INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE 2nd Sem

Department of Accountancy 2021

TRANSFER AND BUSINESS TAXATION

MODULE 1 – SUCCESSION

SUCCESSION
Governing Law:
Republic Act No. 386 or the Civil Code of the Philippines which is effective August 1, 1950
Modes of Acquiring Ownership:
• Occupation
• Law
• Donation
• Tradition
• Intellectual Creation
• Prescription
• Succession
Definition of Terms:
1. Succession -- is a mode of acquisition by virtue of which the property, rights and obligations
to the extent of the value of the inheritance, of a person are transmitted through his death
to another or others either by his will or by operation of law. (Article 774)
2. Decedent is the general term applied to the person whose property is transmitted through
succession, whether or not he left a will. If he left a will, he is also called the testator. (Art
775)
3. An heir is a person called to the succession either by the provision of a will or byoperation
of law. Devisees and legatees are persons to whom gifts of real and personal property are
respectively given by virtue of a will. (Art. 782)
4. The inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death. (Art. 776). The inheritance of a person includes not only the
property and the transmissible rights and obligations existing at the time of his death, but
also those which have accrued thereto since the opening of the succession. (Article 781)
5. Legitime is that part of the testator's property which he cannot dispose of because the law
has reserved it for certain heirs who are, therefore, called compulsory heirs. (Art. 886)
6. Compulsory heirs (Art. 887):
a. Legitimate children and descendants, with respect to their legitimate parents and
ascendants
b. In default of the foregoing, legitimate parents and ascendants, with respect to
their legitimate children and descendants
c. The widow or widower
d. Illegitimate Children* (filiation must be proved)
7. An executor (male) or executrix (female) is the person named in a will to perform these
duties.
8. An administrator (male) or administratrix (female) is the person appointed by the probate
court to complete these tasks when there is no will or no executor or executrix has been
named in the will.
9. Accrual - The rights to the succession are transmitted from the moment of the death of
the decedent. (Art. 777). Payment of taxes accrues from the time of death of the decedent.
(RR 2-2003, as amended)

Kinds of Succession:
1. Testamentary
2. Legal or intestate
3. Mixed

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As to effectivity:
1. Inter vivos
2. Mortis Causa
Testamentary Succession – is that which results from the designation of an heir, made in a will
executed in the form prescribed by law. (Art. 779)
Legal or Intestate Succession
1. If a person dies without a will
2. With a void will
3. With a will which has subsequently lost its validity
4. When the will does not institute an heir to, or dispose of all the property belonging to the
testator
5. If the suspensive condition attached to the institution of heir does not happen or is not
fulfilled
6. If the heir dies before the testator
7. If the heir repudiates the inheritance, there being no substitution, and no right of
accretion takes place;
8. When the heir instituted is incapable of succeeding, except in cases provided in the Civil
Code. (Art. 960)
Mixed Succession - is that effected partly by will and partly by operation of law. (Art. 780)
TESTAMENTARY SUCCESSION
Wills in General –

A will is an act whereby a person is permitted, with the formalities prescribed by law, to control to
a certain degree the disposition of this estate, to take effect after his death. (Art. 783)

The making of a will is a strictly personal act; it cannot be left in whole or in part to the discretion
of a third person, or accomplished through the instrumentality of an agent or attorney. (Art. 784)

The testator may entrust to a third person the distribution of specific property or sums of money
that he may leave in general to specified classes or causes, and also the designation of the persons,
institutions or establishments to which such property or sums are to be given orapplied. (Art. 786)
The testator may not make a testamentary disposition in such manner that another person has
to determine whether or not it is to be operative. (Art. 787)

When there is an imperfect description, or when no person or property exactly answers the
description, mistakes and omissions must be corrected, if the error appears from the context of
the will or from extrinsic evidence, excluding the oral declarations of the testator as to his
intention; and when an uncertainty arises upon the face of the will, as to the application of any of
its provisions, the testator's intention is to be ascertained from the words of the will, taking
into consideration the circumstances under which it was made, excluding such oral declarations.
(Art. 789)

Testamentary Capacity and Intent

Article 796. All persons who are not expressly prohibited by law may make a will.
Article 797. Persons of either sex under eighteen years of age cannot make a will.
Article 798. In order to make a will it is essential that the testator be of sound mind at the time of
its execution.
Article 799. To be of sound mind, it is not necessary that the testator be in full possession of all
his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by
disease, injury or other cause. It shall be sufficient if the testator was able at the time of making
the will to know the nature of the estate to be disposed of, the proper objects of his bounty, and

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the character of the testamentary act.

Article 800. The law presumes that every person is of sound mind, in the absence of proof to the
contrary. The burden of proof that the testator was not of sound mind at the time of making his
dispositions is on the person who opposes the probate of the will; but if the testator, one month,
or less, before making his will was publicly known to be insane, the person who maintains the
validity of the will must prove that the testator made it during a lucid interval.
Article 801. Supervening incapacity does not invalidate an effective will, nor is the will of an
incapable validated by the supervening of capacity.
Article 802. A married woman may make a will without the consent of her husband, and without
the authority of the court.
Article 803. A married woman may dispose by will of all her separate property as well as her
share of the conjugal partnership or absolute community property
Forms of Wills
Article 804. Every will must be in writing and executed in a language or dialect known to the
testator.

NOTARIAL WILL (ART 805)

Article 805. Every will, other than a holographic will, must be subscribed at the end thereof by
the testator himself or by the testator's name written by some other person in his presence, and
by his express direction, and attested and subscribed by three or more credible witnesses in the
presence of the testator and of one another.
The testator or the person requested by him to write his name and the instrumental witnesses of
the will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left
margin, and all the pages shall be numbered correlatively in letters placed on the upper part of
each page. The attestation clause xxx.

Article 806. Every will must be acknowledged before a notary public by the testator and the
witnesses.
Article 807. If the testator be deaf, or a deaf-mute, he must personally read the will, if able to do
so; otherwise, he shall designate two persons to read it and communicate to him, in some
practicable manner, the contents thereof.
Article 808. If the testator is blind, the will shall be read to him twice; once, by one of the
subscribing witnesses, and again, by the notary public before whom the will is acknowledged.
Article 809. In the absence of bad faith, forgery, or fraud, or undue and improper pressure and
influence, defects and imperfections in the form of attestation or in the language used therein
shall not render the will invalid if it is proved that the will was in fact executed and attested in
substantial compliance with all the requirements of article 805.

HOLOGRAPHIC WILL (ART. 810)

Article 810. A person may execute a holographic will which must be entirely written, dated, and
signed by the hand of the testator himself. It is subject to no other form, and may be made in or
out of the Philippines, and need not be witnessed.

Article 812. In holographic wills, the dispositions of the testator written below his signature must
be dated and signed by him in order to make them valid as testamentary dispositions
Article 811. In the probate of a holographic will, it shall be necessary that at least one witness
who knows the handwriting and signature of the testator explicitly declare that the will and the
signature are in the handwriting of the testator. If the will is contested, at least three of such
witnesses shall be required. In the absence of any competent witness referred to in the
preceding paragraph, and if the court deem it necessary, expert testimony may be resorted to.
Article 813. When a number of dispositions appearing in a holographic will are signed without

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being dated, and the last disposition has a signature and a date, such date validates the
dispositions preceding it, whatever be the time of prior dispositions.
Article 814. In case of any insertion, cancellation, erasure or alteration in a holographic will, the
testator must authenticate the same by his full signature.
Article 815. When a Filipino is in a foreign country, he is authorized to make a will in any of the
forms established by the law of the country in which he may be. Such will may be probated in
the Philippines
Article 818. Two or more persons cannot make a will jointly, or in the same instrument, either for
their reciprocal benefit or for the benefit of a third person.
Article 819. Wills, prohibited by the preceding article, executed by Filipinos in a foreign country
shall not be valid in the Philippines, even though authorized by the laws of the country where
they may have been executed.
Witnesses to Wills
Article 820. Any person of sound mind and of the age of eighteen years or more, and not blind,
deaf or dumb, and able to read and write, may be a witness to the execution of a will mentioned
in Article 805 of this Code.
Article 821. The following are disqualified from being witnesses to a will:
1. Any person not domiciled in the Philippines;
2. Those who have been convicted of falsification of a document, perjury or false testimony.
Article 822. If the witnesses attesting the execution of a will are competent at the time of
attesting, their becoming subsequently incompetent shall not prevent the allowance of the will.
Article 823. If a person attests the execution of a will, to whom or to whose spouse, or parent, or
child, a devise or legacy is given by such will, such devise or legacy shall, so far only as concerns
such person, or spouse, or parent, or child of such person, or any one claiming under such
person or spouse, or parent, or child, be void, unless there are three other competent witnesses
to such will. However, such person so attesting shall be admitted as a witness as if such devise or
legacy had not been made or given.
Revocation of Wills and Testamentary Dispositions
Article 828. A will may be revoked by the testator at any time before his death. Any waiver or
restriction of this right is void.
Article 829. A revocation done outside the Philippines, by a person who does not have his
domicile in this country, is valid when it is done according to the law of the place where the will
was made, or according to the law of the place in which the testator had his domicile at the time;
and if the revocation takes place in this country, when it is in accordance with the provisions of
this Code.
Article 830. No will shall be revoked except in the following:
1. By implication of law; or
2. By some will, codicil, or other writing executed as provided in case of wills; or
3. By burning, tearing, cancelling, or obliterating the will with the intention of revoking it, by
the testator himself, or by some other person in his presence, and by his express
direction. If burned, torn, cancelled, or obliterated by some other person, without the
express direction of the testator, the will may still be established, and the estate
distributed in accordance therewith, if its contents, and due execution, and the fact of its
unauthorized destruction, cancellation, or obliteration are established according to the
Rules of Court.
Probate of Wills (Allowance and Disallowance of Wills)
Article 838. No will shall pass either real or personal property unless it is proved and allowed in
accordance with the Rules of Court. The testator himself may, during his lifetime, petition the

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court having jurisdiction for the allowance of his will. In such case, the pertinent provisions of the
Rules of Court for the allowance of wills after the testator's a death shall govern. xxx. Subject to
the right of appeal, the allowance of the will, either during the lifetime of the testator or after his
death, shall be conclusive as to its due execution.
Article 839. The will shall be disallowed in any of the following cases:
1. If the formalities required by law have not been complied with
2. If the testator was insane, or otherwise mentally incapable of making a will, at the time of
its execution
3. If it was executed through force or under duress, or the influence of fear, or threats
4. If it was procured by undue and improper pressure and influence, on the part of the
beneficiary or of some other person
5. If the signature of the testator was procured by fraud
6. If the testator acted by mistake or did not intend that the instrument he signed should be
his will at the time of affixing his signature thereto
Institution of Heir
Article 840. Institution of heir is an act by virtue of which a testator designates in his will the
person or persons who are to succeed him in his property and transmissible rights and
obligations.
Article 841. A will shall be valid even though it should not contain an institution of an heir, or
such institution should not comprise the entire estate, and even though the person so instituted
should not accept the inheritance or should be incapacitated to succeed. In such cases the
testamentary dispositions made in accordance with law shall be complied with and the
remainder of the estate shall pass to the legal heirs
Article 843. The testator shall designate the heir by his name and surname, and when there are
two persons having the same names, he shall indicate some circumstance by which the
instituted heir may be known. Even though the testator may have omitted the name of the heir,
should he designate him in such manner that there can be no doubt as to who has been
instituted, the institution shall be valid.
Article 844. An error in the name, surname, or circumstances of the heir shall not vitiate the
institution when it is possible, in any other manner, to know with certainty the person instituted.
If among persons having the same names and surnames, there is a similarity of circumstances in
such a way that, even with the use of other proof, the person instituted cannot be identified,
none of them shall be an heir.
Article 845. Every disposition in favor of an unknown person shall be void, unless by some event
or circumstance his identity becomes certain. However, a disposition in favor of a definite class
or group of persons shall be valid.
Article 846. Heirs instituted without designation of shares shall inherit in equal parts.
Article 854. The preterition or omission of one, some, or all of the compulsory heirs in the direct
line, whether living at the time of the execution of the will or born after the death of the
testator, shall annul the institution of heir; but the devises and legacies shall be valid insofar as
they are not inofficious. If the omitted compulsory heirs should die before the testator, the
institution shall be effectual, without prejudice to the right of representation.
Article 855. The share of a child or descendant omitted in a will must first be taken from the part
of the estate not disposed of by the will, if any; if that is not sufficient, so much as may be
necessary must be taken proportionally from the shares of the other compulsory heirs.
Article 856. A voluntary heir who dies before the testator transmits nothing to his heirs. A
compulsory heir who dies before the testator, a person incapacitated to succeed, and one who
renounces the inheritance, shall transmit no right to his own heirs except in cases expressly
provided for in this Code
Disposition of Estate
Article 842. One who has no compulsory heirs may dispose by will of all his estate or any part of

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it in favor of any person having capacity to succeed.

One who has compulsory heirs may dispose of his estate provided he does not contravene the
provisions of this Code with regard to the legitime of said heirs.
Substitution of Heirs
Article 857. Substitution is the appointment of another heir so that he may enter into the
inheritance in default of the heir originally instituted.
Conditional Testamentary Dispositions and Testamentary Dispositions With a Term
Article 871. The institution of an heir may be made conditionally, or for a certain purpose or
cause.
Article 872. The testator cannot impose any charge, condition, or substitution whatsoever upon
the legitimes prescribed in this Code. Should he do so, the same shall be considered as not
imposed.
Article 873. Impossible conditions and those contrary to law or good customs shall be considered
as not imposed and shall in no manner prejudice the heir, even if the testator should otherwise
provide.
Disinheritance
Article 915. A compulsory heir may, in consequence of disinheritance, be deprived of his
legitime, for causes expressly stated by law.
Article 916. Disinheritance can be effected only through a will wherein the legal cause therefor
shall be specified.
Article 917. The burden of proving the truth of the cause for disinheritance shall rest upon the
other heirs of the testator, if the disinherited heir should deny it.
Article 918. Disinheritance without a specification of the cause, or for a cause the truth of which,
if contradicted, is not proved, or which is not one of those set forth in this Code, shall annul the
institution of heirs insofar as it may prejudice the person disinherited; but the devises and
legacies and other testamentary dispositions shall be valid to such extent as will not impair the
legitime.
Common Causes for Disinheritance
Children and Descendants Parents or Spouse
Ascendants
When a child or descendant When the parent or When the spouse has been
has been found guilty of an ascendant has been convicted convicted of an attempt
attempt against the life of the of an attempt against the life against the life of the testator,
testator, his or her spouse, of the testator, his or her his or her descendants, or
descendants, or ascendants spouse, descendants, or ascendants
ascendants
When a child or descendant When the parent or When the spouse has
has accused the testator of a ascendant has accused the accused the testator of a
crime for which the law testator of a crime for which crime for which the law
prescribes imprisonment for the law prescribes prescribes imprisonment of
six years or more, if the imprisonment for six years or six years or more, and the
accusation has been found more, if the accusation has accusation has been found to
groundless been found to be false be false
When a child or descendant When the parent or
has been convicted of ascendant has been convicted
adultery or concubinage with of adultery or concubinage
the spouse of the testator with the spouse of the
testator
When a child or descendant When the parent or When the spouse by fraud,

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by fraud, violence, ascendant by fraud, violence, violence, intimidation, or

intimidation, or undue intimidation, or undue undue influence cause the
influence causes the testator influence causes the testator testator to make a will or to
to make a will or to change to make a will or to change change one already made
one already made one already made
A refusal without justifiable Unjustifiable refusal to
cause to support the parent support the children or the
or ascendant who disinherits other spouse.
such child or descendant
Other Causes for Disinheritance
Children and Descendants Parents or Spouse
Ascendants
Maltreatment of the testator When the parents have When the spouse has given
by word or deed, by the child abandoned their children or grounds for the loss of
or descendant induced their daughters to parental authority
live a corrupt or immoral life,
or attempted against their
virtue
When a child or descendant The loss of parental authority When the spouse has given
leads a dishonorable or for causes specified in this cause for legal separation
disgraceful life Code
Conviction of a crime which The refusal to support the
carries with it the penalty of children or descendants
civil interdiction without justifiable cause

An attempt by one of the

parents against the life of the
other, unless there has been a
reconciliation between them.
Disinheritance
Article 922. A subsequent reconciliation between the offender and the offended person deprives
the latter of the right to disinherit, and renders ineffectual any disinheritance that may have
been made.
Article 923. The children and descendants of the person disinherited shall take his or her place
and shall preserve the rights of compulsory heirs with respect to the legitime; but the
disinherited parent shall not have the usufruct or administration of the property which
constitutes the legitime.
Relationship
Article 963. Proximity of relationship is determined by the number of generations. Each
generation forms a degree.
Article 964. A series of degrees forms a line, which may be either direct or collateral. A direct line
is that constituted by the series of degrees among ascendants and descendants. A collateral line
is that constituted by the series of degrees among persons who are not ascendants and
descendants, but who come from a common ancestor
Article 965. The direct line is either descending or ascending. The former unites the head of the
family with those who descend from him. The latter binds a person with those from whom he
descends.
Article 966. In the line, as many degrees are counted as there are generations or persons,
excluding the progenitor. In the direct line, ascent is made to the common ancestor. Thus, the
child is one degree removed from the parent, two from the grandfather, and three from the
great-grandparent. In the collateral line, ascent is made to the common ancestor and then

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descent is made to the person with whom the computation is to be made. Thus, a person is two
degrees removed from his brother, three from his uncle, who is the brother of his father, four
from his first cousin, and so forth.
Article 967. Full-blood relationship is that existing between persons who have the same father
and the same mother. Half-blood relationship is that existing between persons who have the
same father, but not the same mother, or the same mother, but not the same father.
Blood Lines
Direct Line Collateral Line

Descending / Ascending

Order of Succession in Legal or Intestate Succession

• Descending Direct Line
• Ascending Direct Line
• Illegitimate Children
• Surviving Spouse
• Collateral Relatives
• The State
Incapacity to Succeed
Article 1027. The following are incapable of succeeding:
1. The priest who heard the confession of the testator during his last illness, or the minister
of the gospel who extended spiritual aid to him during the same period;
2. The relatives of such priest or minister of the gospel within the fourth degree, the church,
order, chapter, community, organization, or institution to which such priest or minister
may belong;
3. A guardian with respect to testamentary dispositions given by a ward in his favor before
the final accounts of the guardianship have been approved, even if the testator should

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die after the approval thereof; nevertheless, any provision made by the ward in favor of
the guardian when the latter is his ascendant, descendant, brother, sister, or spouse,
shall be valid;
4. Any attesting witness to the execution of a will, the spouse, parents, or children, or any
one claiming under such witness, spouse, parents, or children;
5. Any physician, surgeon, nurse, health officer or druggist who took care of the testator
during his last illness;
6. Individuals, associations and corporations not permitted by law to inherit.
Incapacity to Succeed by Reason of Unworthiness
Article 1032. The following are incapable of succeeding by reason of unworthiness:
1. Parents who have abandoned their children or induced their daughters to lead a corrupt
or immoral life, or attempted against their virtue
2. Any person who has been convicted of an attempt against the life of the testator, his or
her spouse, descendants, or ascendants
3. Any person who has accused the testator of a crime for which the law prescribes
imprisonment for six years or more, if the accusation has been found groundless
4. Any heir of full age who, having knowledge of the violent death of the testator, should fail
to report it to an officer of the law within a month, unless the authorities have already
taken action; this prohibition shall not apply to cases wherein, according to law, there is
no obligation to make an accusation
5. Any person convicted of adultery or concubinage with the spouse of the testator;
6. Any person who by fraud, violence, intimidation, or undue influence should cause the
testator to make a will or to change one already made;
7. Any person who by the same means prevents another from making a will, or from
revoking one already made, or who supplants, conceals, or alters the latter's will;
8. Any person who falsifies or forges a supposed will of the decedent.
END

Reference: Republic Act No. 386 or the Civil Code of the Philippines

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