Short answer. Yes. Article 908 requires all debts and charges of the estate to be deducted from the value of the property left at death before the legitime is computed. Only after that deduction, and after adding back collationable donations, is the net figure used to determine each compulsory heir's share.
What the law says
To determine the legitime, the value of the property left at the death of the testator shall be considered, deducting all debts and charges, which shall not include those imposed in the will.
Civil Code, Article 908 — Computing The Net Estate. Read the full provision →
What the law says
To the net value of the hereditary estate, shall be added the value of all donations by the testator that are subject to collation, at the time he made them.
Civil Code, Article 908 — Computing The Net Estate. Read the full provision →
Debts come out before the legitime is figured
Article 908 lays out the starting point for computing every compulsory heir's legitime, and debts are dealt with immediately: to determine the legitime, the value of the property left at the death of the testator shall be considered, deducting all debts and charges. Your father's outstanding loans are exactly the kind of obligation this covers. Before anyone's legitime can even be calculated, those debts have to be subtracted from the gross value of what he left behind, so the legitime is based on what the estate is actually worth after its liabilities.
One exclusion from "debts and charges"
The article draws one line worth noting: the debts and charges to be deducted are "which shall not include those imposed in the will." Obligations that your father chose to impose through his own will, such as a charge or burden he placed on an heir or on the estate in the will itself, are treated differently from the debts he genuinely owed before he died. Ordinary loans and obligations incurred during his lifetime fall on the deduction side of this rule; conditions or charges he wrote into the will itself do not reduce the estate the same way.
Collationable donations are added back afterward
Once the debts are subtracted, the computation is not yet finished. Article 908 continues: to the net value of the hereditary estate, shall be added the value of all donations by the testator that are subject to collation, at the time he made them. If your father made lifetime donations to compulsory heirs that are subject to collation, their value at the time of the donation is added back into this net figure. Only after both steps, deducting debts and adding back collationable donations, does the resulting figure become the base for computing legitimes.
Why the order of operations matters to you
Getting the sequence right protects everyone's share from being miscalculated. If debts are ignored or only partially deducted, the legitime figures will overstate what is actually available, leading heirs to expect more than the estate can deliver once creditors are paid. If collationable donations are left out, heirs who never received a lifetime gift can end up shortchanged relative to those who did. Before dividing anything among the heirs, it is worth confirming that your father's substantial loans have genuinely been accounted for in this computation, and not simply set aside for later.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Pablo Uy, substituted by his heirs, namely: Mylene D. Uy, Paul D. Uy, G.R. No. 227460, December 5, 2019 — read the decision on LawPhil →
- Spouses Bernardo Buenaventura, et al. vs. Court of Appeals, et al, G.R. No. 126376, November 20, 2003 — read the decision on LawPhil →