Managing inherited property in the Philippines can be a complex process, especially when the heirs intend to sell the asset immediately. The most common way to achieve this is through an extra judicial settlement with deed of sale. This legal procedure allows heirs to divide 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 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 execute an extrajudicial settlement with deed of sale. This simplifies the process by combining the adjudication of the property and the subsequent disposition into one legal instrument.
Advantages for Heirs and Buyers
Liquidating inherited land through this method offers several advantages:
Time Efficiency: It removes the need for two separate transactions and two sets of notarization.
Lower Expenses: 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.
Key Requirements and Steps
To effectively 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 will and the estate must be free of debt.
Unanimous Consent: All legal heirs must be in agreement regarding the sale and the division of proceeds.
Public Notice: The settlement must be published in a newspaper of general circulation for three consecutive weeks.
Settling Tax Obligations: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the extra judicial settlement with deed of sale property can be registered.
The Role of Taxes
One of the essential aspects of selling inherited property Philippines 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. Forgetting to settle these taxes will prevent the issuance of a new Certificate of Title in the buyer's name.
Risks and Safeguards
For buyers, purchasing through an extra judicial settlement with deed of sale carries a unique risk under Rule 74, Section 4 of the Rules of Court. This law stipulates 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.
Summary
Navigating an extrajudicial settlement of estate with deed of sale is a strategic move for families looking to dispose of inherited assets quickly. By mastering the legal requirements, heirs can ensure a smooth transition of ownership while optimizing the value of their inheritance