To leave a physical, valuable legacy is one of the motivations why Filipinos acquire a real estate property. Prior to one’s death, a father or a mother decides on what properties he or she wants to bequeath to each child and processes the necessary documentation so the transfer of ownership is already done.
But in most cases, transferring properties can be a source of pain for families, especially if the parent fails to make such preparations, like leaving a will, for instance. Moreover, settling the estate of the deceased can be quite bureaucratic and expensive, more so if the surviving members of the family cannot agree on the division of properties.
Leaving Your Pamana The SMART Way
Transferring your real estate property to a loved one (donee) can be done via Donation Inter Vivos or legal donation (Art. 725, 618a). A legal donation out of love and liberality happens when:
- the donation is done during your lifetime, and
- the acceptance of the donation by the donee is done during your lifetime.
Here’s a step-by-step guide in transferring properties to your loved one:
1. Make sure that the property you are bequeathing to your loved one has proper ownership documentation.
Regulators like the Bureau of Internal Revenue, Land Registration Authority, and the City Assessor’s Office will be asking the following documents to authenticate that you are the true owner of the properties you will be passing over:
- Condominium Certificate of Title (CCT) for condo units, or
- Transfer Certificate of Title (TCT) for single houses and raw land donated, or
- Original Certificate of Title (OCT)
Make sure though that your property ownership documents are genuine and not fake. Also, it pays to convert the paper property title for ease of transaction.
Can I transfer mortgaged properties to my loved ones?
You can, but this act sort of misses the point of the donation. The donation may also be treated by some regulators as fraudulent. Moreover, calculations for real property taxes are different for donations made to non-familial donees.
2. Have your property assessed to determine the current value of a property.
Towards the course of your life, you might have installed a home improvement on your property. Significant home improvements boost a property’s appeal and can add market value to your home.
Your next step is to go to the City Assessor’s office of the city where the property is located. If there are no improvements made on the property, the City Assessor’s office will issue a “Certificate of No Improvement.”
3. Make sure that the taxes paid on the property is updated.
Paying your real property taxes on time will keep your donee free from the obligations of paying for unpaid taxes and penalties. Moreover, the Tax Declaration of the donated property and/or home improvement is required to legalize to pay for Donor’s Tax (see #5).
You can get your property’s latest Tax Declaration from the City Assessor’s office. The office may require you to present proper documentation such as your valid ID and an old Tax Declaration or any proof of verification to process your request.
4. Put the donation in writing.
The Deed of Donation should contain the following terms:
- the complete name of both the donor and the donee;
- the detailed description of the property, including pertinent info such as property title number and technical description of the property;
- your intention and purpose why you are donating it to your loved one;
- signature of the person who will stand as witness to the donation; and
- notarial acknowledgement.
5. File and pay the right donor’s taxes.
Submit the following pertinent documents to any field office or branch of the BIR:
- Deed of Donation
- Proof of ownership of the property that you are going to donate
- Certificate of No Improvement
Per Republic Act 8424, the donation will be taxed at minimum 2% of the excess over P100,000. If you will be donating more than once in a year, the donor’s tax will be based on the net total amount of the gifts.
6. Get the Certificate Authorizing Registration (CAR) and Tax Clearance (TCL).
The CAR and the TCL are documented proof that you have paid the necessary donated property’s taxes. These documents are required to process the title transfer with the Registry of Deeds. Take note that these documents will be released only by the correct BIR revenue office on where the property is located.
If you have submitted all documents as required by the regulator, the CAR and the TCL will be ready in around two weeks.
Don’t have a legacy to leave to your family yet? You can check out these one-bedroom condos in Manila for sale at around the P2M range.