Handling inherited real estate 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 purchaser waiting, they often sign an extrajudicial settlement of estate with deed of sale. This streamlines the process by combining the adjudication of the property and the subsequent disposition into one legal instrument.
Why Use a Combined Deed of Sale?
Selling inherited property Philippines through this method offers various advantages:
Saved Time: It avoids the need for two separate transactions and two sets of notarization.
Cost-Effectiveness: While taxes must still be paid, handling the paperwork simultaneously can minimize administrative burdens.
Simpler Registration: The Register of Deeds can process the transfer from the deceased directly to the new buyer, provided 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 cleared of liabilities.
Unanimous Consent: All legal heirs must be unanimous regarding the sale and the division of proceeds.
Public Notice: The settlement must be published 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 transferred.
Understanding the Tax Implications
One of the most critical aspects of transferring inherited land is the settlement of taxes. Aside from the Estate Tax, a Capital Gains Tax and Documentary Stamp Tax extrajudicial settlement of estate with deed of sale will be due 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 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 or creditor for a period of two years. To lessen this risk, many buyers request an heir's bond or wait until the two-year period has expired.
Summary
Navigating 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