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

Dealing with inherited property in the Philippines can be a complex process, especially when the heirs wish to sell the asset immediately. The most common way to achieve this is through an extrajudicial settlement of estate with deed of sale. This legal process allows heirs to divide the estate of a deceased person and transfer it to a buyer in a single, consolidated document.
The Basics of Estate Settlement

When a person passes away without leaving a will and has no unpaid debts, the heirs are not obligated to go to court. Instead, they can elect for an extrajudicial settlement. By signing a legal document, the heirs agree on how to divide the properties among themselves.

However, when the heirs already have a purchaser 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?

Liquidating inherited land through this method offers various advantages:

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

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

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

How to Proceed

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.

Agreement Among Heirs: 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 Capital Gains 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 through an extra judicial settlement with deed extrajudicial settlement of estate with deed of sale 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 reduce this risk, many buyers require an heir's bond or delay until the two-year period has lapsed.
Final Thoughts

Handling an extrajudicial settlement with deed of sale is a smart move for families looking to liquidate inherited assets quickly. By learning the necessary documentation, heirs can ensure a hassle-free transition of ownership while maximizing the value of their inheritance