Understanding Extrajudicial Settlement of Estate with Deed of Sale in the Philippines

Managing inherited land in the Philippines can be a challenging process, especially when the heirs intend to sell the asset immediately. The most practical 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 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 unpaid debts, the heirs are not obligated to go to court. Instead, they can elect for an extrajudicial settlement. By signing a legal document, 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 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

Liquidating inherited land through this method offers several advantages:

Saved Time: It avoids the need for two separate transactions and two sets of notarization.

Reduced Costs: While taxes must still be paid, handling the paperwork simultaneously can lower 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 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 of one mind regarding the sale and the division of proceeds.

Publication: The settlement must be advertised 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 extrajudicial settlement with deed of sale 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 extrajudicial settlement of estate 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 claims of any excluded heir or creditor for a duration of two years. To lessen this risk, many buyers require an heir's bond or wait until the two-year period has lapsed.
Final Thoughts

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