Planning Your Estate Strategically By Donating Real Property In Valenzuela City
Liquidizing real property is considered taboo in the Filipino culture, despite the acceptance that such possession cannot be taken to grave. There is always the sentimental value of things that keep people from arranging the transfer of properties before death. However, what most people do not realize is the tax implications of doing so.
The ideal strategy is to donate and transfer the properties in Valenzuela City gradually. This process limits the donor’s taxes in comparison to the possibility of a higher estate tax at the time of death which pairs off with the necessity to move around all of the properties as the original owner has already passed away. In another common case, the deceased has gone through so much medical procedures and costs prior to death, resulting to depletion of monetary resources plus the urgency to arrange estate tax payments. This usually results to the family members selling off the properties in Valenzuela City at lower values due to time pressure. A more depressing scenario the deceased can probably think about is the heirs fighting over their shares of the properties, which could have been avoided if the distribution has been agreed and finalized properly prior to the owner’s demise.
Technically, a donor’s tax is one that is imposed on a property transferred to another person in the form of a gift. This is based on Sections 98 to 104 of the Tax Code. The tax applied is based on the full value of the total gifts transferred in a year’s time. This value is calculated based on the FMV or Fair Market Value of the gift at the time it is given. For real properties, the FMV serves as the taxable base, and this FMV is based on which is higher between the Zonal Value that the Commissioner of Internal Revenue determines or the FMV presented in the most recent values determined and declared by the city and provincial assessor. In their absence, the Fair Market Value indicated in the tax declaration upon giving the gift will serve as the taxable base.
Considering all these provisions for donor’s tax, it is definitely good to opt for graduated donation of one’s real properties in Valenzuela City instead of one-time transfer after an owner’s death.