Published 15 February 2019, The Daily Tribune

Time and again, we are reminded of a declaration by Benjamin Franklin that there are only two things in life that are certain: death and taxes—also two topics seldom welcomed into conversations and often left unprepared for.

However, what if there is a way to maximize the heirs’ distributive shares without increasing the value of the gross estate and without having to pay a higher amount of estate tax? Surely, more people would be less apprehensive about the subject and maybe even less evasive and cunning when it comes to declaring the proper amount of the gross estate.


Estate planning. You have probably heard about this concept. Simply stated, it is a process whereby a person undertakes arrangements for the efficient and less costly administration and disposition of his estate once Death comes knocking. While most estate plans are set up with the help of a lawyer experienced in estate law, I would be discussing one simple method in particular—that is, by getting multiple insurance policies for one’s own life.

There is an opportunity in getting multiple life insurance policies. Parenthetically, since the price of one’s life is inestimable, it follows that there can be no over-insurance which is prohibited under our laws. As a consequence, the insured can leave more [asset-wise] to his chosen beneficiaries.

Fortunately, we have no problem as to the income tax side given that life insurance proceeds are excluded from the beneficiary’s gross income and are thus not taxable. Conversely, a dilemma arises on the estate tax side where the taxability of the proceeds will depend on who the beneficiaries of the life insurance policies are. Under Section 85 of the National Internal Revenue Code the Tax Code, the gross estate includes all the property of the decedent, real or personal, tangible or intangible, wherever situated. This embraces life insurance proceeds, viz: “To the extent of the amount receivable by the estate of the deceased, his executor, or administrator, as insurance under policies taken out by the decedent upon his own life, irrespective of whether or not the insured retained the power of revocation, or  to the extent of the amount receivable by any beneficiary designated in the policy of insurance, except when it is expressly stipulated that the designation of the beneficiary is irrevocable.”

If the designation of the beneficiary is irrevocable, the proceeds are generally payable to the beneficiary. Thus, if one designates his heirs (e.g. wife and children) as irrevocable beneficiaries in his life insurance policies and does not appoint any of them as his estate’s executor or administrator come his demise, then the life insurance proceeds will not form part of the deceased’s gross estate and will not be subject to estate tax.

To illustrate: if Pedro has liquid assets worth P10 million, he can use a portion thereof to pay for the annual premiums on his life insurance policies which designate his heirs as irrevocable beneficiaries.

Let us further say that the policies have a face value totaling P20 million.

Following the letter of the law, the P20 million that will be released to the beneficiary-heirs upon Pedro’s death will be excluded from his gross estate if none of them is appointed as his estate’s executor or administrator. Hence, as discussed above, not only would Pedro have increased his heirs’ distributive share by P20 million in making them his beneficiaries, but the insurance proceeds will also not be subjected to both income and estate tax. In conclusion, it is legally possible to increase the heirs’ distributive shares without increasing one’s gross estate and paying the corresponding taxes.

Given the above scenario, allow me then to modify Franklin’s adage: death may be certain, but at least, taxes are relatively not.

For comments and questions, please send an email to