Under Philippine law, the death of an individual triggers the transmission of their estate to their heirs. Among the most common assets in a decedent’s estate are bank deposits. Navigating the Bureau of Internal Revenue (BIR) requirements for these deposits is critical for heirs to gain access to the funds and ensure legal compliance.

Since the enactment of Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the rules governing estate taxes—specifically regarding bank withdrawals—have been significantly streamlined.

1. The Scope of the Estate Tax

The estate tax is not a tax on property but on the privilege of the deceased to transmit their estate to lawful heirs.

For Citizens and Resident Aliens: All bank deposits, whether located in the Philippines or abroad, are included in the gross estate.
For Non-Resident Aliens: Only bank deposits located within the Philippines are subject to Philippine estate tax (subject to reciprocity rules).

2. Rules on Bank Withdrawals Post-Death

One of the most significant changes introduced by the TRAIN Law (effective January 1, 2018) concerns the withdrawal of funds from the deceased's bank account.

The 6% Final Withholding Tax

Under Section 27 of the TRAIN Law (amending Section 97 of the National Internal Revenue Code), if a bank has knowledge of the depositor's death, it may allow the heirs to withdraw any amount from the account, provided the bank withholds a 6% final withholding tax.

Requirement: The administrator, executor, or any of the legal heirs must present a copy of the death certificate.
The "Final" Nature: This 6% tax is a final tax on that specific withdrawal. The amount withdrawn and subjected to this tax is no longer included in the "Gross Estate" for the purpose of computing the overall estate tax due.
Time Limit: Withdrawals must be made within one (1) year from the date of the decedent's death to qualify for this 6% final tax treatment.

Prior to the TRAIN Law

For deaths occurring before 2018, the rules were stricter. Banks were generally prohibited from allowing withdrawals unless the BIR issued a Certificate Authorizing Registration (CAR), except for a small allowance (PHP 20,000) for funeral expenses in certain cases.

3. Computation of Estate Tax

If the funds are not withdrawn under the 6% final tax scheme, they remain part of the gross estate and are taxed based on the standard estate tax table.

The Current Rate

Under the TRAIN Law, the estate tax is a flat rate of 6% on the Net Estate.

The Formula

$$\text{Gross Estate} - \text{Allowable Deductions} = \text{Net Taxable Estate}$$

$$\text{Net Taxable Estate} \times 6% = \text{Estate Tax Due}$$

Key Deductions for Individual Depositors

Standard Deduction: A fixed amount of PHP 5,000,000 is deductible for citizens or residents, no substantiation required.
Family Home: Up to PHP 10,000,000, provided it was the decedent's actual residence.
Claims against the Estate: Debts or liabilities of the deceased.

4. BIR Compliance Requirements

To settle the estate tax and officially transfer the bank deposits (or obtain a CAR to close the account), the following documents are typically required by the BIR:

BIR Form 1801: The Estate Tax Return.
Certified True Copy of the Death Certificate.
Taxpayer Identification Number (TIN) of the decedent and the heirs.
Bank Certification: A statement from the bank showing the outstanding balance of the accounts as of the date of death.
Affidavit of Self-Adjudication or Deed of Extrajudicial Settlement (EJS): If the heirs are settling the estate out of court.
Proof of Payment: If tax is due, the validated return from an Authorized Agent Bank (AAB).

5. Joint Accounts

A common point of confusion is the "And/Or" account.

General Rule: If one co-depositor dies, only the portion belonging to the deceased is included in the gross estate.
Presumption: In the absence of proof to the contrary, the share of the decedent is presumed to be an equal portion of the total balance (e.g., 50% for two co-depositors).
The 6% final withholding tax on withdrawals still applies to the decedent’s share.

Summary Table: Post-2018 Rules

Feature	Withdrawal with 6% Withholding	Settlement via Estate Tax Return
Tax Rate	6% Final Tax	6% of Net Taxable Estate
Timing	Within 1 year of death	Within 1 year of death (filing)
Documentation	Death Certificate	Full BIR Estate Tax Package
Inclusion	Excluded from Gross Estate	Included in Gross Estate

Legal Advice and Next Steps

Settling an estate can be complex, especially when multiple heirs or various types of assets (real estate, shares of stock) are involved alongside bank deposits.

Would you like me to draft a template for an Extrajudicial Settlement of Estate specifically covering bank deposits?