Unmarried partners(other than same sex couples under U.S. law) living in the Philippines do not enjoy the protections and benefits that are available to married couples under U.S. and Philippine law. For example, unmarried partners are not entitled to an intestate share of the estate, nor do they have a statutory right to a share of their partner’s estate, as spouses do, to mention a few of the rights that a spouse has.
When unmarried couples are planning their estates, they need to understand the disadvantages unmarried couples face and learn about the estate planning strategies available to unmarried couples. The planning becomes more complex where there is property located both in and outside the Philippines.
Unless an individual provides otherwise in a will, upon his or her death, his or her assets located in the Philippines will be distributed according to the Philippine’s law of intestacy. Philippine law provides that if an individual dies intestate, part of their estate must pass to specific heirs. The intestacy rules have a priority list setting forth the order in which heirs of the decedent will inherit the decedent’s estate. Their unmarried partner is not on the list.
So, if an unmarried individual doesn’t make specific provisions for their partner, by will or, better yet, by trust, then upon death, the surviving partner will likely receive nothing. The surviving partner could be left without any assets and could even become homeless. Therefore, if unmarried partners intend to benefit each other upon death, they must plan ahead.
There are three basic strategies unmarried couples can use to protect themselves - get married, do a will, a trust, or use Testamentary substitutes to dispose of their estates. The unmarried partners may obtain the benefits available to a married couple by entering into a marriage before the death of one of the partners. This will work even in the case of a deathbed marriage, although such a marriage may be subject to challenge by family members if the ailing partner’s capacity is diminished. This does not resolve all the issues unmarried couples face under U.S. and Philippine law, but doing something is better than doing nothing.
The unmarried couple can do wills to control how their estate will be distributed. To avoid problems, unmarried partners should take the following precautions to minimize the risk of challenges to their will: Make sure the will is properly executed, include specific statements designed to refute lack of capacity, retain separate attorneys, include an in terrorem or “no contest” clause. This clause would disinherit an unsuccessful will contestant.
Unmarried couples should also consider employing testamentary substitutes such as trusts, life insurance, jointly held property, IRAs, and property that passes by beneficiary designation or operation of law. Properly understood and used, Testamentary substitutes can be powerful estate planning tools, plus Testamentary substitutes are not subject to Probate.
A problem faced by many retirees living in the Philippines is that they may own real property in the Philippines and elsewhere in the world. If they die holding title to the real property in their own name, the property is subject to Probate. This could result in Probate proceedings in several countries, resulting in delays in settling the estate and additional expenses. One way to avoid this is to have a trust hold title to the real property. This will avoid the real property being subject to Probate. In addition, the trust can provide asset protection.
I recently met with a Filipina who had lived with her U.S. boyfriend (referred to herein as Fred) in the Dumaguete City for over 10 years. Together, with financial help from her boyfriend’s son, she cared for Fred during his last illness until he died. To her shock, she is now destitute. Instead of seeking estate planning counsel when he became ill, Fred hand wrote what he intended to be a will, leaving his property to her. The document failed as a will.
Now, the wife back in the U.S. will get most of the estate. The son (from a first marriage) protested that this was unfair. The second wife had been awful to his father and didn’t even come to his father’s memorial service in the U.S.
As they say, it is what it is. The result could have been different if the couple had taken the time to understand the rules when a person dies and that an unmarried partners do not have the same rights as a married couple. The decedent in this case could have done a real will or created a trust for the benefit of the Filipina. Unfortunately, no real planning was done and the Filipina is SOL - sadly out of luck. This did not have to be.