What happens to your Cash Deposits & Investments when you die?

One thing I remembered back in college, specifically in our Taxation class, was that there are 2 things in this world that will always be certain:

Taxes and Death

A famous quote goes like this:

“In this world nothing can be said to be certain, except death and taxes” – Benjamin Franklin

As an adult, that info retained in my mind and still holds true up to this day.

As unpleasant as the topic may be, we must face reality that death may come to us like a thief in the night. It is unknown. It is inevitable.

And when this happens, what will happen to the assets and your fortune you worked so hard for?

This post has two sections namely:

a.) What happens to your Cash Deposits when you die?

b.)What happens to your investments when you die?

Disclaimer: I’m not a lawyer nor have I focused my career on estate planning. But dealing with a bank client who demised years ago and left problems to his heirs compelled me to write this post.

In my case, I have a son, my immediate family and a family of my own. I would want them to be educated too.

And I’m pretty sure it’s best to be informed as early as now.

What happens to your Cash Deposits when you die?

Will My Cash Deposits Go To My Family When I Die?

The answer is YES – as long as you comply with the following stated below.

As most of us are aware that the Tax Reform for Acceleration and Inclusion (TRAIN) Law has made amendments where the estate tax return will NOT be a requirement to withdraw funds from the bank account of a deceased.

Did you understand? This is how it goes.

BEFORE: The estate taxes must be paid first before you withdraw the funds.

NOW: The TRAIN Law only requires that the 6% estate tax is paid on the amount withdrawn. Families of the deceased need not wait for the estate tax to be processed before getting funds from the bank account.

So can you just run down to the bank and withdraw the funds anytime?

Nope.

Here’s a glimpse of the list of the things you need to know. Let me reiterate that this is just a rundown of some pointers that you need to be aware of as early as now.

If you are keen to know every detail then I suggest you consult a lawyer.

1. The bank’s requirements

For the bank, they will require the executor, administrator or legal heir applying for the withdrawal to present a copy of the Tax Identification Number (TIN) of the estate of the decedent and BIR Form No. 1904 of the estate duly stamped received by the concerned Revenue District Office (RDO) of the BIR in accordance with the existing guidelines on the issuance of TIN.

For estate tax purposes, attach the Death Certificate.

2. Withdrawal of the deceased’s account

Withdrawing from the bank account even without first settling the estate tax and the BIR clearance is ALLOWED, but only within 1 year from the date of the depositor’s death.

Failure to withdraw from the bank account within 1 year results to filing the estate tax return and secure the BIR clearance just so you can withdraw.

In short, if the 1 year period has lapsed, there is no other way to withdraw the bank deposits unless you file the said documents.

3. Joint accounts

If the account is in the name of two or more depositors, the 6% withholding tax shall only be imposed on the share of the deceased in the joint bank account.

The withdrawal slips shall include a sworn statement by the joint depositor that he is still living at the time of withdrawal.

Deposits already declared for estate tax purposes are no longer subject to the six percent final withholding tax.

What will happen to my INVESTMENTS when I die?

Your real estate properties, the company shares in your stock market portfolio, the mutual fund investments, and all other assets under your name become FROZEN.

To unfreeze the assets, the family will need to file a Notice of Death with the Bureau of Internal Revenue within two months after the date of death, and then pay the corresponding Estate Tax within 1 year from the decedent’s death.

Will My Investments Go To My Family When I Die?

The answer is YES.

But of course, that answer has some following conditions. That is, if you pay the Estate Tax.

How much estate taxes should be paid?

The new TRAIN law has cancelled the old estate tax rate table.

Beginning 2018, those who will inherit properties and assets from a deceased person will have to pay an estate tax with a flat rate 6% on the amount in excess of P5,000,000.

This is good news for those who will inherit P5,000,000 and below. What about those with in excess of P5,000,000?

Formula:

Gross Estate Value – Tax Deductions = Net Estate Value

To illustrate, for example you have Php 8,000,000 worth of estate when you die (less standard deduction of Php5,000,000), your net estate will be Php3,000,000.

Here’s a simplified example:

P8million – P5million = P3million (net estate)

P 3million x 6% new estate tax rate = Php180,000 (estate tax due)

Note: Estate pertains not only to investments but all your assets such as your house and lot, condo units, cars, cash savings and time deposit accounts, franchises, businesses, farm lots, poultry/animals/pets, equipment, furniture, etc.

What happens to my cash deposits and investments after estate taxes are paid?

For the cash deposits in your bank accounts, your heirs will be able to withdraw them, as mentioned earlier.

For real estate properties, the title or ownership will be transferred to your heirs.

For paper assets such as stocks, UITF investments, bonds, and mutual fund shares, there are two options for your family:

a. Tell the broker to sell the units or shares, and give the cash proceeds to them;

b. Open an account with broker, and transfer the units or shares to their account.

Where will your heirs get the money?

Well, your assets are frozen so they can’t get it from your assets. They have to come up with the cash on their own.

Final thoughts

I hope this post has helped you in learning something new today.

If you’re not ready in telling your family and heirs about all your assets while you’re still alive, then the best option is to simply put those facts in your last will and testament.

As the saying goes: