No More Reason to Evade Estate Taxes under TRAIN

Sen. Sonny Angara, as chair of the Senate Committee on Ways and Means, spearheaded the discussions on the Train Law. Photo grabbed from rappler.com.

In a swift turn of events, the famous or infamous TRAIN Law (depending on which side of the political fence you're at) has taken effect New Year's Day 2018.

For some, this is not a good news; for others, a welcome development. On my part, I wish I had the opportunity to express myself and air my concerns about its possible implications.

Nonetheless, I'm happy with some of the innovations, among which include the increase in income tax brackets and the simplification of some of the tax systems.

One particular innovative change I'd like you to hear is that estate, donor's and capital gains taxes are now pegged at the same rate of 6%.

This means, whether you try to make it appear you're donating or selling a property few years before your impending death, there won't be much of a difference anymore than if you had just willed the same properties on your Last Will and Testament.

In fact, you will actually minimize your tax liabilities if you don't donate or sell your properties but decided to include them on your estate instead.

Photo Credit: Aleksandar Stojanov via delawareonline.com.

A closer look at the TRAIN Law shows that you may claim many deductions from your gross estate, which you can't do for donor's and capital gains taxes. Among these are the standard deduction, family home, vanishing deductions, and many more.

The only item you can deduct from the donor's tax is the dowry which is only be possible if the donation is given to your newly-wed child. On the other hand, capital gains taxes do not allow any form of deductions whatsoever.

So before you try to evade estate taxes by donating or selling your properties, think again, read the TRAIN Law, and ask a tax lawyer or a CPA. In this way, you can actually minimize your taxes by just sticking to doing the "right" thing.

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This article is for general information purposes only and not intended as a form of legal advice. If you have any question or comment regarding this article, you may send an e-mail to the author at rmacpalaw@gmail.com or use the comments section below. 

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References:

1. Estate Tax Rates - Sec. 84 of the National Internal Revenue Code (NIRC), in the original and as amended by the TRAIN Law.
2. Deductions from the Gross Estate - Sec. 86 of the NIRC, as amended.
3. Donor's Tax Rates - Sec. 99 of the NIRC, in the original and as amended.
4. Capital Gain's Tax Rates - Sec. 39 of the NIRC.