Managing inherited real estate in the Philippines can be a challenging 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 mechanism allows heirs to distribute the estate of a deceased person and sell it to a buyer in a single, consolidated document.
What is an Extrajudicial Settlement?
When a person passes away without leaving a will and has no outstanding debts, the heirs are not forced to go to court. Instead, they can elect for an extrajudicial settlement. By signing a notarized deed, the heirs concur on how to divide the properties among themselves.
However, when the heirs already have a buyer 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 sale into one legal instrument.
Advantages for Heirs and Buyers
Selling inherited property Philippines through this method offers multiple advantages:
Saved Time: It removes the need for two separate transactions and two sets of documentation.
Cost-Effectiveness: While taxes must still be paid, handling the documentation simultaneously can lower administrative burdens.
Easier Consolidation: The Register of Deeds can update 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 requirements must be met under Philippine law:
No Will and No Debts: The deceased must have left no testament and the estate must be free of debt.
Unanimous Consent: All legal heirs must be unanimous regarding the sale and the distribution of proceeds.
Public Notice: The settlement must be advertised 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 sold.
The Role extra judicial settlement with deed of sale of Taxes
One of the essential 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 applicable because of the sale component. Forgetting to settle these taxes will block the issuance of a new Certificate of Title in the buyer's name.
Risks and Safeguards
For buyers, purchasing via an extra judicial settlement with deed of sale carries a specific risk under Rule 74, Section 4 of the Rules of Court. This law states that the property is subject to the rights of any excluded heir or creditor for a duration of two years. To lessen this risk, many buyers demand an heir's bond or wait until the two-year period has lapsed.
Summary
Handling an extrajudicial settlement with deed of sale is a strategic move for families looking to liquidate inherited assets quickly. By learning the procedural steps, heirs can ensure a seamless transition of ownership while maximizing the value of their inheritance