Several fellow Expats have told me that you can’t avoid probate in the Philippines. That is not necessarily true. The problem is that Philippine law requires that a certain percentage of your Philippine estate has to go to designated heirs, which may include gifts that you have made prior to your death. However, there is a BUT.
The first BUT, your non-Philippine property located in the U.S., England, Germany, etc. is not subject to Philippine probate rules, unless you make such property subject to the laws of the Philippines. Another BUT, if your Philippine property is acquired by your trust, the trust assets are not subject to probate in the Philippines, except for the possible pull back rules of the compulsory heirs rules. As a result, the trust assets are not subject to the Philippine compulsory heirs rules.
To deal with the compulsory heirs rules, you need to understand how estates are distributed in the Philippines. There are basically three types of heirs- voluntary heirs that are named in your will, compulsory heirs who succeed by force of law to some predetermined portion of the estate, and legal or intestate heirs who succeed to the estate of a decedent that dies without a valid will.
As a general rule, one half of the estate is always reserved for primary and secondary compulsory heirs. The only way to deprive such heirs is by disinheritance properly effected, which is not that easy to do. Therefore the issue is that you can’t avoid probate. The problem is that part of your Philippine estate has to go to compulsory heirs, if you allow your estate to be subject to the estate distribution rules of the Philippines.
There are points to keep in mind when dealing with the force heirship rules. First, the force heirship rules only apply to part of your estate. Secondly, you can develop a plan to work around the force heirship rules. Third, there is no rule that states you can’t avoid probate in the Philippines.
When it comes to estate planning to protect yourself and family, don’t always accept the quick answer- it may not be correct. Ask why and is there another way to do what you want to do. With most rules of law, there is an exception to the general rule. That is why it is called the general rule, If the general rule is blocking what you want to do, look for the exception which is often it is there in the fine print. If you don’t ask, you may never learn that there is an exception or another way to do what you want to do.
The bottom line, you have worked hard to acquire your estate.
Take the time to understand the Philippine rules applicable to you and your estate, and how you can mitigate or avoid the impact of the compulsory heirs on your estate. The best time to do this is before you become a resident of the Philippines. Only you can do this. It is highly unlikely that someone will come running up to you on the street with a plan for you.
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Author’s email: wolff2000@earthlink.net
