Donating real estate to your children in the Philippines is a generous act of succession planning, but it is far from a simple handover. Legally, this is known as a Donation Inter Vivos (a donation made during the lifetime of the donor).
To ensure the transfer is valid and to avoid penalties from the Bureau of Internal Revenue (BIR), you must follow specific legal steps and tax requirements.
1. The Legal Requirements (Civil Code)
Under the Civil Code of the Philippines, the donation of immovable property (land and buildings) must follow strict formalities to be valid:
- Public Instrument: The donation must be made in a Deed of Donation. It cannot be a private letter or a verbal agreement; it must be acknowledged before a Notary Public.
- Acceptance: For the donation to be complete, the children (donees) must formally accept the gift. This acceptance can be written in the same Deed of Donation or in a separate legal document.
- Notification: If the acceptance is made in a separate document, the donor must be notified in an authentic form, and this step must be noted in both instruments.
2. Step-by-Step Process of Transfer
Transferring the title from your name to your children involves several government agencies:
- Preparation of the Deed of Donation: Draft the document specifying the property details (Title number and technical description) and the "love and affection" as the consideration for the gift.
- Notarization: Both the donor and the children must sign the deed in the presence of a notary.
- Tax Clearance (BIR): File the Donor’s Tax Return and pay the necessary taxes at the Revenue District Office (RDO) where the donor is registered or where the property is located.
- Local Government Units (LGU): Pay the Transfer Tax at the City or Municipal Treasurer’s Office.
- Certificate Authorizing Registration (CAR): Once taxes are paid, the BIR issues a CAR. This is the "green light" for the Registry of Deeds.
- Registry of Deeds: Submit the CAR, the old title, and the Deed of Donation to the Registry of Deeds to cancel the old title and issue a new one in the children's names.
3. Taxes and Fees Involved
Donating a property is not "tax-free." In fact, it can sometimes be more immediate than the costs of an inheritance (Estate Tax).
| Tax/Fee | Rate | Basis |
|---|---|---|
| Donor’s Tax | 6% | Total value of the gift in excess of ₱250,000 per year. |
| Documentary Stamp Tax (DST) | 1.5% | Based on the Fair Market Value (FMV) or Zonal Value, whichever is higher. |
| Transfer Tax | 0.5% to 0.75% | Depending on the local government’s ordinance. |
| Registration Fee | Graduated Scale | Based on the Registry of Deeds' table of fees. |
Note on Valuation
The BIR will compute the 6% Donor's Tax based on the higher value between:
- The Zonal Value (determined by the BIR).
- The Assessed Value (found on the Tax Declaration from the Assessor's Office).
4. Key Considerations and Limitations
The "Legitime" Rule
In Philippine law, you cannot donate your entire estate if it prejudices the legitime (the mandatory inheritance) of other compulsory heirs. If you have three children but donate all your property to only one, the other two can legally contest the donation after your death to get their rightful share.
Revocability
Generally, a donation is irrevocable once accepted. However, the law allows for revocation under very specific circumstances:
- Ingratitude: If the child commits an offense against the donor, their honor, or property.
- Non-fulfillment of conditions: If the donation was "conditional" and the child failed to meet the terms.
- Birth/Adoption: If the donor subsequently has more children than they had at the time of the donation.
Marital Consent
If the house and lot are considered Conjugal Property (acquired during the marriage of the parents), both the father and the mother must sign the Deed of Donation. One spouse cannot donate conjugal property without the other's written consent.
5. Summary Checklist of Documents
To complete the BIR and Registry of Deeds requirements, you will typically need:
- Original and Notarized Deed of Donation.
- Certified True Copy of the Transfer Certificate of Title (TCT).
- Certified True Copy of the Tax Declaration (Land and Improvement).
- Tax Clearance from the City/Municipal Treasurer.
- Birth Certificates of the children (to prove relationship).
- Official Receipts for all tax payments.
Would you like me to draft a basic template for a Deed of Donation that complies with Philippine legal standards?