What Happens To Your Investments When You Die?

Posted by Fitz Villafuerte under Investing, Personal Finance on November 1, 2015

What would happen to your stock market shares and other investments when you die? It’s a common question that people ask me and below is my usual answer.

First, investments are considered your assets – it is among the list of things that you own – and because it is as such, they become “frozen” when you die.

The cash in the bank, the real estate properties that you own, the company shares in your stock market portfolio, the mutual fund investments that you have, and all other assets under your name become frozen.

In other words, your loved ones cannot withdraw or sell them, and the ownership can’t be transferred to them – well, not just yet.


To unfreeze the assets, the family will need to file a Notice of Death with the Bureau of Internal Revenue within two months after the date of death, and then pay the corresponding Estate Tax within six months from the decedent’s death.

The amount of Estate Tax to be paid is based on the value of the Net Estate; that is the present or fair market value of the asset at the time of death less applicable tax deductions, which can fortunately go as high as 3 million pesos nowadays. As a formula, it looks like this:

Net Estate Value = Gross Estate Value – Tax Deductions

Below are the applicable estate tax rates based on the net estate amount:

Over But not over Tax Plus In excess of
0 200,000 Exempt
200,000 500,000 0 5% 200,000
500,000 2,000,000 15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 And Over 1,215,000 20% 10,000,000

This means that if all your assets and investments during the time of your death is worth P11 million, then this will be your Gross Estate Value.

Now supposed that after your family consults a lawyer, accountant, or financial planner – it was determined that you are eligible for P3 million worth of tax deductions, then your Net Estate Value would be P8 million.

Following the table above, the Estate Tax that needs to be paid by your family to unfreeze your assets will be 465,000 plus (15% of 3M); or 915,000 pesos.

Where will they get the money? They can’t get it from your assets (because it’s frozen), they have to come up with the cash on their own.

This is how life insurance becomes a tool for estate planning because if you have one, your family will immediately receive the cash benefits of your policy, which they can now use to pay the Estate Taxes.

There are other legal matters that need to be addressed when you die, but I won’t discuss them anymore. Sufficient to say that you will need a lawyer, accountant or a financial planner to assist you if you’re not familiar with the process.


What happens to your investments after estate taxes are paid?

What’s important for you to realize now is that Estate Taxes need to be paid, so the assets and investments can be transferred to your family and heirs.

For the cash deposits in your bank accounts, your heirs will be able to withdraw them.

For real estate properties, the title or ownership will be transferred to your heirs, which will give them the right to sell it, or actually do anything they want with it because it’s now theirs.

For paper assets such as stock market shares, UITF investments, bonds, and mutual fund shares, there are two options for your family:

  1. Tell the bank or broker to sell the units or shares, and give the cash proceeds to them; or
  2. Open an account with the bank or broker, and transfer the units or shares to their account

In short, they don’t just disappear; they will in fact, be given or transferred to your heirs – but that’s assuming they know that those assets and investments exists.

If not, then they won’t be able to pay the corresponding estate tax for them; and the investment will remain dormant and unclaimed until the bank or broker notices and take action according to their terms.

So if you’re not keen on telling your family and heirs about all your wealth while you’re still alive (I know some people do), then the best option is to simply put those facts in your last will and testament.

I hope you learned something new today, if you want further reading, you can check out these two articles below:

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Photo credit: Eric Huybrechts


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12 Responses to “What Happens To Your Investments When You Die?”

  1. junji says:

    Thanks for the valueble info, as always…

  2. Rowena says:

    Is it true that for life insurance the beneficiaries don’t need to be irrevocable so that proceeds will not be part of the estate (which will then be liable to estate tax)? I was told by an agent basta life insurance the whole cash value is claimable upon death whether beneficiaries are revocable or irrevocable.

  3. Leo says:

    Hi Fitz, assuming the account is joint “and/or”, how does the taxation affect the surviving wife or husband. Is it computed as half? Thanks for the informative blog.

  4. In case of joint account for the couple be it in stock or money in the bank, what is the procedure? TIA

  5. Fitz says:

    The agent is right. Let’s just hope that BIR doesn’t change their mind about that.

    @Leo and Ernel
    The share in the conjugal property is an applicable deduction. This means the net share of the surviving spouse will not be included in the net estate value (and will not be subject to estate taxes). I’m not a lawyer, please consult one if this is a real concern.

  6. Lani says:

    Hi Sir Fitz! Can you recommend somebody to me from Sunlife. I am interested to get an insurance for my Partner. We are both OFW.Thanks.

  7. There must be some money somewhere that my family can use to pay the estate tax in the event that i die because they can not spend my money and investments unless they pay the tax. Now I know.

  8. Zaldy says:

    I want to have life insurance but company can u recommend.? Tnx

  9. Jerich says:

    Sir Fitz, I was wondering why we pay the estate tax? or bakit may tax pa sa mga naiwan ng namatay. Naiisip ko tuloy ginawa ito sa systema para may pwesto ang mga life insurance sa cycle ng pera. sa life insurance naman, basically naisip ko is pamana ito para sa naiwan, pero mafo-force din na gamitin para sa estate tax. imbes po na panatag ang loob ng mga naulila, mas sasakit pa ang ulo sa paghanap ng propesyonal na babayaran at pag proseso ng mga kailangan.

  10. Ryan says:


    Unfortunately, that’s how the government system works. It sucks. Really sucks. But that’s reality. All our hard earned money or properties, are government property (very ironic, noh). The more you have, the more government will run after you.

    Insurance companies came up with the Life Insurance to ease the burden of the families left behind.

    PS. I think I could be a good salesperson for the insurance companies. LOL. NO, I’m happy to be free from corporate world.

  11. George Town says:

    Under the internal revenue code, for life insurance proceeds to NOT form part of the gross estate of the deceased (and therefore subject to estate tax), the life insurance policy must expressly stipulate that it designates an irrevocable beneficiary. Thus, it might not be accurate for the insurance sales agent to say that a life insurance policy with a revocable/irrevocable beneficiary will have the same tax benefit as a life insurance policy with an irrevocable beneficiary.

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