Handling inherited real estate in the Philippines can be a complex process, especially when the heirs decide to sell the asset immediately. The most practical way to achieve this is through an extra judicial settlement with deed of sale. This legal procedure allows heirs to distribute the estate of a deceased person and convey it to a buyer in a single, combined document.
What is an Extrajudicial Settlement?
When a person is deceased without leaving a will and has no outstanding debts, the heirs are not forced to go to court. Instead, they can choose 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 perform 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
Selling inherited property Philippines through this method offers various advantages:
Time Efficiency: It avoids the need for two separate transactions and two sets of notarization.
Lower Expenses: While taxes must still be paid, handling the paperwork simultaneously can lower administrative burdens.
Clear Title Transfer: The Register of Deeds can update the transfer from the deceased directly to the new buyer, provided all requirements are met.
The Step-by-Step Process
To successfully execute an extrajudicial settlement with deed of sale, certain conditions must be met under extrajudicial settlement of estate with deed of sale Philippine law:
No Will and No Debts: The deceased must have left no will and the estate must be free of debt.
Unanimous Consent: All legal heirs must be in agreement regarding the sale and the division of proceeds.
Public Notice: The settlement must be published in a newspaper of general circulation for three consecutive 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 settlement of taxes. Aside from the Estate Tax, a Capital Gains 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 to the claims of any excluded heir or creditor for a period of two years. To lessen this risk, many buyers require an heir's bond or wait until the two-year period has expired.
Final Thoughts
Executing an extrajudicial settlement of estate with deed of sale is a strategic move for families looking to sell inherited assets quickly. By mastering the legal requirements, heirs can ensure a seamless transition of ownership while securing the value of their estate