Handling inherited real estate in the Philippines can be a complex process, especially when the heirs decide 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 sell it to a buyer in a single, consolidated document.
Understanding the Legal Framework
When a person passes away without leaving a will and has no unpaid debts, the heirs are not required 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 buyer waiting, they often execute an extrajudicial settlement of estate 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 various advantages:
Speedier Process: It removes the need for two separate transactions and two sets of notarization.
Lower Expenses: While taxes must still be paid, handling the paperwork simultaneously can lower administrative burdens.
Simpler Registration: The Register of Deeds can process the transfer from the deceased directly to the new buyer, assuming all requirements are met.
How to Proceed
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 division of proceeds.
Public Notice: The settlement must be published in a newspaper of general circulation for three successive weeks.
Settling Tax Obligations: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be registered.
Understanding the Tax Implications
One of the essential 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 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.
Risks and Safeguards
For buyers, purchasing through an extrajudicial settlement of estate with deed of sale carries a particular risk under Rule 74, Section 4 of the Rules of Court. This law stipulates that the property is subject to the claims of any excluded heir or creditor for a period 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
Executing an extrajudicial settlement of estate with deed extra judicial settlement with deed of sale of sale is a practical move for families looking to dispose of inherited assets quickly. By understanding the necessary documentation, heirs can ensure a hassle-free transition of ownership while maximizing the value of their estate