Property Transfer via Last Will versus Deed of Donation in the Philippines

A comprehensive legal primer

1. Introduction

Every Filipino who owns property eventually confronts the same practical question: “Should I pass my assets to my loved ones through a last will and testament, or is it better to give them away by deed of donation while I am still alive?”
Both paths are perfectly valid under Philippine law, but each carries distinct legal, tax, and procedural consequences. This article walks you through everything you need to know—from statutory foundations to tax math, from drafting tips to common pitfalls—so you can make an informed choice or frame the right questions for counsel.

2. Statutory Landscape at a Glance

Source of Law	Last Will & Testament	Deed of Donation (Inter Vivos)
Civil Code	Arts. 783 – 834 (Succession)	Arts. 725 – 762
Rules of Court	Rule 75 – 91 (Probate & Settlement)	N/A (treated as ordinary contract once perfected)
Tax Code (NIRC, as amended by TRAIN)	Estate Tax (6 % of net estate)	Donor’s Tax (6 % of net gifts in excess of ₱250,000 per calendar year)
Special Laws	Estate Tax Amnesty Act (RA 11213, as amended)	N/A

3. Transfer by Last Will & Testament

3.1 Nature and Timing

A will is a unilateral, strictly personal, mortis causa act that takes effect only upon the testator’s death (Civil Code, Art. 783). Nothing is transferred during the testator’s lifetime.

3.2 Formal Requisites

Testamentary Capacity – At least 18 years old and of sound mind (Art. 799).
Intent (Animus Testandi) – Clear intent to dispose of property by will.
Form –
- Notarial (ordinary) will: written, signed, attested by three credible witnesses in presence of each other and of the testator; every page signed and notarized (Arts. 804–808).
- Holographic will: entirely handwritten, dated, and signed by the testator; no witnesses needed (Art. 810).
Probate – No will can pass property unless admitted to probate by a competent court (Rule 75, Sec. 1).

3.3 Substantive Limits

Legitime of compulsory heirs (Arts. 887–892). Attempts to impair legitimes trigger reduction or annulment.
Prohibited substitutions & conditions contrary to law, morals, public policy (Arts. 857–865).

3.4 Revocation & Modification

Freely revocable during lifetime by express act, implied act (subsequent incompatible will), or destruction (Art. 830).

3.5 Tax & Fees

Estate Tax: 6 % of net estate; due within 1 year from death, extendible.
Judicial Costs: filing fees, publication, bond if letters testamentary sought.

3.6 Practical Timeline

Death
File petition for probate → 3–12 months (longer if contested)
Estate inventory & debts settlement
Final distribution & titling

4. Transfer by Deed of Donation (Inter Vivos)

4.1 Nature and Timing

A donation inter vivos is an onerous-but-gratuitous contract that takes effect once accepted by the donee (Art. 734). Ownership transfers immediately; donor can no longer revoke unilaterally except on narrow statutory grounds (ingratitude, fulfillment of conditions, etc., Arts. 760–764).

4.2 Essential Elements

Capacity of donor and donee (Arts. 735–736).
Cause or Liberality: intent to give without equivalent consideration (Art. 726).
Object or Subject Matter: property within commerce.
Form for immovables:
- Public instrument specifying property and donor’s title;
- Separate Acceptance by donee in same or another public instrument, duly notified to donor (Art. 749);
- Annotated on the Torrens title and registered with the Registry of Deeds.
Inventory of charges and liens if donation exceeds ₱5,000 (Art. 749 para 2).

4.3 Tax & Fees

Donor’s Tax: Flat 6 % on net gifts above ₱250,000 each calendar year; BIR Form 1800 filed within 30 days from notarization.
Documentary Stamp Tax (DST) at ₱15.00 for every ₱1,000 of fair market value.
Transfer Tax (local): up to 0.75 % of zonal/assessed value.
Registration Fees: LRA schedule + annotation fees.

4.4 Impact on Future Succession

Donations are generally irrevocable; however, their value must be collated if donor dies and compulsory heirs demand legitime (Arts. 1061–1071).
If donation impairs legitimes, heirs may seek reduction or bring action for inofficious donation after death (Art. 771).

5. Donations Mortis Causa—Not to Be Confused

A donation mortis causa looks like a donation but produces effect only at death and must follow will formalities (Art. 728). Courts treat such documents as wills in disguise; failure to observe testamentary formalities leads to nullity.

6. Head-to-Head Comparison

Feature	Last Will	Donation Inter Vivos
When title passes	After death & probate	Immediately upon acceptance & registration
Revocability	Freely revocable	Irrevocable (with narrow exceptions)
Requires probate?	Yes, court-supervised	No
Taxes	Estate Tax (6 %)	Donor’s Tax (6 %)
Control over property during life	Full control retained	Donor loses ownership (can retain usufruct via reservation)
Effect on legitime	Directly governed; will reduced if excessive	Subject to collation & reduction later
Formalities	Strict testamentary forms	Public instrument + acceptance
Typical timeline	1–3 years (if uncontested)	2–6 months
Main risks	Probate delay; possible contests	Immediate loss of asset; donor’s tax penalties

7. Strategic Considerations

Need for Control
- Retain revenue or management? Use a will (or donate bare title and reserve usufruct).
Avoiding Probate Delays
- Urgency to vest ownership in heirs? Donate inter vivos; no court clearance needed for registration.
Tax Neutrality After TRAIN
- Since 2018, both estate and donor’s tax are 6 %. The decision now hinges more on non-tax factors (ease, control, timing).
Family Harmony & Transparency
- Donations can prevent confusion by transferring title early, yet may spark jealousy if heirs feel “short-changed.”
Future Insolvency Risks
- Donations become part of donee’s assets, reachable by the donee’s creditors.

8. Step-by-Step Checklist

8.1 For a Will

Draft will in proper form.
Keep originals safe; tell executor where it is.
Prepare list of assets & debts for future inventory.
On death:
- Executor/heir files petition for probate (Rule 75).
- Court issues notice, publication, hearing.
- Upon allowance, executor settles estate, pays estate tax, distributes property.
Register court order and new titles with Registry of Deeds (RD), LRA Form 106.

8.2 For a Donation

Secure certified true copy of TCT/CCT & tax declarations.
Obtain zonal and fair market values for tax base.
Draft Deed of Donation; schedule notarial act.
Donee signs Deed of Acceptance (same day or separate).
File BIR Form 1800, pay donor’s tax & DST within 30 days.
Secure BIR Electronic Certificate Authorizing Registration (eCAR).
Pay local transfer tax; present eCAR, tax clearance, and documents to RD.
RD cancels old TCT/CCT and issues new title in donee’s name.

9. Illustrative Supreme Court Rulings

Case	G.R. No.	Key Take-Away
Heirs of Malate v. Gamboa	170139 (Oct 13 2009)	Donation inter vivos upheld despite donor retaining right to reside; usufruct reservation did not convert it into mortis causa.
Acedera v. CA	101083 (Oct 13 1992)	Acceptance must be made during donor’s lifetime; post-mortem acceptance void.
Suntay v. Suntay	140900 (Dec 14 2011)	Donation inofficious when it impaired legitime; ordered collation and reduction.
Spouses Abellera v. Spouses Diaz	167980 (Jan 25 2012)	Failure to annotate donation on title rendered it ineffective against subsequent buyers in good faith.

10. Common Pitfalls and How to Avoid Them

Pitfall	Prevention
Holographic will missing date or signature	Follow Art. 810 to the letter; better yet, have a lawyer review.
Donation not registered	Always present deed and eCAR to RD; unregistered deeds do not bind third parties.
Forgetting legitime computations	Compute legitime before deciding gift size; collate prior donations.
Paying tax late	25 % surcharge + 12 % annual interest apply for donor’s or estate tax deficiency.
Over-reliance on oral acceptance of donation	Acceptances for real property must be in a public instrument and duly notified.

11. Frequently Asked Questions

Can I include a clause in my will making it “self-executing” without probate?
No. Probate is jurisdictional; a clause cannot oust the court’s authority.
Is a deed of donation revocable if my child becomes ungrateful?
Possibly. Art. 764 lists ingratitude grounds (attempt on life, serious offenses, refusal to support) but revocation suits must be filed within 1 year from knowledge.
I want to donate but still receive rental income. Options?
Donate the naked ownership and reserve usufruct in favor of the donor under Art. 749.
If I give property today, will it still be subject to estate tax later?
The donated property is excluded from the net estate, but its value is included for legitime collation. Estate tax applies only to property still owned at death.

12. Conclusion

Choosing between a last will and a deed of donation inter vivos is essentially a choice between control and speed. Wills let you keep full dominion until death but entail probate; donations shift ownership now, bypassing probate but permanently divesting you and triggering immediate tax. Since TRAIN equalized the 6 % rates, decide based on family goals, legitime math, and tolerance for court proceedings.

For tailored advice, especially on legitime computations or mixed strategies (such as combining donations with a residual will), consult counsel experienced in both estate planning and tax practice.

Disclaimer: This article is for general information only and does not constitute legal advice. Laws and regulations may change, and factual circumstances vary; consult a qualified Philippine lawyer for guidance specific to your situation.