Abelardo “Billy” Cortez l February 2, 2023 l Manila Bulletin
Estate planning is the process of determining what you want to happen to your estate, which includes all the rights, tittles, and interest that you have in the property you own.
I remember way back during our San Beda Law classes on Wills and Succession, our then law professor, Supreme Court Justice Jose P. Vitug (he later became chairman of the Philippine Stock Exchange) would jokingly remind us to do proper estate planning, or else, if we have three children, we’ll end up with four, if we don’t do any planning at all. The fourth is called government.
The theory supporting this is that since your wealth and property have been acquired and accumulated under the government’s protection, it is but right the government collect its share. It isn’t much of a stretch, though we cherish your right to think otherwise.
Being the start of the year, this is the best time as any to start making inventory of all your assets and liabilities, wherever located, including their updated valuations. It’s always a smart move to do this, planning ahead for the preservation and proper transfer of your wealth to your heirs. This is always a sensitive issue so you must give it time and attention as well as be sure to tell your intended beneficiaries what you’re doing, why you’re doing it, and that it’s your call as the estate owner.
It’s always critical to know the roadmap on how you decide how your assets will be divided after you’re gone or maybe while you are still here. The only alternative is to let the government do it for you, something most people don’t want to happen. Keep this in mind. If your estate is large enough, taxes will need to be paid upon your death. You must plan for the payment and be sure you have enough liquid assets to avoid forced sale of your assets. Often this is avoided with proper estate planning.
Clearly, there are three main objectives of estate planning: (a)Preserve the wealth that has been acquired; (b)use the wealth as desired during your lifetime; (c) then pass on to your heirs the greatest possible amount of that wealth in appropriate form after your death. By understanding basic definitions and characteristics of estate planning, you can begin to learn more and take control of your assets and finances.
Precisely, you should seriously figure out your long-term needs and be realistic in assessing your personal situation when preparing an estate plan, the accumulation of your wealth, how you want to serve its value, and finally how you want to distribute that after your death. This is an important point to ponder on.
By the way, ordinary people are not really clear of certain words usually employed in estate planning discussions. Some of those terms are the following: (a) Probate is the process of providing who is entitled to get the property if the person wo died did not make that clear before his or her death; (b)testator (male) and testatrix (female) refer to people who leave a valid will upon their death; (c) intestacy is what an estate is called if there is no will. Partial intestacy means the will did not effectively dispose of all the assets. That is not, of course, to suggest that you do away with any estate planning.
As it is now, computing the estate tax is no longer that complicated. Before the estate tax rate was computed based on the value of the net estate of the decedent. Now, under the new TRAIN law, the estate will now be subject only to a flat rate of 6 percent. Also under the old Tax Rule, only with withdrawals up to Php20,000 were allowed, but the new Train law has now increased allowable withdrawals from the deceased person’s accounts to any amount subject only to a 6-percent final withholding tax.
Let me share with you the other option presently popular among American billionaires which is to donate a big portion of their wealth to qualified charitable foundations and leave just enough for your children. The case of billionaire Warren Buffett, one of the world’s most successful investors, is a sterling example of this option. Let me quote from author Sandy Kraemer’s Estate Planner book, “The two sons and the daughter of Omaha investor Warren Buffett were raised with great wealth. Buffett, the chairman of Berkshire Hathaway, is worth billions of dollars. But the Buffett children know they can expect to receive only few hundred thousand dollars from their father’s estate. Most of Buffett’s fortune will go to his charitable foundation.”
Buffett is withholding larger bequests to his children because he thinks setting children up “with a lifetime supply of food stamps just because they came out of the right womb” is a harmful and “antisocial act”. My kids are going to carve out their own place in the world, and they know I’m for them whatever they want on their own, not because of his money. So, he’s leaving them “enough so that they would feel they could do anything, but not so much that they could do nothing.’’
At the end of the day, you will appreciate doing an estate planning with all your best intentions and instincts. When there’s a will, there’s a way.
*** Atty. Abelardo “Billy” Cortez is former FINEX national president and chairman of FINEX Foundation, former co-chairman of the Philippine Capital Markets Development Council and currently member of FINEX Ethics Committee. He is presently board director and executive committee member of the International Association of Financial Executives Institutes (IAFEI).