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

Handling inherited real estate 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 convey it to a buyer in a single, combined document.
What is an Extrajudicial Settlement?

When a person is deceased without leaving a will and has no outstanding debts, the heirs are not forced to go to court. Instead, they can choose for an extrajudicial settlement. By signing a public instrument, 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 with deed of sale. This simplifies the process by combining the adjudication of the property and the subsequent transfer into one legal instrument.
The Benefits of Combining the Settlement and Sale

Trading inherited assets through this method offers multiple advantages:

Speedier Process: It removes the need for two separate transactions and two sets of documentation.

Lower Expenses: While taxes must still be paid, handling the legalities simultaneously can reduce administrative burdens.

Easier Consolidation: The Register of Deeds can process the transfer from the deceased directly to the new buyer, granted 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:

Absence of a Will: The deceased must have left no testament and the estate must be cleared of liabilities.

Unanimous Consent: All legal heirs must be unanimous regarding the sale and the distribution of proceeds.

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

Payment of Taxes: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be registered.

The Role of Taxes

One of the vital aspects of transferring inherited land is the settlement of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will be due because of the sale component. Failure to settle these taxes will block the issuance of a new Certificate of Title in the buyer's name.
Ensuring a Valid Transaction

For buyers, purchasing via an extra judicial settlement with deed of sale carries a unique risk under Rule 74, Section 4 of the Rules of Court. This law states that the property is subject to the claims of any excluded heir or creditor for a period of two years. To lessen this risk, many buyers extrajudicial settlement with deed of sale require an heir's bond or wait until the two-year period has expired.
Final Thoughts

Executing an extrajudicial settlement of estate 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 optimizing the value of their estate