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 partition the estate of a deceased person and convey it to a buyer in a single, combined document.
The Basics of Estate Settlement
When a person passes away without leaving a will and has no pending debts, the heirs are not forced to go to court. Instead, they can choose for an extrajudicial settlement. By signing a notarized deed, the heirs agree 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 simplifies the process by combining the adjudication of the property and the subsequent sale into one legal instrument.
Advantages for Heirs and Buyers
Liquidating inherited land through this method offers various advantages:
Time Efficiency: It removes the need for two separate transactions and two sets of documentation.
Reduced Costs: While taxes must still be paid, handling the paperwork simultaneously can reduce administrative burdens.
Simpler Registration: The Register of Deeds can update 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 conditions 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 successive weeks.
Payment of Taxes: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be transferred.
Financial Obligations
One of the essential 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 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 extrajudicial settlement with deed of sale a unique risk under Rule 74, Section 4 of the Rules of Court. This law stipulates 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 wait until the two-year period has lapsed.
Summary
Executing an extrajudicial settlement with deed of sale is a strategic move for families looking to liquidate inherited assets quickly. By understanding the legal requirements, heirs can ensure a hassle-free transition of ownership while securing the value of their estate