Handling inherited real estate 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 extra judicial settlement 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.
What is an Extrajudicial Settlement?
When a person dies without leaving a will and has no unpaid debts, the heirs are not required to go to court. Instead, they can choose for an extrajudicial settlement. By signing a notarized deed, the heirs agree on how to divide the properties among themselves.
However, when the heirs already have a purchaser waiting, they often perform an extrajudicial settlement with deed of sale. This streamlines 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
Trading inherited assets through this method offers several advantages:
Saved Time: It removes the need for two separate transactions and two sets of notarization.
Lower Expenses: While taxes must still be paid, handling the legalities simultaneously can reduce administrative burdens.
Simpler Registration: The Register of Deeds can update the transfer from the deceased directly to the new buyer, granted all requirements are met.
How to Proceed
To properly execute an extrajudicial settlement with deed of sale, certain requirements 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 unanimous regarding the sale and the distribution of proceeds.
Public Notice: The settlement must be advertised in a newspaper of general circulation for three successive weeks.
Settling Tax Obligations: 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 transferring inherited land is the settlement of taxes. Aside from the Estate Tax, a Capital Gains Tax and Documentary Stamp Tax will be required 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 through an extrajudicial settlement of estate 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 reduce 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 necessary documentation, heirs can ensure extrajudicial settlement of estate with deed of sale a hassle-free transition of ownership while optimizing the value of their estate