I Heard A Foreigner Can Inherit Land In The Philippines
by Philly ~ March 8th, 2008
Indeed, you heard right. This is the "saving grace" for many foreigner/Filipino couples who want to buy property together here in the Philippines and have an assurance the the "foreigner ‘ half of the couple can continue living in the couple’s property.
Notice something important that I didn’t say above, though. I didn’t call it the couple’s "joint" property. Foreigners to think they have a lot more share in their marital property than they actually do.
In the US, for example, it’s very common for a married couple to own property in "joint tenancy" or as "tenants in common", typically with "right of survivorship". Loosely translated from legal-eze to English (remember I am a lay person and not a a lawyer) this means that should either spouse die while the other survives, then the dying partner’s share transfers almost automatically to the survivor, who then owns 100%of the property until her/his death, when the property will normally be passed to party ort parties of choice, typically by means of a will. If you own property in the US you typically can leave it to anyone you chose, without regard to children, parents, etc. We’ve all heard of children being cut out of their parent’s will, etc.
Don’t try to translate that to Philippine law. It will get you in trouble. here in the Philippines the law operates much differently than many are used to. Using our common example of Fil-Foreign family, let’s look at what happens when the Filipino partner passes away. (nothing really happens property-wise when the foreigner partner passes, since s/he never owned the property to begin with).
Wills are much less common here than in many developed countries. But they certainly are used. But when real property is involved, there is a basic underlying law which takes precedence over any language in a will. Philippine law stipulates a reserved portion of all estates for compulsory heirs
Certain parts of the estate of a deceased Filipino citizen cannot be freely disposed of because Philippines law reserves them for the “compulsory heirs”. The “compulsory heirs” are classified as:
- Primary - legitimate children and/or descendants
- Secondary - legitimate parents and/or ascendants; illegitimate parents
- Concurring - surviving spouse; illegitimate children and/or descendants
This is one of the reasons I advise a lot of caution and competent legal advice before rushing off to buy property here. Note, in the three levels of "compulsory heirs" the surviving spouse comes, at best, on the third level of heirs to be endowed. The legitimate children of the marriage, the legitimate parents, illegitimate parents (a common occurrence here) all come first and the surviving spouse has to battle it our on level three with illegitimate children who may show up.
Here’s atypical example case: if a decedent is survived by her husband and four legitimate children, ½ of her hereditary estate is reserved equally between the children (1/8 each) whilst the husband takes the same share as one legitimate child i.e. 1/8. This leaves 3/8 of the estate which can be freely disposed of in accordance with her will.
The free portion of a hereditary estate can be freely willed to any person or class of person with the capacity to succeed under the Civil Code, even if that person is already a compulsory heir, with a prescribed share.
OK, so that means that the surviving spouse gets 1/8 under the compulsory law, but the wife could have made a will which gives him the ‘left over’ 3/8 as well … totaling up to one half, and the children have the other half (which he is likely the legal guardian of), so why worry?
One good reason to worry. A foreigner can inherit from a Filipino spouse, so long as he or she inherits from an intestate estate,that is, one with no will. Non-Filipino citizens, who can inherit land by hereditary or intestate succession (without a will) but not by testamentary succession (with a will). That 3/8 share we were talking about? It can’t be willed to the surviving spouse.
Keep one other thing in mind … the foreigner who inherits in this way is legally the owner under Philippine law, but he/she can not sell or bequeath to another foreigner. In other words the foreign ownership can not be a chain. the property does belong to the surviving foreign spouse bit he/she can’t dispose of it at will. It can only be sold or bequeathed to a natural born Filipino.
I already have a headache, myself. I think you can get enough of a taste here to see why I feel the property laws, especially with ‘mixed’ couples here are very convoluted. I see couple all the time who have invested their life savings and it’s all at risk because of children the wife had previously or even a case where the Filipino spouse’s father never married her mother and disappeared. If the man is till alive and chooses to, he can show up and demand his share of her estate … in front of the woman’s surviving spouse. If he has children, they can show up and claim their share of their father’s share. They may not prevail, but it will cost a small fortune in legal costs and months or years in court to defend against their claim. How strange is that?
Buy property is you chose to … my spouse and I are going to buy some soon ourselves, but be darn sure you don’t make it the cornerstone of your estate … it’s a place to live, not an investment, because neither the foreigner nor the Filipino owner has much control over the distribution … and these cases can go on for years.
Related posts:
- Owning Your Own Home
- Marriage, Nationality and Divorce
- More About Foreigner Jobs in the Philippines
- Why I Don’t Own My House — Part 3
- Good News and Bad News Mixed Together
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March 8th, 2008 at 10:12 am
That sounds like a Monty Python skit! Unbelievable! Thanks for the warning.
March 8th, 2008 at 11:15 pm
Indeed that’s a good analogy, John … I wonder if that reference is in Philippine law textbooks … step one, watch all the Monty Python movies *smile*.
Thanks for reading … I was afraid most people wouldn’t … There’s a number of other “gotchas” I left out to try to cut down the length a bit.
I’ve gotten a lot of static over the years from folks who think things work the same in the Philippines as at ‘home” and can’t wait to dump their life savings into a property because they are convinced that “owning your home is an investment”.
As the song says, “It ain’t necessarily so.”
March 9th, 2008 at 12:16 am
Sound advice, Philly.
We can’t forget the residency requirements of the non-Filipino spounse, though. Foreigners not holding resident visas are totally out of luck, as are those holding resident visas but have not completed five years residency in the Phils.
Plenty of “extended visitor visa” ex-pats planning on property ownership via inheritence get a rude awakening (usually at the hands of a disgruntled or gold-digging member of the extended family)!
Always wondered why there was such turmoil with deeds, property holdings, etc. until I learned of the many issues generated by local law. Of course, I haven’t even come close to learning or hearing of them all!
March 9th, 2008 at 4:28 am
Yes, I probably should have thrown that in as well, Paul … there are a number of things that foreigners think they can do that are not open to non-permanent residents.
This whole mantra about the value of buying property that someof the expat community spends much of their time chanting is one of the chief reasons I don’t spend much time in some of the online communities I used to frequent. There are just so many people who enjoy living in a dream world….
Thanks again for coming by, Paul, and for your valuable contributions.
March 10th, 2008 at 10:09 am
[...] other day, my husband was writing a post on inheritance for his Philfaqs blog. He turned to me and asked if I knew how crazy the law was. He explained [...]
August 29th, 2008 at 1:55 am
@lvd: Before I approve your comment, can you tell me why you made it? You basiclaly restated exactly as I said, except you left out some important details that prevent inheritance from being automatic. What is your interest in living in the Philippines or in my blog? Not just looking for a link to your blogspot blog, are you?
August 31st, 2008 at 2:11 am
Hi Philly: If I understand this right, a foreign husband can only inherit if there is no will? I assume a foreign child can inherit as primary - with or without a will? No wonder it is not common here to prepare a will.
August 31st, 2008 at 8:49 am
@Ellen: Hi Ellen. We can quickly get into “lawyer territory” here, that’s for sure. But indeed, it’s my understanding that under the constitution there are shares that spouse(s), children and parents _must_ have, regardless of what is writtne in a will, or not.
Indeed it does seem to cause wonderment as to why a married couple needs a will, becuase the surviving spouse isgoing to be entitled to part (but almost never all) the property in the deceased spouse’s name. That’s why the concept of a ‘clean title’, to me, seems a little lke words which have different meaning to folks from different countries … because even with the best researched title, the child of a previous owner, for example, can “pop up” out of the woodwork and claim a share, even years after the death. Myself, I have no answer. Everything is in my wife’s name and statistically, she should survive me (she’s 18 years my junior). If the cards were to fall the other way her property will be divided amongst me and the others who have a share by law and that will be that. I irritated a few people some months ago when I wrote an article or two on the fallacy of buying a home for ’security’ … the folks who got upset didn’t like looking at the facts instead of their “feelings”. I have not changed my views.
September 1st, 2008 at 12:09 am
In a way, it does make it sound very simple, as long as you don’t fool around and have lots of illegimate children - haha. The scary part that you mentioned is the child of a previous owner - are there no deadlines to making claims here?
Some cultures do not like discussing wills (i.e., the Chinese) because you are talking about death. I recall “forcing” a couple in Canada to prepare their will - more for estate planning and minimizing estate taxes, and lawyers tend to make it so complicated in order to charge exuberant fees. Accountants too, for that matter, but in this case, my services were free :).
September 1st, 2008 at 1:05 am
@Ellen: Yeah the illegitimate children issue is not as far fetched as some people think. In most western societies. Although not legal and not offically condoned by the Church, “extra” famines are not uncommon here at all.
I’m not at all aware of a deadline for cliams … there may be one. We’re straying into legal professional territory. There are also laws like term limitations for mayors .. 6 years .. and last year a mayor was sworn in for his 17th year in a town in Zambales, by the provincial governor, so my confidence in such deadline laws offering any real protection isn’t high even if they do exist.
In most developed countries we are used to a product called ‘title insurance’, which, for a fee, will protect the buyer of land with life-long defense against claims raised after the sale. Last time I checked, China and the Philippines were the only two significant countries where title insurance is not available. I know there was talk about enabling legislation for title insurance a few months back, but I’m not aware of any actual progress.
September 1st, 2008 at 2:14 am
I’ve never heard of title insurance in Canada. But there, when you buy property, it is SOP to do a title search, to see if there are any liens on the property. If none, then technically you are safe and to serve any future liens on the property related to previous owners, I would think, will have no grounds. Anyway, am not a lawyer, so who knows.
Thanks for replying and explaining best you could. I just told my husband about it, and I haven’t even finished my story, he said “so I have to kill you first”, and then I said you can’t inherit if there is a will, then he said “then I have to kill you fast”. Haha - the law here does make it sound so ludicrous.
September 1st, 2008 at 4:25 am
@Ellen: Well title insurance appears to be a big business in Canada, exactly as it is in the US. I realize that the purpose of title insurance is not really clear to a lot of folks, so perhaps I shold aplify a bit. here’s a definition from a big Canadian insurance-selling site:
——————————
What is Title Insurance?
Title insurance is unlike any other kind of insurance. It is not house insurance which only protects the contents of your home or its structure and for which you have to pay a monthly premium.
Title insurance protects your ownership to the property and protects you against:
* Fraud – fraudulently obtained mortgages on your home
* Errors in surveys or other official public records
* Encroachments onto neighbouring properties
* Zoning infractions
* And many more known and unknown defects that could affect your ability to sell your property in the future.
Unlike house insurance, you only pay a one-time premium with no deductible. Title insurance covers all legal expenses related to restoring title, meaning that you do not have to take time off work and deal with the added stress needed to defend yourself.
———————–
The operative issue we are talking about here would be the last bulet “Other defects in title”.
A title search, by a reputable attorney is absolutley a recommended thing. However, even the most diligent attorney in the world can not find claims against a property that have not yet been made. Only David Copperfield coulddo this and I don’t have that much confidence in him, either ;-). If someone has a lien against the property recorded, then that’s what a title search should show up. But something that is unrecorded obviously can’t be seen.
So the title insurance would ‘kick in’ if that long-lost child or other relative from the past shows up and files suit against you. (this can happen easily in the US and other countries too, even though the inheritance laws may be different there) are a hundred ways someone _might_ feel s/he has an interest in a property and even thogh thye may not prevail in court, it’s the defending in court that could really ruin a person’s day.
Where I know of some people at real risk here in the Philippines are foreigners married to Filipinas who were once married and have received legal annulments. Often these get granted based on the belief the first husband is dead. If the owman owned property during that marriage, though, her husband at the time nquestionably owns half of it. Should he suddenly ‘be ressurected’ by miraculous means or otherwise, even though he is no longer the legal husband he still can at least argue he has a stake in the property. He may, in fact, lose in the end, but these cases can take years and years to grind through the court system here, causing untold amounts of money and most important to me, sabotaging piece of mind.
September 1st, 2008 at 4:29 am
@Ellen: Hmm … do you have a personal food taster? If I were you I might be thinking of one
I’ve lived under a cloud like this for years, as I am certainly worth much more dead than alive, so it certainly pays me not to make my dear asawa angry … an excellent “hubby be good motivator” LoL Oh, and this is humor, folks, Mita reads these comments … Joke lang!
September 1st, 2008 at 10:46 pm
Hmmm, one time cost? Thanks for the information. I wonder if this insurance was part of our closing costs of buying our property, but can’t confirm. We’ve been away too long.
Hehehe - don’t worry, I am the cook, the banker and I take care of all the paperwork.