In the past, banks tend to freeze both individual and joint accounts of our loved ones the moment they get notification that they have passed away.

It is not about keep the money; rather, Section 97 of the Tax Code requires that heirs must first show a BIR Certificate that estate taxes of the deceased have been paid before the bank can allow them to withdraw from the depositor’s bank accounts both individual and joint accounts. That is why, co-depositors of joint accounts usually take out the money as soon as possible.

Technically, joint accounts are co-owned and therefore, shares are presumed equal. Having said that, a co-depositor should be free to use half of its value. In case there is a survivorship clause in the agreement, the entire bank account goes to the co-depositor once the other dies. These processes are halted by Section 97 as no one can withdraw from the said account, both as to the share of the deceased and of the surviving depositor.

Withdrawals from bank accounts of the deceased are now allowed under the TRAIN Law

Upon the enactment of Republic Act No. 10963 or TRAIN Law. Section 97 now states:

“Section 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights.

If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall allow any withdrawal from the said deposit account, subject to a final withholding tax of 6 percent. For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors.”

Implementing the TRAIN Law, Bureau of Internal Revenue (BIR) issued RMC No. 62-2018 which allows executors, administrators, or any of the legal heirs who, prior to the decedent’s death, maintained bank deposits with the deceased to withdraw within one (1) year from the date of death.

What are the requirements?

RMC No. 62-2018 allows the executor, administrator, or any legal heir to present to the bank a copy of the TIN of the estate and BIR Form No. 1904 duly stamped by the RDO in lieu of a BIR Certificate or electronic Certificate Authorizing Registration (eCAR).

As such, the following requirements must first be complied with:

1. Those that must be presented to the Revenue District Office in accordance with the existing guidelines on the issuance of the TIN:
   1. A copy of the Tax Identification Number (TIN) of the decedent’s estate, duly stamped received by the concerned; and
   1. BIR Form No. 1904 of the estate, duly stamped received by the concerned RDO.
2. All withdrawal slips to be used must contain the following terms and conditions:
   1. A sworn statement of any of the surviving joint depositors to the effect that all other joint depositors are still living at the time of the withdrawal; and
   1. A statement that the withdrawal is subject to 6% FWT.

Note, however, that the Circular does not prevent the bank from requiring additional documents in accordance with its existing policies, such as those ascertaining the heirs’ identity and right to claim before allowing any withdrawal.

What happens if the executor, administrator or heirs fail to withdraw within one (1) year?

Should the heirs fail to withdraw from the accounts within one year, there is a risk that the banks will freeze the accounts pending the settlement of estate tax. As bank accounts are part of the deceased’s estate, these must be declared for estate tax purposes and indicated in the eCAR.

Note that RMC specifies both “individual and joint accounts”. Should the one-year period expire, there is a risk that both accounts may be frozen as the prescriptive period apply to both indiscriminately.

 Issue #2: Are the withdrawals taxable?

Based on RMC No. 62-2018, each amount withdrawn shall be subject to six percent (6%) final withholding tax (FWT).

As the RMC specifies both individual and joint accounts, executors, administrators and heirs may actually withdraw from both, provided the requirements above are complied with. For the individual accounts, the tax shall be deducted from the entire amount to be withdrawn. Meanwhile, for the joint accounts, it shall be based on the share of the decedent.