We write relative to your request for a legal opinion on whether

or not the proceeds of the life insurance of the decedent form part of
this gross estate as embodied in our present laws.
Taxation of the proceeds of life insurance will generally depend
on the beneficiarys type of designation. The basic rule was that if the
designation of the beneficiary was revocable 1, the proceeds of the
insurance policy shall still form part of the decedents estate. If the
designation was irrevocable, the proceeds shall not be considered as
part of the gross estate of the decedent. The exception to this rule was
that whether or not the designation was revocable, if the beneficiary
was the (1) estate of the deceased, (2) his executor, or (3) his
administrator, the same would still be taxable.
However, in 2013, Presidential Decree 612, otherwise known as
the Insurance Code of 1978, was amended by Republic Act 10607
where it now deems insurance proceeds to be irrevocable if not
revoked during the lifetime of the decedent, to wit:
SEC. 11, P.D. 612 as amended by R.A. 10607, The insured
shall have the right to change the beneficiary he designated in
the policy, unless he has expressly waived this right in the said
policy. Notwithstanding the foregoing, in the event the
insured does not change the beneficiary during his
lifetime, the designation shall be deemed irrevocable.
(Emphasis ours).

It would seem that from these pertinent provisions of the law we

can say that the designation of the beneficiary is automatically
irrevocable upon the death of the decedent, hence not taxable.
However, a closer reading of the pertinent provisions of our National
Internal Revenue Code would reveal an apparent conflict between its
Estate Tax provisions and the provisions of the amended Insurance
Code, to wit:
SEC. 85(E), National Internal Revenue Code (Estate Tax),
Proceeds of Life Insurance. 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
1 It is revocable when the beneficiary may still be change and the decedent has still
retained interest in the policy (Sec. 85E, NIRC).

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. (Emphasis ours)

It is a basic rule in statutory construction that from the words of the

statute there should be no departureverba legis non est
recedendum. In this case, there is a fundamental difference between
an irrevocable designation that was expressly stipulated versus one
that was deemed to be irrevocable by the law. The first is irrevocable
by clear intention of the decedent; the latter is only such by operation
of law. What more, tax laws are liberally construed in favor of the
government and strictly against the tax payer for the reason that taxes
are the lifeblood of the government.
That being said, we cannot readily say that all designations of
insurance proceeds are irrevocable and hence non-taxable from the
estate of the deceased by default, despite the recent amendments in
the Insurance Code. Notwithstanding, it is our opinion that the spirit of
the amended Insurance Code is to make the designations irrevocable
by default and that the interpretation of the much older Estate Tax laws
should conform to the newer policies of Congress.
For now, it is best to take the safer route by indicating the
irrevocability of a particular designation within the policy itself up until
the Bureau of Internal Revenue or the Supreme Court makes a
definitive ruling on the matter at hand.
We hope this clarifies your points of inquiry. Should you have any
other questions and clarifications regarding this matter, please feel
free to coordinate with us.