Handling 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, integrated 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 buyer waiting, they often sign an extrajudicial settlement with deed of sale. This simplifies the process by combining the adjudication of the property and the subsequent transfer into one legal instrument.
The Benefits of Combining the Settlement and Sale
Selling inherited property Philippines through this method offers multiple advantages:
Time Efficiency: It removes the need for two separate transactions and two sets of documentation.
Lower Expenses: While taxes must still be paid, handling the legalities simultaneously can reduce administrative burdens.
Easier Consolidation: The Register of Deeds can update the transfer from the deceased directly to the new buyer, provided all requirements are met.
Key Requirements and Steps
To effectively execute an extrajudicial settlement with deed of sale, certain criteria must be met under Philippine law:
No Will and No Debts: The deceased must have left no testament and the estate must be cleared of liabilities.
Unanimous Consent: All legal heirs must be in agreement 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.
Settling Tax Obligations: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be transferred.
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 transfer tax and Documentary Stamp Tax will be applicable 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.
Risks and Safeguards
For buyers, purchasing through an extrajudicial settlement of estate with deed of sale carries a particular risk under Rule 74, Section 4 of the Rules extra judicial settlement with deed of sale 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 reduce this risk, many buyers request an heir's bond or delay until the two-year period has expired.
Conclusion
Executing an extrajudicial settlement with deed of sale is a smart move for families looking to dispose of inherited assets quickly. By learning the procedural steps, heirs can ensure a seamless transition of ownership while optimizing the value of their estate