A Guide to Extrajudicial Settlement 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 extra judicial settlement with deed of sale. This legal process allows heirs to distribute 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 is deceased without leaving a will and has no unpaid debts, the heirs are not required 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 interested party waiting, they often execute an extrajudicial settlement with deed of sale. This streamlines the process by combining the adjudication of the property and the subsequent transfer 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, provided 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.

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

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

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

Financial Obligations

One of the most critical 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 applicable 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 selling inherited property philippines 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 claims of any excluded heir or creditor for a period of two years. To mitigate this risk, many buyers require an heir's bond or wait until the two-year period has lapsed.
Summary

Handling an extrajudicial settlement with deed of sale is a practical move for families looking to dispose of inherited assets quickly. By mastering the necessary documentation, heirs can ensure a hassle-free transition of ownership while securing the value of their estate