MARRIAGE SETTLEMENT

The determination of the gross estate of the decedent who is married will depend upon the property
relations between the spouses.
The spouse may, in the marriage settlements, agree upon the regime of absolute community, conjugal
partnership of gains, complete separation of property, or any othe regime. In thwe absence of a marriage
settlement, or when the regime agreed upon is void, the property relations of the spouses shall be governed by
the following regime or system:
1. Conjugal Partnership of Gains, if married before August 3,1988.
2. Absolute Community of Property, if married on or after August 3,1988 ( Art. 75, Family Code)
Note: the Family Code took effect on August 4, 1988.

Conjugal Partnership of Gains

The regime of Conjugal Partnership of Gains is also called Relative Community of Property.

A. CONJUGAL PROPERTIES
1. Those acquired by onerous title during the marriage at the expense of the common fund, whether
the acquisition be for the partnership, or for only one of the spouses;
2. Those obtained from labor, industry, work, or profession of either both the spouses;
3. The fruits, natural, industrial, or civil, due or received during the marriage from the common
property,as well as the net fruits from the exclusive property of each spouse;
4. The share of either spouse in the hidden treasure which the law awards to the finder or owner of the
property where the treasure is found;
5. Thise acquired through occupation such as fishing and hunting;
6. Livestock existing upon the dissolution of the partnership in the excess of the number of each kind
brought to the marriage by either spouse and;
7. Those which are acquired by chance, such as winnings from gambling or betting. However, losses
therefrom shall be borne exclusively by the loser-spouse.

B. EXCLUSIVE PROPERTIES
1. That which is brought to the marriage as his/her own;
2. That which each acquires during the marriage by gratuitous title;
3. That which is acquired by right or redemption, by barter or by exchange with property belonging to
only one of the spouses; and
4. That which is purchased with the exclusive money of the wife or of the husband.

Absolute Community of Property

The Absolute Community of Property between the spouses shall commence at the precise moment that
the marriage is celebrated.

A. COMMUNITY PROPERTIES
1. ALL properties owned by the spouses at the time of the marriage, and
2. ALL properties acquired thereafter.
B. EXCLUSIVE PROPERTIES
1. Property acquired during the marriage by gratuitous title by either spouse, and the fruits as well as
income thereof, if any, unless it is expressly provided by the donor, testator or grantor that they
shalol form part of the community property;
2. Property for personal and exclusive use of either spouse. However jewelry shall form part of the
community property; and
 3. Property acquired before the marriage by either spouse who has legitimate descendants by a former
marriage, and the fruits as well as the income, if any, of such property.

Similarities Between the Regimes of the Conjugal Partnership and Absolute Community

Property Conjugal Partnership Absolute Community

The property acquired during the marriage (other than inheritance Conjugal Property Community Property
or donation)

Property acquired from labor, industry, work or profession of the Conjugal Property Community Property
spouses

Fruits or income received during the marriage comming from the Conjugal Property Community Property
common property

Property inherited or donated during the marriage Exclusive Property Exclusive Property

Differences Between the System of Conjugal Partnership and Absolute Community of Property

Property Conjugal Partnership Absolute community

Property acquired before marriage, or brought to the marriage Exclusive Property Community Property
Fruits or income due or received during the marriage from Conjugal Property Exclusive Property
exclusive property

Formula for Gross Estate of Married Decedent

1. If the couple was under the conjugal partnership of gains
Conjugal Properties xxx
Add: Exclusive Properties of Decedent xxx
GROSS ESTATE xxx
2. If the couple was under the absolute community of properties
Community properties xxx
Add: Exclusive properties of decedent xxx
GROSS ESTATE xxx

ILLUSTRATIVE PROBLEMS

IP 1. Mr. And Mrs. J. Reyes have the following assets:

1. Properties inherited by Mr. Reyes before the marriage 100,000
2. Properties brought to the marriage by Mrs. Reyes 400,000
3. Properties inherited during the marriage by Mr. Reyes 200,000
4. Income of the properties in No. 3 20,000
5. Properties inherited during the marriage by Mrs. Reyes 500,000
6. Income from properties in No. 5 50,000
7. Property acquired during the marriage 300,000
8. Income of the property in No. 7 100,000
Required:
A. Classify ther properties under Conjugal Partnership of Gains.
B. Classify the properties under Absolute Community of Property.

SOLUTIONS:
A. UNDER CONJUGAL PARTNERSHIP
1. Conjugal Properties
Property acquired during the marriage 300,000
Income of properties inherited during the marriage by Mr. Reyes 20,000
Income of properties inherited during marriage by Mrs. Reyes 50,000
Income of properties acquired during marriage 100,000
TOTAL CONJUGAL PROPERTIES 470,000

2. Exclusive Properties of Mr. Reyes

Properties inherited by Mr. Reyes 100,000
Properties inherited during the marriage by Mr. Reyes 200,000
TOTAL EXCLUSIVE PROPERTIES OF MR. REYES 300,000

3. Exclusive Properties of Mrs. Reyes

Properties brought to the marriage by Mrs. Reyes 400,000
Properties inherited during the marriage by Mrs. Reyes 500,000
TOTAL EXCLUSIVE PROPERTIES OF MRS. REYES 900,000

B. UNDER ABSOLUTE COMMUNITY

4. Community Properties
Properties inherited by Mrs. Reyes before the marriage 100,000
Properties brought to the marriage by Mrs. Reyes 400,000
Property acquired duriong marriage 300,000
Income of property acquired during the marriage 100,000
TOTAL COMMUNITY PROPERTIES 900,000

5. Exclusive Properties of Mr. Reyes

Properties inherited during marriage by Mr. Reyes 200,000
.Income of properties inherited during marriage 20,000
TOTAL EXCLUSIVE PROPERTIES OF MR. REYES 220,000

6. Exclusive Properties of Mr. Reyes

Properties inherited during the marriage by Mrs. Reyes 500,000
Income of properties inherited during the marriage by Mrs. Reyes 50,000
TOTAL EXCLUSIVE PROPERTIES OF MRS. REYES 550,000

IP 2.
The following information are gathered regarding the inheritance due to death of a married individual, Filipino and
and a resident of Baguio City, Philippines:

*Residential house and lot in Baguio, acquired at P1,000,000 with zonal value of P3,000,000 at the date of death.
*Jewelry found on the body of the decedent at the date of death, with fair market value of P500,000. This asset is
determined as exclusive property of the decedent.
*Real property in Mindanao, Philippines, bought 10 years ago, assessed at that time for P1,000,000. An interested
buyer would like to buy this property a week before his death at P5,000,000.
*Investment in Bonds, local and foreign, P600,000.
*Shares of stock of various domestic corporations, listed in the local stock exchange at date of death at aggregate
value of 400,000.
*Real property located in Pangasinan, inherited from his father 3 years ago. This was taxed at 2,500,000 when
transferred from his father to hi name. At that time, he assumed the unpaid mortgage of 500,000. This has 20%
assessment level at declared fair market value of 2,600,000. The BIR zonal valuation stated a fair value of
2,800,000 at date of death.
*Income from farm earned before the date of death, 800,000 (net of related income tax).
*Commercial lot inherited by wife during marriage. This was valued at 6,000,000 when inherited by wife and it has
a fair market value of 10,000,000 at the date of death, 3,000,000, (net of related income tax).
*Property brought to marriage by his wife, 6,000,000.
Deductions claimed by the executor:
Actual funerla expenses 180,000
Judicial expenses 900,000
Medical expenses 1,000,000
Unpaid mortgage on property in Pangasinan 200,000
Various claims of creditors 8,000,000
Claims against insolvent person 800,000

Required:

A. Under the regime of conjugal partnership of gains, compute the following:

1. The gross exclusive estate.
2. The gross conjugal estate.
3. The total gross estate.

B. Under the regime of absolute community of property, compute the following:

1. The gross exclusive estate.
2. The gross conjugal estate.
3. The total gross estate.
SOLUTION to IP 2 (1) (2) (3)
Conjugal Partnership of Gains Exclusive Conjugal Total
Properties:
Residential house and lot in Baguio City 3,000,000 3,000,000
Jewelry 500,000 500,000
Real property in Mindanao, Philippines 5,000,000 5,000,000
Investment in bonds 600,000 600,000
Shares of stock 400,000 400,000
Inheritance from the decedent father 2,800,000 2,800,000
Income from farm 800,000 800,000
Income from wifes exclusive property 3,000,000 3,000,000
Claims against insolvent person _________ 800,000 800,000
TOTAL 3,300,000 13,600,000 16,900,000

(4) (5) (6)

Absolute Community of Property Exclusive Community Total
Properties:
Residential house and lot in Baguio City 3,000,000 3,000,000
Jewelry 500,000 500,000
Real property in Mindanao, Philippines 5,000,000 5,000,000
Investment in bonds 600,000 600,000
Shares of stock 400,000 400,000
Inheritance from the decedent father 2,800,000 2,800,000
Income from farm 800,000 800,000
Claims against insolvent person 800,000 800,000
Prperty brought to marriage by wife _________ 6,000,000 6,000,000
TOTAL 3,300,000 16,600,000 16,900,000

IP 3.
1999. Mr. H through his labor acquired personal properties valued at 4,000,000. Mrs. W
acquired real properties, valued at 1,000,000 and inherited commercial buildings worth
2,000,000 from her grandparents.
 2000. Mr. H and Mrs. W got married.
2001 to 2004. Through their joint income, they were able to acquire their residential house and
lot at 3,000,000. Mr. H received house and lot in Tarlac as inheritance from his father, valued at
1,000,000; H & W used this as their family home. Mrs. W earned rent income of 200,000 from
the commercial building she had inherited from here grandparents. In November 2004, Mr. H
died of heart attack.

Which of the above properties should be included in the gross estate of Mr. H?

Property ownership of H & W is governed by Absolute Commnity under the Family Code because the couple was
married after August 3, 1988, and as such, the properties to be included in the gross estate of Mr. H are:

Community Property:
Hs personal properties acquired in 1997 400,000
Properties of W acquired before marriage (1M+2M) 3,000,000
Residential house and lot 3,000,000
Rent Income 200,000
Total Community Property 6,600,000
Add: Exclusive Property of H, inheritance from his father 1,000,000
TOTAL GROSS ESTATE OF MR. H 7,600,000

Note:
1. The properties acquired by the wife during marriage through gratuitous transfer reamain
exclusive property of the wife and should not be included in the gross estate of the husband.
2. The gross esatate should be valued at their FMV, fair market value at the date of death.
3. Exclusive property does not become a community property just beacause it is used as family
home.
4. Fruits or income due during the marriage coming from exclusive property is an exclusive property
under the absolute community property regime.
5. As a rule, the earnings of the exclusive or conjugal properties have been subjected o income
taxes which is different from estate tax. Hence, thse earnings will still be subjected to transfer
taxes.

IP 4. Concepcion, married to Domingo Jugalab on June 12, 1995 died in 1999 leaving the following properties:

Car purchased in 1990 250,000

House and lot acquired during marriage from conjugal funds 800,000
Savings deposit with Banco Filipino, obtained through labor
and industry of Domingo 90,000
Fishpond in Pangasinan, acquired through the income from
Concepcios Goto House 200,000
Lotto winnings by Domingo 5,000,000
Yamaha wonderbike purchased by Concepcion out of
her exclusive property 50,000
Riceland brought into marriage by Domingo 200,000
Shares of stocks inherited by Concepcion from her
mother who died two weeks ago 63,000

Required: Compute the gross estate.

Conjugal Property:
House and lot 800,000
Savings deposit 90,000
 Fishpond in Pangasinan 200,000
Winnings in Lotto 5,000,000 6,090,000
Exclusive Poperty:
Car 250,000
Yamaha wonderbike 50,000
Shares of stocks 63,000 363,000
GROSS ESTATE 6,453,000

IP5. Dante Pugante, Filipino, married to Ada Maganda on February 10, 2000, died March 20, 2004 leaving the
following properties:

Real properties:
Riceland bought by Dante in 2002 720,000
House and lot which he brought into the marriage 3,400,000
Subdivision lot inherited by Dante from his father in 2002 1,300,000
Coconut land inherited by Ada from her father who died in 1995 1,200,000
Personal Properties:
Computer set given as birthday gift to Ada by her mother in 2003 240,000
Rolex watch owned by Dante 200,000
Cash in bank earned by the spouses during the marriage 3,800,000

Required: Compute the gross estate of Dante if the marriage was under the absolute community of property
regime.

Community Property:
Riceland 720,000
House and Lot 3,400,000
Cash in Bank 3,800,000
Coconut land 1,200,000 9,120,000
Exclusive property:
Rolex watch 200,000
Subdivision lot 1,300,000 1,500,000
GROSS ESTATE 10,620,000