A Guide to Extrajudicial Settlement of Estate 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 extrajudicial settlement of estate 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.
Understanding the Legal Framework

When a person is deceased without leaving a will and has no pending debts, the heirs are not required to go to court. Instead, they can elect 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 purchaser waiting, they often sign an extrajudicial settlement 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 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 of Taxes

One of the vital 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. Failure to settle these taxes will block the issuance of a new Certificate of Title in the buyer's name.
Ensuring a Valid Transaction

For buyers, purchasing via an extra judicial settlement with deed of sale carries a unique risk under Rule 74, Section 4 of the Rules of Court. This law stipulates that the property is subject extra judicial settlement with deed of sale to the claims of any excluded heir or creditor for a period of two years. To reduce this risk, many buyers require an heir's bond or wait until the two-year period has lapsed.
Final Thoughts

Executing an extrajudicial settlement of estate with deed of sale is a smart move for families looking to sell inherited assets quickly. By mastering the legal requirements, heirs can ensure a smooth transition of ownership while optimizing the value of their estate