Understanding Extrajudicial Settlement with Deed of Sale in the Philippines

Managing 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 forced to go to court. Instead, they can choose for an extrajudicial settlement. By signing a public instrument, the heirs concur 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.
Why Use a Combined Deed of Sale?

Selling inherited property Philippines through this method offers multiple 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 lower administrative burdens.

Easier Consolidation: 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:

No Will and No Debts: 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 selling inherited property philippines 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. Forgetting to settle these taxes will prevent the issuance of a new Certificate of Title in the buyer's name.
Risks and Safeguards

For buyers, purchasing through 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 rights of any excluded heir or creditor for a period of two years. To reduce this risk, many buyers demand an heir's bond or delay until the two-year period has lapsed.
Conclusion

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