Transferring Property Ownership to Children in the Philippines

A comprehensive legal and practical guide (updated to July 29 2025)

Disclaimer: This article is for general information only and does not constitute legal advice. Philippine property and tax rules are intricate and fact‑sensitive; always consult a licensed lawyer, tax practitioner, and the relevant government offices before acting.

1. Governing Legal Framework

Source of Law	Key Provisions Relevant to Transfers
1987 Constitution	Protects private ownership, regulates land ownership of aliens, reserves certain lands to Filipino citizens.
Civil Code (RA 386)	Book II (Property), Book III (Modes of Acquisition), Book IV (Succession) set rules on ownership, donations, sales, and inheritance.
Family Code (EO 209)	Defines property regimes of spouses, parental authority, legitimes of compulsory heirs (children, spouse, parents).
Property Registration Decree (PD 1529)	Provides the Torrens system procedures for registration and transfer of titled land.
National Internal Revenue Code (as amended by TRAIN Act, CREATE, FIRESHIELD, etc.)	Imposes donor’s tax, estate tax, capital gains tax (CGT), documentary stamp tax (DST) and prescribes BIR procedures/forms.
Local Government Code (RA 7160)	Empowers provinces/cities to levy transfer and real property taxes.
Special Laws	Condominium Act (RA 4726), Indigenous Peoples’ Rights Act (RA 8371), CARP/CARPER, Agrarian Laws, Trust Receipts Law, Anti‑Dummy Law, Anti‑Money Laundering Act, etc.

2. Main Modes of Transferring Property to Children

2.1 Donation inter vivos (during the parent’s lifetime)

Instrument: Notarized Deed of Donation describing the property, the intention to donate, and the child’s acceptance (mandatory; parents or a guardian accept on behalf of a minor).
Formalities:
- Must be in a public instrument (Art. 749, Civil Code).
- For real property, a detailed technical description is required and the deed must be annotated on the title and recorded with the Register of Deeds (RD).
Tax Impact:
- Donor’s tax: 6 % of net gifts above ₱250,000 aggregate per calendar year.
- DST: 1.5 % of the higher of zonal value or fair market value (FMV).
- Transfer tax: Up to 0.75 % of zonal/FMV (varies by LGU).
- Registration fees: ~ 0.25 % of property value + IT fee.
Notes & Pitfalls:
- Donations infringing the legitime of compulsory heirs are reducible.
- The Family Home may be donated only with spousal consent.
- Parents remain liable for real‑property tax until RD transfer is completed.

2.2 Sale to Children (Deed of Absolute Sale)

Parents sometimes sell at nominal value to avoid donor’s tax; BIR will assess taxes based on the higher of stated price, zonal value, or FMV.

Taxes:
- Capital Gains Tax (CGT): 6 % on the higher of zonal value or gross selling price (GSP).
- DST: 1.5 % of same base.
- Transfer tax & fees as above.
Advantages: CGT and DST are computed only once, unlike donor’s tax that may recur annually for multiple parcels.
Watch‑outs: If the sale is simulated (price not paid) the BIR may reclassify it as a donation and impose donor’s tax plus surcharges.

2.3 Succession mortis causa (after death)

2.3.1 With a Will (Testate Succession)

Instruments: Notarial or holographic will, probated in court.
Estate Tax: 6 % of net estate (gross estate minus deductions: standard ₱5 million, family home up to ₱10 million, medical expenses, debts, etc.).
Process:
1. Secure TIN and BIR Forms 1801/2000-OT.
2. File estate tax return within 1 year from death (extendable for cause).
3. Pay estate tax or avail of installment (up to 2 years no interest, up to 10 years with interest).
4. Obtain Electronic Certificate Authorizing Registration (eCAR) per property.
5. Register new titles at RD.

2.3.2 Without a Will (Intestate Succession)

Same tax rules. Heirs execute an Extrajudicial Settlement (EJS) if:

No will, no outstanding debts, or debts are paid; and
All heirs are of legal age or represented.

EJS must be:

In a public instrument or court‑approved petition;
Published once a week for 3 consecutive weeks in a newspaper of general circulation;
Followed by BIR clearance and RD registration.

2.4 Partition During Lifetime

Parents and children co‑owning property may execute a Deed of Partition. If consideration is unequal, excess portions are treated as donations subject to donor’s tax.

2.5 Creation of a Trust

Parents can create an irrevocable trust naming the child beneficiary. Title vests in the trustee; beneficial ownership transfers without triggering CGT. Donor’s tax still applies at 6 % on the net transfer to the trust.

2.6 Incorporation or Family Holding Company

Real property may be transferred to a family corporation in exchange for shares. This can defer CGT if qualifying as a tax‑free exchange under Sec. 40(C)(2), NIRC, but donor’s tax may arise if share values are skewed.

3. Taxation Summary

Tax	Rate	Triggering Event	Responsible Party	Deadline
Donor’s Tax	6 % on net gifts above ₱250 k per year	Execution of Deed of Donation	Donor	30 days after donation
Estate Tax	6 % on net estate	Death of decedent	Heirs/Executor	1 year after death
Capital Gains Tax	6 % of higher of ZV or GSP	Sale/Exchange of real property classified as capital asset	Seller	30 days after sale
Documentary Stamp Tax	1.5 % of base value	Sale or donation of real property	Seller/Donor	On or before registration
Transfer Tax (LGU)	≤ 0.75 %	RD registration	Buyer/Donee/Heirs	Within 60 days of notarization (varies)
Registration Fees	0.25 % + IT fee	RD registration	Transferee	Upon registration

ZV = BIR Zonal Value; GSP = Gross Selling Price; FMV = Fair Market Value from city assessor.

4. Capacity, Consent, and Restrictions

Children as Minors (below 18): May own property but cannot sell, mortgage, or lease it without court approval (Rule 96, Rules of Court). Acceptance of donations is through parents/guardians.
Legitime Protection: Parents may dispose of only the free portion (½ if legitimate children survive). Excess donations/sales may be reduced upon action by compulsory heirs.
Conjugal/Community Property: Spousal consent needed for any disposition of community assets (Art. 96, 124, Family Code).
Foreign‑Owned Property: Children with dual citizenship may own land; purely foreign nationals, even if children, cannot inherit land except by hereditary succession but must dispose of it within a reasonable time.
Agricultural/Heritage Land: CARP retention limits (5 ha per parent + 3 ha collectively for children) apply to transfers.
Family Home: Exempt from execution except specific cases; transfer must keep value cap (₱10 million estate deduction) in mind.

5. Step‑by‑Step Transfer Checklist (Donation Example)

Due Diligence: Verify clean title (Torrens), absence of liens, tax declarations, updated real‑property tax receipts.
Prepare Deed of Donation (public instrument).
Notarize the deed; secure two (2) witnesses.
Secure BIR Clearance:
- Pay donor’s tax (BIR Form 1800) and DST (BIR Form 2000‑OT).
- Get eCAR.
Pay Local Transfer Tax at city/municipal treasurer.
Register at RD: Present original title, notarized deed, eCAR, transfer tax receipt, tax clearances. RD cancels old title, issues new TCT/CCT in child’s name.
Update Tax Declaration at the Assessor’s Office.

(For sale, substitute Form 1706 for CGT and Form 2000 for DST; for inheritance, start with death certificate and estate tax return.)

6. Advanced Estate‑Planning Tools

Tool	Highlights	Pros	Cons
Living Trust / Family Trust	Trustee holds property for minors until specified age	Control distribution; privacy; probate avoided	Setup costs; donor’s tax due now
Insurance‑funded Buy‑Sell or Redemption	Life insurance proceeds fund buyout among heirs	Liquidity for estate taxes	Premium costs; CGT may still arise
Family Corporation / Real Estate Investment Trust (REIT)	Property exchanged for shares; profits distributed as dividends	Succession via shares; limited liability; estate tax on shares easier to pay	Ongoing SEC/BIR compliance; potential VAT/CGT if conditions not met
Usufruct Reservation	Parent donates bare ownership, retains usufruct	Parent keeps use/income; low immediate tax	Double transfer taxation when usufruct ends

7. Common Pitfalls & How to Avoid Them

Incomplete Paper Trail: Missing eCAR or tax receipts delays RD transfer—keep duplicates.
Ignoring Legitimes: Over‑donation or unequal partition breeds disputes; do a legitime computation first.
Late Tax Filing: Surcharge (25 %), interest (12 % p.a.), compromise penalties apply.
Wrong Property Classification: Misdeclared “capital asset” vs. “ordinary asset” alters tax exposure; align with taxpayer’s business purpose.
Undervalued Sale: BIR will use zonal/FMV, not book value, and may investigate for tax evasion.
Minor Children as Vendors: Courts must approve, otherwise sale is voidable.
Over‑reliance on Simulated Sales: If consideration is uncollected, the donor’s tax + penalties can be harsher than straightforward donation.

8. Frequently Asked Questions

Can I donate in installments to stay below ₱250 k donor’s‑tax exemption? – Yes, but aggregation applies per calendar year; splitting a single property into parts solely to dodge tax invites scrutiny.
Is there VAT on land transfer? – Generally no VAT on sale of residential land; VAT may apply to buildings sold by VAT‑registered sellers or to commercial properties.
How long does BIR processing take? – Average 2–8 weeks in Metro Manila; faster in provinces. Rely on complete documents and online queue booking (eCAR System).
Must my OFW child appear personally? – A Special Power of Attorney (SPA) authenticated by a Philippine consulate allows representation.
What if the property is untitled? – First secure a title via judicial or administrative legalization (e.g., DENR Free Patent, cadastral proceedings). Transfer without a title is risky.

9. Practical Recommendations

Start Estate Planning Early: Lower property values today mean lower taxes; TRAIN’s 6 % donor’s tax creates predictable costs.
Keep Records Digitally: Scan titles, tax receipts, IDs, and BIR filings; attach QR‑coded eCAR print‑outs.
Synchronize Family Agreements: Minutes of family meetings reduce later contestations.
Update Titles After Marriage Changes: Annulment or death of a spouse may require annotation before any transfer to children.
Consult Multidisciplinary Professionals: Lawyer for conveyancing; tax consultant for BIR compliance; surveyor for re‑lotting; broker for valuation.

10. Conclusion

Transferring property to your children in the Philippines can be simple when properly planned, yet costly and contentious if mishandled. The optimal path—donation, sale, trust, or testamentary succession—depends on family circumstances, property type, and tax posture. Secure expert advice, observe statutory formalities, and, above all, respect the legitime rights of all heirs to ensure a smooth and lawful transition of wealth across generations.

Transferring Property Ownership to Children in the Philippines