Disclaimer: The following article provides general information only and is not intended as legal advice. Laws and regulations may change over time and can vary depending on specific circumstances. For personalized guidance, you should seek advice from a qualified attorney or legal professional in the Philippines.

Property Transfer from Parent to Child in the Philippines: Legal Steps and Requirements

Transferring property from a parent to a child is a common occurrence in the Philippines, either as part of estate planning, lifetime gift-giving, or upon a parent’s death. Philippine laws and regulations prescribe specific legal steps and obligations. Below is a comprehensive overview of what you need to know, from the types of transfers to the pertinent requirements.

1. Modes of Property Transfer

Sale (Deed of Absolute Sale)
- A parent may opt to sell property to a child, typically at fair market value or a discounted price.
- The transaction is subject to taxes (capital gains tax, documentary stamp tax) unless there are exemptions.
Donation (Inter Vivos)
- This involves transferring property from the parent to the child as a gift during the parent’s lifetime.
- Donations of real property must be executed in a public instrument (i.e., a notarized Deed of Donation).
- The transfer is subject to donor’s tax, although there are exemptions and allowances under Philippine law.
Succession (Inheritance)
- Upon the parent’s death, property passes through either:
  - Testate Succession (with a valid will).
  - Intestate Succession (no will).
- In both cases, children (as compulsory heirs) are entitled to a legitime, a portion of the estate mandated by law.
- A court or extrajudicial settlement process may be necessary depending on the circumstances.

2. Legal Framework

Civil Code of the Philippines
- Governs donations, wills, and succession, including rules on legitimes and forced heirs.
Family Code of the Philippines
- Establishes the rights of legitimate, illegitimate, and adopted children with respect to inheritance and family property.
National Internal Revenue Code (NIRC)
- Imposes taxes on transfers (donor’s tax, estate tax, capital gains tax, documentary stamp tax).
- Amended by subsequent laws (e.g., TRAIN Law), impacting rates and exemptions.
Presidential Decree No. 1529 (Property Registration Decree)
- Governs the registration of property, issuance of Transfer Certificates of Title (TCT), and procedures at the Registry of Deeds.
Rules of Court
- Governs judicial or extrajudicial processes for settlement of estates, especially when multiple heirs are involved or if the deceased left no will.

3. Transfer by Donation (Inter Vivos)

3.1 Legal Requirements

Deed of Donation:
Must be in a public instrument (notarized) for real property. For donations of personal property exceeding PHP 5,000, a written document is required, though not necessarily notarized.
Acceptance by the Donee (Child):
The child must signify acceptance of the donation in the same or a separate notarized document.
Limits on Donation:
Philippine law prohibits donors from donating beyond their free disposable portion when compulsory heirs exist. A donation cannot prejudice the legitimes of other heirs.

3.2 Taxes and Fees

Donor’s Tax:
- As amended by the TRAIN Law, donor’s tax is generally a flat rate of 6% on the amount in excess of the allowable deduction of PHP 250,000.
- A sworn declaration of the property’s fair market value (FMV) must be provided.
Documentary Stamp Tax (DST):
A fixed amount is due per PHP 1,000 of consideration or FMV (whichever is higher).
Registration Fees and Notarial Fees:
- Paid at the local Registry of Deeds.
- Notarial fees for the Deed of Donation vary.

3.3 Procedure for Registration

Execution of Deed of Donation and Acceptance:
Signed, notarized document.
Tax Declaration and Payment:
- File at the Bureau of Internal Revenue (BIR) for donor’s tax.
- Pay the donor’s tax and DST within the prescribed period (typically 30 days from execution of the deed).
Issuance of Electronic Certificate Authorizing Registration (eCAR):
The BIR, upon payment of taxes, will issue the eCAR.
Registration at the Registry of Deeds:
- Present the Deed of Donation, eCAR, and other documents for transfer of title.
- Pay the required registration fees.
- A new Transfer Certificate of Title (TCT) is issued in the child’s name.

4. Transfer by Sale (Deed of Absolute Sale)

Although transferring property by sale from a parent to a child is less common than by donation, it remains an option. Sometimes a “sale” is used as a form of donation at a price below market value. However, if the BIR deems the transaction a disguised donation, donor’s tax may apply instead.

4.1 Legal Requirements

Deed of Absolute Sale:
- Must be in writing and notarized.
- Contains the terms of sale, price, and property description.

4.2 Taxes and Fees

Capital Gains Tax (CGT) or Creditable Withholding Tax (CWT):
- CGT is 6% of the gross selling price or FMV, whichever is higher, on the sale of real property classified as capital assets.
- CWT may apply if the property is classified as an ordinary asset.
Documentary Stamp Tax:
1.5% of the selling price or FMV, whichever is higher.
Transfer Tax (Local Government Unit):
Rates vary per municipality or city, often around 0.5% to 0.75% of the property value.
Registration Fees:
Depends on the schedule of fees at the Registry of Deeds.

4.3 Procedure

Execute and Notarize the Deed of Sale.
Compute and Pay Taxes (CGT or CWT, DST) to the BIR within the prescribed period.
Obtain eCAR from the BIR.
Register the Deed of Sale and Transfer Title at the Registry of Deeds.
Update Tax Declaration at the local Assessor’s Office.

5. Transfer by Succession (Inheritance)

When property is transferred upon a parent’s death, the distribution follows either testate or intestate succession. Children are considered compulsory heirs and cannot be deprived of their legitime except under exceptional circumstances (e.g., disinheritance by valid grounds).

5.1 Extrajudicial vs. Judicial Settlement

Extrajudicial Settlement of Estate:
- Possible if the decedent left no will and the heirs are all of legal age, or if minors are represented by a legal guardian.
- Heirs must execute a notarized Extrajudicial Settlement Agreement, publish it in a newspaper of general circulation, pay estate tax, and secure the eCAR from the BIR.
- If there is no contest or dispute among heirs, this is faster and less costly than going to court.
Judicial Settlement:
- Required if there is a valid will to be probated or if heirs cannot agree on the distribution.
- Court proceedings determine the validity of the will or settle disputes in the estate partition.

5.2 Estate Tax

Estate tax is 6% of the net estate value.
There are standard deductions and an exemption threshold (e.g., PHP 5 million standard deduction under the TRAIN Law, subject to updates).
The estate tax return must be filed, and the tax paid, typically within one year from the date of death (extensions may be granted under certain conditions).

5.3 Procedure

Obtain Death Certificate and other necessary documents.
Determine if there is a Will (testate) or none (intestate).
Prepare the Inventory of Assets and Liabilities.
Extrajudicial Settlement (if applicable) or Judicial Settlement if required.
Pay Estate Tax and secure eCAR from the BIR.
Transfer of Title at the Registry of Deeds in favor of the heirs.
Update Tax Declaration at the local Assessor’s Office.

6. Special Considerations

Participation of Minors:
- If the child is a minor, a guardian may need to sign documents or represent the minor in legal proceedings.
- For significant property transactions involving minors, court approval may be necessary.
Spousal Rights:
- Under Philippine law, if the parents are married under the regime of Absolute Community of Property or Conjugal Partnership of Gains, the spouse (another parent or step-parent) may also have rights or obligations in the transfer.
Legitime Protection:
- Donations or transfers that infringe on the legitime of other compulsory heirs can be reduced or invalidated to protect their rightful shares.
Documentation Requirements:
- Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT).
- Tax Declaration from the local Assessor’s Office.
- Notarized Deeds (Donation or Sale).
- Identification Documents of parties.
- Certified True Copies from the Registry of Deeds (when needed).
- Special Power of Attorney (SPA) if someone else is acting on behalf of the parent or child.
Foreign Nationals and Dual Citizens:
- The Philippine Constitution restricts land ownership by foreign nationals.
- A child who is a Filipino citizen (including dual citizens) can legally own property in the Philippines.

7. Practical Tips

Start Estate Planning Early:
Clarify the mode of transfer you prefer (sale, donation, or inheritance) to minimize disputes and tax liabilities.
Ensure Accurate Valuation:
For tax purposes, always use the correct fair market value or zonal value (whichever is higher) to avoid penalties and fines.
Observe Deadlines:
Pay donor’s tax (within 30 days of donation) or estate tax (within one year of death) to avoid surcharges, interest, or legal complications.
Secure Professional Assistance:
A lawyer or licensed broker can help handle due diligence, draft documents, and navigate BIR and Registry of Deeds processes.
Keep Clear Records:
Maintain certified copies of all documents—titles, deeds, tax receipts, settlement papers—in a secure place.

Conclusion

Transferring property from parent to child in the Philippines can be done through donation, sale, or inheritance, each governed by distinct legal requirements and tax implications. Understanding the legal framework under Philippine law is essential to ensure a smooth process and to protect everyone’s interests. From preparing the correct documents and paying the right taxes to complying with legitime and forced heirship rules, each step demands attention to detail.

Because of the complexity of Philippine laws on property, inheritance, and family rights, consulting an attorney or legal professional is highly recommended for proper guidance and to avoid costly errors. By being informed and well-prepared, parents and children can ensure a legally valid and efficient transfer of property, safeguarding family assets for generations to come.