A Guide to Extrajudicial Settlement of Estate with Deed of Sale in the Philippines

Handling inherited land in the Philippines can be a challenging process, especially when the heirs decide to sell the asset immediately. The most practical way to achieve this is through an extra judicial settlement with deed of sale. This legal procedure allows heirs to partition the estate of a deceased person and sell it to a buyer in a single, integrated document.
What is an Extrajudicial Settlement?

When a person is deceased without leaving a will and has no pending debts, the heirs are not required to go to court. Instead, they can elect for an extrajudicial settlement. By signing a legal document, the heirs decide on how to divide the properties among themselves.

However, when the heirs already have a buyer waiting, they often sign an extrajudicial settlement of estate with deed of sale. This streamlines the process by combining the adjudication of the property and the subsequent sale into one legal instrument.
Advantages for Heirs and Buyers

Selling inherited property Philippines through this method offers multiple advantages:

Saved Time: It eliminates the need for two separate transactions and two sets of notarization.

Reduced Costs: While taxes must still be paid, handling the documentation simultaneously can reduce administrative burdens.

Clear Title Transfer: The Register of Deeds can update the transfer from the deceased directly to the new buyer, assuming all requirements are met.

Key Requirements and Steps

To properly execute an extrajudicial settlement with deed of sale, certain criteria must be met under Philippine law:

No Will and No Debts: The deceased must have left no will and the estate must be free of debt.

Agreement Among Heirs: All legal heirs must be of one mind regarding the sale and the division of proceeds.

Public Notice: The settlement must be published in a newspaper of general circulation for three successive weeks.

Settling Tax Obligations: The Estate Tax must be paid extra judicial settlement with deed of sale to the Bureau of Internal Revenue (BIR) before the property can be registered.

Financial Obligations

One of the vital aspects of transferring inherited land is the payment of taxes. Aside from the Estate Tax, a Capital Gains Tax and Documentary Stamp Tax will be due because of the sale component. Neglecting to settle these taxes will prevent the issuance of a new Certificate of Title in the buyer's name.
Protecting the Buyer

For buyers, purchasing through an extrajudicial settlement of estate with deed of sale carries a particular risk under Rule 74, Section 4 of the Rules of Court. This law states that the property is subject to the rights of any excluded heir or creditor for a duration of two years. To mitigate this risk, many buyers demand an heir's bond or delay until the two-year period has expired.
Summary

Handling an extrajudicial settlement with deed of sale is a strategic move for families looking to sell inherited assets quickly. By mastering the legal requirements, heirs can ensure a seamless transition of ownership while maximizing the value of their estate