How to Navigate Extrajudicial Settlement with Deed of Sale in the Philippines

Handling 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 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 forced to go to court. Instead, they can opt for an extrajudicial settlement. By signing a notarized deed, the heirs decide on how to divide the properties among themselves.

However, when the heirs already have a buyer waiting, they often perform an extrajudicial settlement with deed of sale. This speeds up the process by combining the adjudication of the property and the subsequent sale into one legal instrument.
The Benefits of Combining the Settlement and Sale

Trading inherited assets through this method offers multiple advantages:

Speedier Process: 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 of Deeds can process the transfer from the deceased directly to the new buyer, granted all requirements are met.

Key Requirements and Steps

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 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 successive weeks.

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

The Role of Taxes

One of the essential aspects of transferring inherited land 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. Neglecting to settle these taxes will hinder the issuance of a new Certificate of Title in the extrajudicial settlement with deed of sale buyer's name.
Risks and Safeguards

For buyers, purchasing via 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 period of two years. To lessen this risk, many buyers demand an heir's bond or delay until the two-year period has expired.
Conclusion

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