Handling inherited property in the Philippines can be a daunting process, especially when the heirs intend to sell the asset immediately. The most efficient way to achieve this is through an extrajudicial settlement of estate 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, integrated document.
What is an Extrajudicial Settlement?
When a person is deceased without leaving a will and has no outstanding 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 decide 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 speeds up the process by combining the adjudication of the property and the subsequent sale into one legal instrument.
Advantages for Heirs and Buyers
Trading inherited assets through this method offers several advantages:
Saved Time: It eliminates the need for two separate transactions and two sets of documentation.
Reduced Costs: While taxes must still be paid, handling the documentation simultaneously can minimize 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.
The Step-by-Step Process
To successfully 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 will and the estate must be free of debt.
Agreement Among Heirs: All legal heirs must be of one mind regarding the sale and the division 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 registered.
Understanding the Tax Implications
One of the essential aspects of selling inherited property Philippines is the payment of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will be applicable 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.
Ensuring a Valid Transaction
For buyers, purchasing via 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 extrajudicial settlement of estate with deed of sale the property is subject to the claims of any excluded heir or creditor for a period of two years. To lessen this risk, many buyers require an heir's bond or wait until the two-year period has lapsed.
Final Thoughts
Executing an extrajudicial settlement of estate with deed of sale is a smart move for families looking to sell inherited assets quickly. By learning the legal requirements, heirs can ensure a smooth transition of ownership while optimizing the value of their estate