Owner, heir, lover

It seems apt to answer questions in this genre on the first day of the love month.

Q. Husband is an OFW who diligently sends money to his wife. The wife buys their dream house and lot, which she has placed under her name. Husband goes home and learns that his wife is having an affair. He threatens to sue her for adultery. Can he just ask his wife to give up the property and turn it over to him completely, in exchange for not suing her for adultery?

A. What I am about to explain in so many words is that the rights of the wife as an owner are stronger than her rights as an heir. And these two kinds of rights are in play in this scenario.

This couple who got married ten years ago is governed by the absolute community of property regime. This means that everything they individually own before, they now co-own as spouses. Even if the wife did not work for a single peso to buy the house, she owns half of it. And even if she placed it entirely under her name, she still owns only half of it. (Of course, we are talking of rights over undivided property, so she cannot claim she owns the sala [living room] and the kitchen, for instance.)

Because she has full ownership over that half, she can only part with it by selling it, donating it, or eventually handing it over through inheritance. Threatening her with an adultery lawsuit (even if the crime were true) would impair her consent because she would be transferring the property under duress. It is no different from pointing a gun to her head. If she transfers under duress and she is able to prove it, it can be a ground to recover the property later. The only acceptable scenario is for her to willingly renounce her rights over half of the property in favor of her husband. This she can do because as an owner, she can donate her property at her discretion.

Let’s assume that she voluntarily transfers the property to her husband. If her husband dies without a will (and assuming that she is the only heir), she may yet be entitled to half of it by succession, even if she really committed adultery. She will not lose her right as an heir unless she is disinherited. And this can be done if the husband executes a will and indicates in that will that she is being disinherited because of the offense that she did.

The other way for the wife to lose her inheritance rights, even if the husband dies without a will, is if her husband files a petition for legal separation and secures a decree of legal separation from the court. This decree shall disqualify the wife from inheriting intestate. But this will still not forfeit her rights over half of the property even if she is a lover of another. And the lawyer’s fees of the erring spouse can also be charged against the community bank account. So the husband can grin until it hurts.

Q. Parents do not fully trust their daughter’s fiancé, or they just really want to be careful, but they love their daughter unconditionally. They want to give her an earning piece of property but they don’t want her future husband to have an interest in that property. What should be done?

A. The short and simple answer to that is for the couple to enter into a prenuptial agreement so that any property arrangement that will protect their daughter’s assets can be made. But this may not work as this is not really within the control of the parents, who are not party to this contract or the contract of marriage (although in the Philippines, it feels like the parents are really part of the marriage contract, in a good way).

This question reminds me of the typical “provincial” story. They would sell their carabao (domestic water buffalo that helps farmers plow the soil to grow rice and other staples), their source of livelihood, so that there would be money for the wedding feast. In a number of occasions, the level-headed wife would say: “I will give them the carabao, even if we have nothing to eat. But I will do so after they get married, not before, so that they can earn from it”.

Back to our question—it is almost counter-intuitive, but the right approach is to give the property to the daughter after the wedding, while they are married. In an absolute community of property, everything is co-owned, except those received as gifts or inherited during the marriage.

The rent income from that property will, however, be part of the community of property. If the property is given to the daughter before the marriage, without a prenuptial agreement, such will come in as part of the community of property. Thus, the date, specified donee, and terms of donation should be covered in a proper deed of donation. When that is done, the only other thing to worry about is this little thing called donor’s tax.

* * *

Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He also chairs the tax committee of the Management Association of the Philippines (MAP). Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.