The burden of death in the family and why we should talk about it

Death is a topic we rarely talk about. It is a sensitive topic to begin with, and casually bringing it up in ordinary conversations could raise some eyebrows and even negative emotions. Despite this, we need to tackle the reality of death as it has consequences that we all have to prepare for spiritually, emotionally, and even financially.

As a famous saying goes, “Nothing is certain except for death and taxes.” To prepare for the inevitable, let’s talk about something that covers both—dealing with estate tax. Estate pertains to all the cash and properties owned by a person, which is usually assessed in cases of bankruptcy or death. 

When a person dies, the estate of the deceased, including all of his or her assets such as savings in the bank and investments such as stocks and bonds, real estate properties, among others, will be frozen. This means that the deceased’s estate will remain inaccessible to family or relatives until the necessary documents are presented, tax returns are filed, and the estate tax is paid accordingly.

Knowing this, the more important question to ask is, what happens to your surviving family when you die?

Your family has to deal with a lot of paperwork within tight deadlines

Prior to the settling of the estate tax, the surviving family needs to secure several documents within a certain timeframe to avoid fines and penalties due to non-compliance or delay. Knowing what to do during these times could spare the surviving family the additional burden of having to deal with bureaucratic processes of securing documents while grieving.

First thing the surviving family has to secure is the death certificate because it will be required to obtain other needed documents to settle liabilities or to claim or transfer estates left by the deceased. The Bureau of Internal Revenue (BIR) should be notified by the surviving family by filing a Notice of Death at the BIR Revenue District Office (RDO) that has jurisdiction over the location where the deceased resided at the time of death. This should be done within two (2) months from the time of passing.

Aside from the filing of the Notice of Death, the surviving family should also file the estate tax return and settle the estate tax within six (6) months from the date of death. Failure to comply with these requirements could mean the surviving family has to settle additional penalties. For estate tax, there could be a 25% to 50% surcharge with 20% interest per year of non-compliance, plus a compromise penalty. However, the surviving family may request for an extension of the compliance period or make arrangements to pay the estate tax through installment options.

Your family could end up in a guessing game

Aside from the death certificate, the surviving family should gather other documents and records that are related to the estate of the deceased. They have to secure the original or the certified duplicates of titles, certificates or other proof of ownership of the deceased person’s properties.  This includes real estate titles, car registration, bank passbooks, deeds of assignment, contracts to sell, declarations of trust, stock certificates, deeds of assignment contracts to sell, among others, as long as it is under the deceased person’s name. 

The surviving family should get the zonal valuation of the real estate properties of the deceased. The zonal valuation is the basis of BIR in computing the estate tax. If the deceased has shares of stocks, mutual funds, or other investments, the broker may provide service in liquidating the assets or , the heirs should be informed ahead also know their proper value by consulting the corporate secretary of the company where the shares were bought.

The assumption is that the surviving family has an idea of all the assets left by the deceased. There are cases when the surviving family are left without any clue regarding the estate of the deceased. They end up in a guessing game and there are chances that some of the deceased person’s estate are not properly accounted for. Instead of benefitting the surviving family, the deceased person’s estate ends up hidden. By the time the surviving family discovers the estate, it has already incurred several penalties that prove to be bothersome to settle.

Your family could be buried in financial obligations you leave behind

Contrary to popular belief that a person’s debt and financial obligations die with him or her, the Civil Code of the Philippines clarifies through Article 774 that settling of debt and other financial obligations left by the deceased is assumed by his or her successors.

“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 776 of the same code also states that “the inheritance includes all the property rights and obligations of a person which are not extinguished by his death.” With this, aside from the deceased’s assets, it is important for the surviving family to also know if the deceased left any liabilities such as credit card debts, amortizations, outstanding loans, among others, to be settled.

The family of the deceased already has to deal with the financial burden of dealing with the wake and burial expenses, aside from the possible hospital expenses. The additional obligation of settling the financial obligations of the deceased could make things harder for the surviving family. It could have been easier for the surviving family if any family member had prepared way ahead for occurrences such as death.

Prevent leaving your family with additional financial burden

This is where financial planning plays a big role and getting life insurance proves to be one of the effective ways to help a person and his family overcome any financial difficulty in cases of death. Given that all of a person’s estate is frozen at the time of death, the surviving family has no other way of funding the settling of financial obligations such as paying of the estate tax without reaching in their own pockets. Oftentimes, this also leaves the surviving family in debt.

Life insurance could help the surviving family to cope financially after a person’s death by providing them with financial assistance. Getting life insurance sounds like a very practical thing, but in times of difficulty, especially in times of grieving, life insurance can be considered  as a gesture of love and care by the deceased to the family he or she leaves behind.