Understanding Extrajudicial Settlement 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 efficient 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.
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 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 transfer 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.

Easier Consolidation: The Register selling inherited property philippines 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 criteria 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 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 Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be sold.

Financial Obligations

One of the most critical aspects of transferring inherited land is the payment of taxes. Aside from the Estate Tax, a Capital Gains Tax and Documentary Stamp Tax will be required 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 extrajudicial settlement of estate with deed of sale carries a specific risk under Rule 74, Section 4 of the Rules of Court. This law provides that the property is subject to the rights of any excluded heir or creditor for a duration of two years. To mitigate this risk, many buyers request an heir's bond or wait until the two-year period has passed.
Summary

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 inheritance