Handling inherited real estate 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 mechanism allows heirs to divide the estate of a deceased person and transfer it to a buyer in a single, integrated document.
Understanding the Legal Framework
When a person passes away 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 buyer waiting, they often sign an extrajudicial settlement with deed of sale. This simplifies the process by combining the adjudication of the property and the subsequent transfer into one legal instrument.
The Benefits of Combining the Settlement and Sale
Selling inherited property Philippines through this method offers multiple advantages:
Speedier Process: It removes the need for two separate transactions and two sets of documentation.
Cost-Effectiveness: While taxes must still be paid, handling the legalities simultaneously can reduce extra judicial settlement with deed of sale administrative burdens.
Easier Consolidation: The Register of Deeds can process the transfer from the deceased directly to the new buyer, assuming 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.
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 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 vital 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 extra judicial settlement with deed of sale carries a particular risk under Rule 74, Section 4 of the Rules of Court. This law stipulates that the property is subject to the rights of any excluded heir or creditor for a period of two years. To mitigate this risk, many buyers demand an heir's bond or delay until the two-year period has passed.
Conclusion
Handling 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