Dealing with inherited property 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 mechanism allows heirs to partition the estate of a deceased person and convey it to a buyer in a single, combined document.
What is an Extrajudicial Settlement?
When a person dies without leaving a will and has no outstanding 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 interested party waiting, they often perform 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.
Why Use a Combined Deed of Sale?
Trading inherited assets through this method offers various advantages:
Speedier Process: It eliminates the need for two separate transactions and two sets of notarization.
Cost-Effectiveness: While taxes must still be paid, handling the documentation simultaneously can reduce administrative burdens.
Easier Consolidation: The Register of Deeds can process the transfer from the deceased directly to the new buyer, granted all requirements are met.
The Step-by-Step Process
To properly execute an extrajudicial settlement with deed of sale, certain conditions must be met under Philippine law:
Absence of a Will: The deceased must have left no testament and the estate must be free of debt.
Agreement Among Heirs: All legal heirs must be in agreement regarding the sale and the division of proceeds.
Publication: The settlement must be advertised in a newspaper of general circulation for three successive weeks.
Settling Tax Obligations: The extrajudicial settlement of estate with deed of sale inheritance 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 settlement of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will be due because of the sale component. Neglecting to settle these taxes will block the issuance of a new Certificate of Title in the buyer's name.
Protecting the Buyer
For buyers, purchasing via an extra judicial settlement with deed of sale carries a specific 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 or creditor for a duration of two years. To mitigate this risk, many buyers request an heir's bond or wait until the two-year period has passed.
Summary
Navigating an extrajudicial settlement of estate with deed of sale is a practical move for families looking to dispose of inherited assets quickly. By understanding the procedural steps, heirs can ensure a hassle-free transition of ownership while maximizing the value of their inheritance