Dealing with 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 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 forced to go to court. Instead, they can opt 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 interested party waiting, they often execute an extrajudicial settlement of estate with deed of sale. This streamlines 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
Trading inherited assets through this method offers several advantages:
Speedier Process: It avoids the need for two separate transactions and two sets of documentation.
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.
The Step-by-Step Process
To successfully 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 free of debt.
Agreement Among Heirs: All legal heirs must be unanimous regarding the sale and the distribution of proceeds.
Public Notice: The settlement must be advertised 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 transferred.
Understanding the Tax Implications
One of the vital aspects of transferring inherited land is the payment of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will be due because of the sale component. Forgetting to settle these taxes will extrajudicial settlement with deed of sale prevent the issuance of a new Certificate of Title in the buyer's name.
Protecting the Buyer
For buyers, purchasing via an extra judicial settlement with deed of sale carries a particular 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 reduce this risk, many buyers require an heir's bond or delay until the two-year period has expired.
Summary
Executing an extrajudicial settlement with deed of sale is a practical move for families looking to dispose of inherited assets quickly. By learning the necessary documentation, heirs can ensure a hassle-free transition of ownership while securing the value of their estate