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

Managing inherited property in the Philippines can be a daunting process, especially when the heirs intend 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 partition the estate of a deceased person and transfer it to a buyer in a single, combined document.
Understanding the Legal Framework

When a person dies without leaving a will and has no outstanding debts, the heirs are not required to go to court. Instead, they can elect 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 sign an extrajudicial settlement of estate with deed of sale. This simplifies 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 various advantages:

Saved Time: It eliminates the need for two separate transactions and two sets of documentation.

Lower Expenses: While taxes must still be paid, handling the documentation simultaneously can reduce administrative burdens.

Easier Consolidation: The Register of Deeds can handle the transfer from the deceased directly to the new buyer, provided all requirements are met.

The Step-by-Step Process

To effectively execute an extrajudicial settlement with deed of sale, certain conditions must be met under Philippine law:

Absence of a Will: The deceased must have left no will and the estate must be free of debt.

Unanimous Consent: 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.

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

The Role of Taxes

One of the most critical aspects of selling inherited property Philippines is the payment of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will extrajudicial settlement with deed of sale be due 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 through 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 mitigate this risk, many buyers require an heir's bond or wait until the two-year period has passed.
Conclusion

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