Most of us avoid thinking about estate tax. It sounds like something that applies to the very wealthy, and it comes bundled with a subject nobody enjoys.
But the rules changed a few years ago in a way that makes the basics worth knowing, because they affect ordinary families who own a home, some savings or a business.
I'm not a lawyer or a tax professional, and this is general information, not advice for your situation.
The headline numbers
Under the TRAIN Law, which applies to people who died on or after January 1, 2018:
- The estate tax is a flat 6% on the net estate.
- There is a standard deduction of ₱5 million for citizens and residents, up from ₱1 million before.
- The family home can be deducted up to ₱10 million, subject to the rules.
Before TRAIN, the tax was graduated and the deductions were smaller. The change meant that more estates fall below the point where any tax is due, but those above it still pay.
What "net estate" means
The tax isn't on everything you own. It's calculated on the net estate, which is, roughly, the value of the estate minus allowed deductions. Which items count, how they're valued and what can be deducted all matter, and details differ between assets.
Why it matters even for modest estates
Even if no tax is due, settling an estate involves paperwork: identifying assets, filing returns and transferring titles. Banks may hold accounts until the process is done. Property can't easily be sold or transferred until it is.
Families who haven't prepared often discover this at the worst moment, with funeral costs, hospital bills and the loss of the person's income all arriving together.
Where insurance fits
Life insurance is often used to give a family quick, accessible cash in that period. How insurance proceeds are treated for tax purposes depends on how the policy is set up, including who is named as beneficiary and whether the designation is revocable. This is a question for a lawyer or tax professional, and it's worth asking before the need arises, not after.
What you can do now
1. List what you own, with where the documents are. An account inventory does this. 2. Check titles and names. Is property in the right name? Are there unsettled issues from earlier generations? 3. Review your beneficiaries on policies and accounts. 4. Consider a will, and speak to a lawyer about it. 5. Keep some accessible cash, through savings or insurance, so the family isn't forced into a rushed sale. 6. Tell someone where it all is.
A cautious note
Tax rules change, and the right answer depends on the details. Treat the figures above as a map of the territory, not a calculation of your own case.
Sources: Philippine TRAIN Law (Republic Act 10963) and BIR Revenue Regulations No. 12-2018 as summarized by KPMG, PwC and Philippine law references (6% flat estate tax rate; ₱5 million standard deduction; ₱10 million family home deduction; effective for decedents who died on or after January 1, 2018). Consult a lawyer or tax professional for current rules and your own situation.
The free Life Ready Checklist at lifereadywithvenus.com has a page for writing down what you find, free and with no sign-up.
