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 extra judicial settlement with deed of sale. This legal process allows heirs to distribute the estate of a deceased person and convey it to a buyer in a single, consolidated 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 opt 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 purchaser waiting, they often perform an extrajudicial settlement of estate with deed of sale. This speeds up the process by combining the adjudication of the property and the subsequent transfer into one legal instrument.
Advantages for Heirs and Buyers
Selling inherited property Philippines through this method offers several advantages:
Time Efficiency: It avoids the need for two separate transactions and two sets of documentation.
Lower Expenses: While taxes must still be paid, handling the documentation simultaneously can lower administrative burdens.
Simpler Registration: The Register of Deeds can process the transfer from the deceased directly to the new buyer, provided all requirements are met.
Key Requirements and Steps
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.
Unanimous Consent: All extrajudicial settlement with deed of sale legal heirs must be in agreement regarding the sale and the division of proceeds.
Public Notice: The settlement must be advertised in a newspaper of general circulation for three consecutive weeks.
Settling Tax Obligations: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be transferred.
Financial Obligations
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. 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 provides that the property is subject to the rights of any excluded heir or creditor for a period of two years. To reduce 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