Dealing with inherited property in the Philippines can be a daunting 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.
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
Trading inherited assets through this method offers several advantages:
Speedier Process: It eliminates the need for two separate transactions and two sets of documentation.
Reduced Costs: While taxes must still be paid, handling the documentation simultaneously extrajudicial settlement with deed of sale can minimize administrative burdens.
Simpler Registration: 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 requirements 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.
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 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. Neglecting to settle these taxes will hinder the issuance of a new Certificate of Title in the buyer's name.
Protecting the Buyer
For buyers, purchasing via an extrajudicial settlement of estate with deed of sale carries a unique 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 procedural steps, heirs can ensure a hassle-free transition of ownership while securing the value of their inheritance