Understanding Deed of Donation in the Philippines

Do you intend to transfer one of your properties to a family member? Or is a family member giving you their property? How are properties transferred between relatives?

In the Philippines, it is customary for parents to pass down property to their children during their lifetime as a form of either a gift or an inheritance from a previous generation. They sometimes do this so that the properties are transferred before they pass away.

For the purpose of this write-up, when we mention ‘property’ we are referring to real estate property or real estate in the Philippines.

There are different ways to donate your properties. Understanding deed of donation could be quite challenging. Just remember to read over all the details carefully.

Defining Deed of Donation or Contract of Donation

To understand the contract and deed in relation to donating properties, let us take a look at their definitions.

What is a Deed of Donation?

A Deed of Donation is a document that transfers the title of ownership of a property from one person (donor) to another (donee). This type of transfer does not require any consideration, meaning it is usually done free of charge. In most cases, donations between family members and close friends are made this way.

In certain cases, Philippine legislation requires that donations of (a) immovable property (e.g., land, house) and (b) movable property (e.g., jewelry, car) worth as much as ₱50,000.00 be in writing and notarized. As a result, certain donations cannot be made orally because they are not legally binding. A Deed of Donation in the Philippines can be used to fulfill the legal requirement for a written document.

What is a Contract of Donation?

In the Philippines, the Contract of Donation is a formal legal document that needs to be signed by both parties involved in the transaction. This document will act as an agreement between the donor and the donee. It should be noted that both parties will be asked to provide personal information such as their names, addresses, and contact details. A contract of donation can also be used if you want to donate some property or other item to someone else without any monetary value involved in exchange for something else.

Is there a Difference Between the Deed of Donation and Contract of Donation?

Both the Deed of Donation and Contract of Donation are legal documents in the Philippines that enable the transfer of ownership of property from one person or entity to another. However, there are still many differences between a Deed of Donation and a Contract of Donation.

First, a Deed of Donation is a public instrument, while the contract is a private instrument. This means that the former can be found in the registry or office which had jurisdiction over it and is open to public inspection. A private document on the other hand cannot be inspected by anyone except by those who were involved in it.

One important difference between these two documents is that a Deed of Donation only concerns real property such as land, estate, building structures, and all properties related to realty like trees, plants, animals, and all accessories attached to them. On the other hand, a Contract of Donation can either refer to real or personal properties such as jewelry collections, furniture sets, or cash including stocks and bonds among others.

In terms of flexibility when deciding how much possession period before transferring ownership, a Contract of Donation has an advantage because it allows you to choose when you want your property transferred from your name or entity’s name into another person or entity’s name or if you would want your ownership transferred immediately after signing this document without any conditions whatsoever unlike with Deed of Donation where you have no choice but for your ownership to be transferred immediately after signing unless otherwise stated with prior agreement from both parties involved in this deed.

Advantages and Disadvantages of a Deed of Donation

A Deed of Donation is a contract given as a gift to a recipient. This document is used for the transfer of a real estate or other personal properties. It’s typically not applicable if the donor wishes to give money since this requires the donation to be made by check or cash.

Like other legal documents, a Deed of Donation must be written in a formal language and signed by both parties in front of two witnesses, which can be anyone except the donor and donee.

A lawyer may be consulted if there are any additional questions regarding the requirements for this type of contract. A Deed of Donation is then delivered to the registrar’s office, where it should be registered within 90 days after signing it by both parties and their witnesses.

Once registered, no one can contest your donation anymore, even if you try to revoke it later on with another legal document called Deed of Revocation. Since it’s a public document, anyone has access to its information about who donated what property and who received them as donations.

Advantages and Disadvantages of Contract of Donation

The first disadvantage of a Contract of Donation is that it might not be allowed depending on the amount of donation. If the donation exceeds ₱50,000.00, then you are required to execute a Deed of Donation. In this case, this type of contract would not be applicable.

The second disadvantage of a Contract of Donation is that the donation might be revoked if you commit any kind of fraud or if your heirs are prejudiced in any way. This means that your heirs might not receive the thing that you donated should there be any issue regarding your property and its ownership.

The third disadvantage is that even though it has been stated in the contract, one cannot guarantee if the transfer of ownership actually happened with regard to the property being owned by the donor or donee. It will depend on whether or not a transfer certificate was executed.

In Conclusion

While both documents can be used to convey an interest in real property, it is important to choose the correct document when you transfer properties in the Philippines. You should keep in mind that a Deed of Donation is usually permanent and that a Contract of Donation can be revoked or modified, with or without an additional contract of revocation or modification.

Additionally, you should remember that the donor has no duty to inform the donee about any defects in the donated property. Lastly, if you are still unsure about whether you should use a Deed of Donation or a Contract of Donation in the Philippines, it is best to seek legal advice from an experienced lawyer.

What happens to a foreigner's assets when he dies in the Philippines?

A foreign citizen may settle in the Philippines and live here for years, finally passing away far from family in his home country.

When it comes time to settle his estate, his family abroad might not know how to begin searching for any assets he left behind in the Philippines, much less his intentions for those assets.

This article goes through basic considerations for how to locate, settle, and recover a foreigner's estate in the Philippines. It also takes up what happens if no heir ever claims the properties.

How do you find the assets in the Philippines?

There are some initial considerations to answer this question. First, the Philippine constitution reserves ownership of land to Filipino citizens. Except for former Filipino citizens, a foreigner cannot legally buy land in the Philippines. For this reason, the Philippine estate of foreign-born aliens typically cannot include land unless it was acquired by him through inheritance as from a spouse or a parent.

However, other kinds of real estate may be purchased by foreigners. Buildings, houses (excluding the land they are built on which may be leased instead), apartments and condominium units may be part of the Philippine estate of the deceased alien.

In searching for these properties, as well as bank account holdings, stocks, and bonds, the first place to look would be the papers of the deceased himself. Inquiries should also be made with his family and friends in the Philippines.

Further information may be obtained by conducting an investigation in the Philippines. Part of this investigation can done be by looking into public records to identify assets registered in the Philippines.

The ownership of shares of stock are recorded at the Securities and Exchange Commission. Searching SEC records does require that you should at least know what corporations the deceased had shares in. More digging would be needed if you don't have that information.

The Philippines has a real property registry system through which the registries of deeds of the local government units keep public records of the ownership of real property. The centralization of this information into a national database remains a work in progress so that checking property records typically requires legwork at the city or province where the property is actually located.

The information from the registries of deeds is parsed in relation to information obtained from other offices such as the city or municipal assessors' offices.

The Law on Secrecy of Bank Deposits is another obstacle. This law makes deposits with banks or banking institutions in the Philippines absolutely confidential in nature. These deposits may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.

Locating assets has been further complicated by the Philippine Data Privacy Act of 2012, which placed restrictions on public access to information which could previously be used to trace property ownership.

These barriers can make it necessary to employ litigation to obtain information on the estate. Through depositions and interrogatories, the Rules of Court grant broad latitude with which to question possible witnesses about their knowledge of the deceased's assets. Court orders directing relevant institutions to disclose information can also be availed of.

It is also worth discussing what happens to a bank account when the account holder passes away in the Philippines. It used to be a legal requirement for banks to freeze accounts upon being informed of the account holder's death. The banks would not allow access until the deceased's estate was settled and the taxes were paid on it.

This would prevent someone who would take advantage of a person's death from continuing to withdraw money from it without authority.

Banks' internal checklists still require the settlement of the estate before allowing withdrawal.

Since the amendments to our tax laws effective as of 2018, heirs are now legally allowed to make withdrawals from the account even before full settlement of the estate tax, provided that the bank withholds a balance in the account to answer for the estate taxes.

However, this is not so easily done in practice. As a matter of practical, internal policy, banks still require the settlement of the deceased's estate in accordance with law before allowing withdrawals from the account. They do this to ascertain the heirs' identity and their right to claim, as well as to manage their own liability in case of mistaken release of funds.

The Bureau of Internal Revenue has clarified that such internal policies remain valid notwithstanding the relaxation of the legal requirement. Consequently, the deceased's estate in the Philippines should be settled in order to access his assets.

Which country's inheritance laws will apply over the estate?

The citizenship of the deceased determines which country's inheritance law applies to his estate. Thus, if he/she is a citizen of the United States or Japan, the distribution of his estate in the Philippines will be according to the laws of his home state. It is in the absence of proof of the foreign law that Philippine laws on inheritance will apply.

The manner of the distribution of the estate under Philippine law largely depends on whether or not there was a last will and testament.

Is there a will or not?

Whether or not there was a last will and testament makes a big difference. Foreigners in particular are accorded a wide latitude in the disposition of their estate provided the will is valid. If there was a valid will, then the property will be distributed according to its terms as long as they are not illegal.

How do you know if there is a will?

Many times, the actual circumstances are far from the ideal that the deceased kept his papers in order and easily accessible so that his last will and testament is easily found.

His papers may be in disarray. Their location may be unknown. Or, because he died in another country, the documents might not even be accessible to the heirs.

Asking someone for advice is often a good start. His close friends or his family in the Philippines could provide information. Or his lawyer here may have the will in his custody.

Philippine law mandates that the will should be turned over to the local court upon the testator's death. The Rules of Court require that person who has custody of a will shall deliver the will to the court or to the executor named in the will within 20 days after he knows of the death of the testator.

It is thus a good idea to engage counsel to check the records of the local Regional Trial Court in the city or province where the deceased resided. It is possible that someone has already filed a court case to settle the estate and submitted the will to do so. If so, the court's records can be opened to claimants and heirs.

What if there is no will?

If there is no will, then the default provisions of the law will control how the assets are distributed. With the deceased having been a foreigner, the inheritance laws in question will be those will be those of his country, (unless these foreign laws cannot be proved, in which case the intestate provisions in the Philippine Civil Code will apply).

How will the foreigner's estate in the Philippines be settled?

An estate can be settled either extrajudicially or in court.

An extrajudicial settlement is an agreement among the heirs. It can be availed of if there is no will, if all the debts of the estate are paid, and if the heirs are in unanimous agreement. It has significant formal requirements which have to be complied with, as well as taxes paid on the estate, in order for it to cause a transfer of property.

On the other hand, if there is a will or if unanimous agreement among the heir is not possible, then the estate must be judicially settled through probate. A case to prove the will in court — or for the court to order the settlement of the estate without a will — must be filed.

For those estates with a foreign aspect, another alternative is a case for reprobate. In reprobate, the objective is to prove to the Philippine court that a foreign court already rendered a judgment upholding the deceased's will and that this foreign court's judgment should be given effect in the Philippines.

The estate can be distributed upon the conclusion of the court case.

What if there are no heirs?

The property will default to the public if no heirs ever appear.

If someone dies leaving no heirs, the Philippine government can initiate escheat proceedings in court after which the property is forfeited to the government.

At the conclusion of those escheat proceedings, the court will assign the personal estate to the municipality or city where the deceased last resided in the Philippines, and the real estate to the municipalities or cities, respectively, where they are located.

If the deceased never resided in the Philippines, the whole estate may be assigned to the respective municipalities or cities where the properties are located. The estate shall be for the benefit of public schools, and public charitable institutions and centers in those places.

The court, at the instance of an interested party, or on its own motion, may order the establishment of a permanent trust, so that the only income from the property shall be used.

An heir who comes to know about the escheat of property to which she is entitled can file a claim with the court within 5 years of the escheat judgment, beyond which it shall be forever barred.

Source: Lawyer Philippines

What to do when seller refuses to surrender title?

In general, a buyer in a perfected contract of sale needs to register the deed of sale covering the transaction in order to bind the land against third persons. This is in accordance with Section 51 of Presidential Decree 1529, as amended, known as the "Property Registration Decree," which states that:

"An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration.

"The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies."

The above-mentioned provision of law may be availed of by the buyer if the owner's duplicate of title was surrendered by the seller. In case of refusal of the seller to surrender his or her certificate of title, the appropriate legal remedy is to file an adverse claim, as mentioned in the case of Logarta v. Mangahis (GR 213568, July 5, 2016), where the Supreme Court speaking through Associate Justice Estela Perlas-Bernabe, stated that:

"Thus, the prevailing rule is that voluntary instruments such as contracts of sale, contracts to sell, and conditional sales are registered by presenting the owner's duplicate copy of the title for annotation, pursuant to Sections 51 to 53 of PD 1529. The reason for requiring the production of the owner's duplicate certificate in the registration of a voluntary instrument is that, being a willful act of the registered owner, it is to be presumed that he is interested in registering the instrument and would willingly surrender, present or produce his duplicate certificate of title to the Register of Deeds in order to accomplish such registration. The exception to this rule is when the registered owner refuses or fails to surrender his duplicate copy of the title, in which case the claimant may file with the Register of Deeds a statement setting forth his adverse claim."

So if the seller refuses to hand over the title, applying for the annotation of your adverse claim is proper under the circumstances.

Source: Manila Times