registration (CAR) from the Bureau of Internal Revenue (BIR). The TRAIN Law significantly simplified this process by introducing a specific withdrawal mechanism.
Under Section 97 of the National Internal Revenue Code (Tax Code), as amended by the TRAIN Law:
| Option | Method of Withdrawal | Tax Implication | Requirements |
|---|---|---|---|
| Option 1: Direct Withdrawal | Heirs can withdraw funds directly from the deceased's account within one (1) year from the date of death. | Subject to a 6% final withholding tax on the amount withdrawn. | * Death Certificate |
* Joint Affidavit of Heirs
* Bank-specific claim forms |
| Option 2: Inclusion in Estate Settlement | The bank account is declared as part of the gross estate. Funds are frozen until the entire estate is settled. | Subject to the standard 6% estate tax on the net estate (with a Php 5M standard deduction). | * Estate Tax Return (BIR Form 1801)
* BIR-issued CAR
* Deed of EJS |
Step-by-Step Guide to Claiming Bank Accounts via Direct Withdrawal
If the heirs choose to pull funds quickly within the one-year window using the 6% final withholding tax option, they must follow these steps:
- Notify the Bank: Inform the branch manager of the parent's passing. The bank will formally freeze the account to protect the funds from unauthorized transfers.
- Submit Documentation: Present the required identifying documents. Typically, banks require:
- Certified True Copy of the Death Certificate (issued by the PSA).
- Birth Certificates of the children to prove filiation.
- Marriage Certificate (if the surviving spouse is claiming).
- A notarized Deed of Extrajudicial Settlement or a Joint Affidavit of Consent/Heirship executed by all legal heirs authorizing a specific representative to withdraw the funds.
- Valid government-issued IDs of all heirs and the authorized representative.
- Tax Withholding: The bank will automatically deduct the 6% final withholding tax from the total balance being withdrawn and remit this directly to the BIR.
- Release of Funds: The bank releases the remaining 94% of the funds to the designated representative.
4. Tax Compliance and Penalties
Even if the bank account is emptied via the 6% withholding tax mechanism, the remaining properties (real estate, vehicles, shares of stock) still require the filing of an Estate Tax Return (BIR Form 1801).
- Rate: The estate tax is a flat rate of 6% applied to the net estate (the value of the properties minus allowable deductions).
- Deductions: The TRAIN Law provides a generous Standard Deduction of Php 5,000,000, meaning if the net value of the parent's total remaining estate is under 5 million pesos, no estate tax will be owed, though an Estate Tax Return must still be filed to transfer titles.
- Filing Period: The Estate Tax Return must be filed within one (1) year from the date of the parent's death. Failure to file on time attracts severe penalties, including a 25% to 50% surcharge, plus a 12% annual interest charge on the unpaid tax liability.