Dealing with inherited property in the Philippines can be a complex process, especially when the heirs wish to sell the asset immediately. The most common way to achieve this is through an extrajudicial settlement of estate with deed of sale. This legal process allows heirs to distribute the estate of a deceased person and transfer it to a buyer in a single, consolidated document.
The Basics of Estate Settlement
When a person dies without leaving a will and has no outstanding debts, the heirs are not obligated 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 speeds up 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
Trading inherited assets through this method offers multiple advantages:
Speedier Process: 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 process the transfer from the deceased directly to the extra judicial settlement with deed of sale new buyer, granted all requirements are met.
Key Requirements and Steps
To properly execute an extrajudicial settlement with deed of sale, certain criteria 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 unanimous regarding the sale and the distribution 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 hinder the issuance of a new Certificate of Title in the buyer's name.
Protecting the Buyer
For buyers, purchasing through an extrajudicial settlement of estate with deed of sale carries a specific risk under Rule 74, Section 4 of the Rules of Court. This law provides that the property is subject to the rights of any excluded heir or creditor for a duration of two years. To mitigate this risk, many buyers demand an heir's bond or delay until the two-year period has passed.
Conclusion
Handling an extrajudicial settlement with deed of sale is a practical move for families looking to liquidate inherited assets quickly. By understanding the necessary documentation, heirs can ensure a hassle-free transition of ownership while maximizing the value of their inheritance