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

Dealing with inherited property in the Philippines can be a daunting process, especially when the heirs intend 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 distribute the estate of a deceased person and convey it to a buyer in a single, combined document.
The Basics of Estate Settlement

When a person dies without leaving a will and has no outstanding debts, the heirs are not obligated to go to court. Instead, they can opt for an extrajudicial settlement. By signing a notarized deed, the heirs agree on how to divide the properties among themselves.

However, when the heirs already have a interested party waiting, they often execute an extrajudicial settlement of estate with deed of sale. This streamlines the process by combining the adjudication of the property and the subsequent disposition into one legal instrument.
Why Use a Combined Deed of Sale?

Selling inherited property Philippines through this method offers various advantages:

Time Efficiency: 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.

extrajudicial settlement of estate with deed of sale Easier Consolidation: The Register of Deeds can process the transfer from the deceased directly to the new buyer, assuming all requirements are met.

Key Requirements and Steps

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

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

Unanimous Consent: All legal heirs must be of one mind regarding the sale and the division of proceeds.

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

Payment of Taxes: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be transferred.

Understanding the Tax Implications

One of the essential aspects of selling inherited property Philippines 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 particular risk under Rule 74, Section 4 of the Rules of Court. This law stipulates 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 request an heir's bond or delay until the two-year period has passed.
Conclusion

Navigating an extrajudicial settlement of estate with deed of sale is a strategic move for families looking to dispose of inherited assets quickly. By understanding the procedural steps, heirs can ensure a hassle-free transition of ownership while securing the value of their estate