Managing inherited real estate in the Philippines can be a daunting process, especially when the heirs wish to sell the asset immediately. The most practical way to achieve this is through an extrajudicial settlement of estate with deed of sale. This legal procedure allows heirs to distribute 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 is deceased without leaving a will and has no unpaid debts, the heirs are not required to go to court. Instead, they can opt for an extrajudicial settlement. By signing a legal document, the heirs decide on how to divide the properties among themselves.
However, when the heirs already have a purchaser waiting, they often perform an extrajudicial settlement with deed of sale. This speeds up 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:
Saved Time: It eliminates the need for two separate transactions and two sets of documentation.
Lower Expenses: While taxes must still be paid, handling the documentation simultaneously can reduce administrative burdens.
Easier Consolidation: The Register of Deeds can handle the transfer from the deceased directly to the new buyer, assuming all requirements are met.
How to Proceed
To successfully 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 free of debt.
Unanimous Consent: All legal heirs must be unanimous regarding the sale and the distribution of proceeds.
Publication: 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 vital aspects of transferring inherited land is the settlement of taxes. Aside from the Estate Tax, a Capital Gains Tax and Documentary Stamp Tax will be due because of the sale component. Failure to settle these taxes will block the issuance of a new Certificate of Title in the buyer's name.
Ensuring a Valid Transaction
For buyers, purchasing 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 stipulates that the property is subject to the claims of any excluded heir extrajudicial settlement of estate with deed of sale 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.
Conclusion
Handling an extrajudicial settlement with deed of sale is a practical move for families looking to liquidate inherited assets quickly. By learning the necessary documentation, heirs can ensure a smooth transition of ownership while optimizing the value of their estate