Managing inherited land in the Philippines can be a challenging process, especially when the heirs decide 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 partition the estate of a deceased person and sell it to a buyer in a single, combined document.
What is an Extrajudicial Settlement?
When a person is deceased 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 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 sale into one legal instrument.
The Benefits of Combining the Settlement and Sale
Trading inherited assets through this method offers multiple advantages:
Speedier Process: It eliminates the need for two separate transactions and two sets of documentation.
Cost-Effectiveness: While taxes must still be paid, handling the legalities simultaneously can reduce administrative burdens.
Easier Consolidation: The Register of Deeds can process the transfer from the deceased directly to the new buyer, assuming all requirements are met.
Key Requirements and Steps
To properly 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 cleared of liabilities.
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 inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be transferred.
Understanding the Tax Implications
One of the most critical aspects of selling inherited property Philippines 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 selling inherited property philippines 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 require an heir's bond or delay until the two-year period has lapsed.
Final Thoughts
Executing an extrajudicial settlement with deed of sale is a smart move for families looking to sell inherited assets quickly. By mastering the legal requirements, heirs can ensure a seamless transition of ownership while securing the value of their estate