Niko Villamor

As for real estate (specific immovable property), the following claims, mortgages and liens will be preferred and shall constitute an encumbrance on the immovable or real right:
1) Real estate taxes,
2) Unpaid price of the real property,
3) Unpaid wages and salaries of laborers, architects, engineers and contractors,
4) Claims for furnishers of materials,
5) Mortgage credits recorded in the registry of property (now Registry of Land Titles and Deeds) upon the real estate mortgage,
6) Improvement expenses,
7) Credits annotated in the Registry of Property by virtue of a court order, by attachments or executions and only as to later credits,
Claims of co-heirs for warranty in the p&tition of an immovable among them,
9) Claims of donors of real estate for pecuniary charges or other conditions imposed upon the donor, 10) Credits of insurers for the insurance premium for two years, (Articles 2236-2251, Civil Code).

The declaration of bankruptcy spawns a feeding frenzy, a time to negotiate the terms of surrender. The white flag has been raised. If you are in the midst of financial quagmire and unpaid bills start to pile up, there will be a long line of creditors outside your doorstep knocking furiously to secure payment from you. You will receive harassing telephone calls and dirty demand letters telling you to pay up.. .or else! Yes, the law prefers some creditors to others. The law acts as a traffic police officer manning the intersection to prevent vehicles from crashing against each other. Rumblings that this law is unfair have been voiced out over the years. Why should some creditors get paid ahead of others? The reason behind this law is to provide an orderly scheme or sequence for creditors to collect their debts. Based on their status, some creditors would have to be preferred to provide a systematic approach to the problem of who gets paid first. Creditors cannot rush to the door and expect to get paid all at the same time. This situation is conducive to pandemonium. Creditors should initiate legal steps to put liens on your identified properties to make sure that their stake will be respected once your properties are liquidated and sold to pay for your debts. A lien is a charge affecting the property subject to the lien. The law established what is known as “preference of credits” to guide the courts and other persons involved as to who or what gets paid first to avoid a mad scramble. Creditors, claimants and lien holders will line up to be paid out of your estate in accordance with their “preference” under the New Civil Code.

Wills are important if the person who made the will (the testator) owns real estate with unpaid mortgages. For example, if you own a house and lot worth P5 million with P2 million left on the mortgage, savings accounts, stocks, bonds and a life insurance policy and you left the house and lot with an unpaid mortgage to your daughter with the balance of your estate going to your spouse, does this mean that your child will get the house with or without the mortgage? Your daughter will get the house and lot with the obligation to pay for the mortgage unless you specified in your will that the mortgage will be paid by your estate. Without this clear instruction for the executor to pay the mortgage from the proceeds of your estate, your child would have to pay for the balance of the mortgage. If your daughter fails to pay the mortgage, the bank (the mortgagee) will file a lawsuit to foreclose the property, rendering your child without any asset protection device to preserve the real estate interest you passed on to her.

Writing a will is an act of love. You must deal with practical matters including asset protection to preserve your estate for future generations. You must devise ways to insure that the people or groups you love will receive the assets you want them to get. A well-written will is an effective instrument of asset protection and estate planning but it will take effect only at the time of your demise. A majority of Filipinos do not have wills. They die intestate. Why? Belli and Wilkinson explained that even in the United States, 70 percent or more of American adults do not have wills. The main reason is psychological in nature: people are apprehensive about thinking of their own demise. Or they believe their death will be accelerated if they made a will. You must care for your heirs unless you wish to follow Picasso’s example.

The will should have clear provisions on how your debts will be paid. Outstanding debts will expose your estate to lawsuits that could deplete your entire nest egg. In making your will, you should include provisions that would answer the following inquiries:
1) Who will be the executor of your estate?;
2) Who will serve as guardians to your minor children?;
3) Should your spouse be given the freedom to transfer your property if he or she remarries?;
4) Who will get the remainder of your estate after the legitimes and specific bequests have been made?;
5) Should your estate pay off real estate and chattel mortgages before your properties are transferred to your heirs?;
6) Should debts owed to you be canceled?;
7) Should there be a priority list to determine which property should be sold first in case assets will be sold to pay for your liabilities?; and
How should estate and inheritance taxes be paid? Your responses to these questions will provide a smooth transition of your assets to your heirs and could perpetuate the asset protection devices you have formulated. The downside to a will is the necessity of a probate before it could be given effect. Probate is expensive, not private, and could tie up your assets because of the length of the pro-
ceedings.

The muggy weather, the breath-taking scenery and the presence of promiscuous bikini clad denizens may have little to do with the seductive involvement of tropical countries. Offshore is an international term meaning not only out of your country or jurisdiction, but also out the tax reach of your country of residence or citizenship. Going offshore simply means you are taking your money to a foreign jurisdiction. Offshore banking involves banking operations and activities in two or more countries. This section is perhaps the most complex facet of asset protection planning. The need for an expert is indispensable here. This method of asset protection inquires nerves of steel. It is neither for the control freaks nor the faint-hearted. Most top shelf lawyers, portfolio managers, certified public accountants, estate planners, and offshore consultants are familiar with the intricacies of going offshore. There is a prevalent myth that only money launderers and other criminals go offshore for clandestine purposes or to conceal properties. Many legitimate businessmen, professionals and other law abiding citizens open offshore accounts. Putting your money offshore may help discourage litigation and may facilitate settlement at a lesser price.

“The hardest thing to hide,” wrote Eric Hoffer, “is something that is not there.” We have reached the information age. Only those infused with the ability play in the global village will break the shackles of their economic constraints. Face it, the industrial age is gone. National borders are disappearing and people should have a global mind- set to expand the horizons of their mental faculties and financial resources. People are looking beyond their national borders to look for better opportunities. Going offshore is truly the stage when asset protection becomes a complex and abstruse concept. It is only after you have done your research and talked to reputable professionals that you will muster enough courage and knowledge to decide if going offshore will suit your financial needs. Most people go offshore for a variety of reasons. Their motives include the quest for privacy and confidentiality, concerns for financial security, fear of the future, rampant litigation, concerns with the government, apprehension concerning local banks, confiscatory taxes, the possibility of matrimonial dissolution, potential business failure, anticipation of debilitating illness, preparation for retirement, providing for the family after death, protecting a lump-sum disability award, providing for a disabled or spendthrift spouse or child (Cornez, supra). German and French businessmen are particularly concerned about the confiscatory tax policies in their homeland. High income taxes spurred the perception by the business community that some governments have predatory instincts. To retain a substantial part of their profits on each transaction, these businessmen avail of offshore companies (conduits).

High

Execution is a post judgment remedy. A writ of execution is a court order directing the sheriff to seize the debtor’s property and authorizing a judicial sale of that property. The proceeds are used to pay the creditor the amount of the final judgment. Any surplus must be paid to the debtor. Certain real and personal properties are exempt from attachment or execution. For example, the law provides for a homestead or family home exemption that allows the debtor to retain his residence up to a specific peso value. When you fail to pay, the creditor may go to court and file a case against you. If he wins and you are unable or unwilling to pay, the judgment creditor can enforce the judgment through a judicial process known as “execution.” A court official will notify you that a judgment is outstanding against you and that if it is not settled, the official will seize and sell your property to pay the judgment.