Dealing with inherited real estate in the Philippines can be a complex process, especially when the heirs intend 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 transfer it to a buyer in a single, integrated document.
What is an Extrajudicial Settlement?
When a person dies without leaving a will and has no unpaid 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 purchaser waiting, they often sign an extrajudicial settlement 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:
Saved Time: It eliminates the need for two separate transactions and two sets of notarization.
Lower Expenses: While taxes must still be paid, handling the documentation simultaneously can minimize administrative burdens.
Clear Title Transfer: The Register of Deeds can handle the transfer from the deceased directly to the new buyer, assuming all requirements are met.
Key Requirements and Steps
To effectively 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 free of debt.
Agreement Among Heirs: All legal heirs must be unanimous regarding the sale and the distribution of proceeds.
Publication: The settlement must be advertised in a newspaper of general circulation for three consecutive weeks.
Payment of Taxes: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be transferred.
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 transfer tax and Documentary Stamp Tax will be required because of the sale component. Failure to settle these taxes will hinder the issuance of a new Certificate of Title in the buyer's name.
Ensuring a Valid Transaction
For buyers, purchasing through an extrajudicial settlement of estate with deed of sale carries a specific risk under Rule 74, Section 4 of the Rules of Court. This law provides that the property extra judicial settlement with deed of sale is subject to the claims of any excluded heir or creditor for a period of two years. To lessen this risk, many buyers demand an heir's bond or wait until the two-year period has lapsed.
Summary
Executing an extrajudicial settlement of estate with deed of sale is a smart move for families looking to sell inherited assets quickly. By understanding the legal requirements, heirs can ensure a smooth transition of ownership while optimizing the value of their estate