Handling inherited real estate in the Philippines can be a daunting 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 partition the estate of a deceased person and transfer it to a buyer in a single, integrated document.
The Basics of Estate 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 elect 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 buyer waiting, they often perform an extrajudicial settlement with deed of sale. This streamlines 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
Liquidating inherited land through this method offers various advantages:
Speedier Process: It eliminates the need for two separate transactions and two sets of documentation.
Lower Expenses: While taxes must still be paid, handling the paperwork simultaneously can lower administrative burdens.
Easier Consolidation: The Register of Deeds can handle the transfer from the deceased directly to the new buyer, provided all requirements are met.
The Step-by-Step Process
To effectively execute an extrajudicial settlement with deed of sale, certain requirements 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 of one mind regarding the sale and the distribution of proceeds.
Public Notice: The settlement must be published in a newspaper of general circulation for three successive weeks.
Payment of Taxes: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be registered.
The Role of Taxes
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 applicable 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 through an extrajudicial settlement of estate with deed of sale carries a unique risk under Rule 74, Section 4 of the Rules of Court. This law states that the property is subject to the claims of any excluded heir extrajudicial settlement of estate with deed of sale or creditor for a duration of two years. To lessen this risk, many buyers demand an heir's bond or wait until the two-year period has lapsed.
Conclusion
Navigating an extrajudicial settlement with deed of sale is a practical move for families looking to dispose of inherited assets quickly. By mastering the legal requirements, heirs can ensure a smooth transition of ownership while maximizing the value of their inheritance