Dealing with inherited property in the Philippines can be a challenging 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 procedure allows heirs to divide the estate of a deceased person and convey it to a buyer in a single, integrated document.
What is an Extrajudicial Settlement?
When a person is deceased without leaving a will and has no outstanding debts, the heirs are not obligated to go to court. Instead, they can choose for an extrajudicial settlement. By signing a notarized deed, the heirs concur on how to divide the properties among themselves.
However, when the heirs already have a buyer waiting, they often execute an extrajudicial settlement with deed of sale. This speeds up the process by combining the adjudication of the property and the subsequent sale into one legal instrument.
Why Use a Combined Deed of Sale?
Selling inherited property Philippines through this method offers multiple advantages:
Saved Time: It removes the need for two separate transactions and two sets of documentation.
Lower Expenses: While taxes must still be paid, handling the documentation simultaneously can reduce administrative burdens.
Clear extra judicial settlement with deed of sale Title Transfer: The Register of Deeds can process the transfer from the deceased directly to the new buyer, provided all requirements are met.
How to Proceed
To properly execute an extrajudicial settlement with deed of sale, certain criteria 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 in agreement regarding the sale and the division of proceeds.
Publication: The settlement must be published in a newspaper of general circulation for three consecutive weeks.
Payment of Taxes: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be registered.
Financial Obligations
One of the most critical aspects of selling inherited property Philippines is the settlement of taxes. Aside from the Estate Tax, a Capital Gains Tax and Documentary Stamp Tax will be applicable because of the sale component. Forgetting to settle these taxes will block 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 rights of any excluded heir or creditor for a duration of two years. To reduce this risk, many buyers request an heir's bond or delay until the two-year period has expired.
Final Thoughts
Navigating an extrajudicial settlement of estate with deed of sale is a smart move for families looking to dispose of inherited assets quickly. By learning the procedural steps, heirs can ensure a smooth transition of ownership while securing the value of their estate