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ESTATE PLANNING PROBLEM

Upon his retirement from a multinational drug company, Mr. Cruz bought out the rights to several popular over the counter drugs and set up his own drug company in Paranaque. During its ten years of operations, he managed to make the company into what is now a P300 Million asset with gross sales of around P40 Million a year. However on the 10th year, Mr. Cruz had a heart attack and passed away, survived by his 62 year old wife and his 40 year old son. Operations of the company are now ably handled by two of his trusted employees, the COO and the Treasurer while Mrs. Cruz is now Chairman of the Board and the son is the CEO, and the son and the mother now reside in Bacolod. The son is really a figurehead who is given a monthly salary of P1 Million per month and flies to Manila every other week to go to the company to sign documents carefully prepared and vetted by the COO and the Treasurer. Despite objections from his mother, he recently got married to a 22 year old girl also from Bacolod who used to work in Japan as an entertainer. This of course, alarmed Mrs. Cruz, since the son refused a pre-nuptial contract and would fly into a rage anytime someone would question his wifes motives in marrying. Mrs. Cruz on the other hand is not in good health at this point, since she has diabetes and now hardly leaves her Bacolod as she frequently uses a wheelchair. After more than a year of marriage, the son and his wife has not been successful in having a child. Mrs. Cruz comes to you for help in coming up with an estate plan, telling you straight away that while she prefers to think with her concern that should something happen to her, the entire assets of the family, which she and her husband worked so hard for, may go to the family of her sons wife. As of now, her assets include:

1. 97% of the shares of stock of Drug Company

2. Four houses and lots in a posh Bacolod subdivision worth P15 Million

3. Two houses and lots in Ayala Alabang worth P60Million

4. Blue chip stocks worth P8Million

5. Several bank accounts in four banks totaling Php 40Million.

Factors to be taken into consideration:

1. Mrs. Cruz wants to be able to retain the option to sell the Drug Company if she is offered the right price. This means that she would like to keep the shares of stock as a block as it is worth much more than selling it piecemeal.

2. The son is obese and a borderline diabetic, so that having children may be a problem.

3. Mrs. Cruz wants her arrangements concerning her properties to be a secret from her son as much as possible.

4. Mrs. Cruz has only two sisters, both only a few younger than her and both are old maids.

5. While Mrs. Cruz so far thinks her daughter-in-law is sincere, she has reservations about the other brothers and parents of her daughter-in-law.

6. Of course Mrs. Cruz wants to minimize any tax payments involved in the transfer of the assets to the beneficiaries.

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