Managing inherited property 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 extrajudicial settlement of estate with deed of sale. This legal mechanism allows heirs to divide the estate of a deceased person and sell it to a buyer in a single, integrated document.
Understanding the Legal Framework
When a person passes away without leaving a will and has no unpaid debts, the heirs are not required to go to court. Instead, they can elect for an extrajudicial settlement. By signing a legal document, the heirs agree on how to divide the properties among themselves.
However, when the heirs already have a purchaser waiting, they often execute 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?
Liquidating inherited land through this method offers various advantages:
Saved Time: It avoids the need for two separate transactions and two sets of notarization.
Reduced Costs: While taxes must still be paid, handling the paperwork simultaneously can minimize administrative burdens.
Clear Title Transfer: The Register of Deeds can update the transfer from the deceased directly to the new buyer, provided all requirements are met.
The Step-by-Step Process
To successfully execute an extrajudicial settlement with deed of sale, certain conditions must be met under Philippine law:
No Will and No Debts: The deceased must have left no will and the estate must be free of debt.
Unanimous Consent: All legal heirs must be of one mind regarding the sale and the division of proceeds.
Public Notice: The settlement must be advertised in a newspaper of general circulation for three consecutive weeks.
Settling Tax Obligations: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be sold.
Financial Obligations
One of the most critical aspects of selling inherited property Philippines is the payment of taxes. Aside from the Estate Tax, a Capital Gains Tax and Documentary Stamp Tax will be required 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 specific risk under Rule 74, Section 4 of the Rules extra judicial settlement with deed of sale of Court. This law provides that the property is subject to the rights of any excluded heir or creditor for a period 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 learning the necessary documentation, heirs can ensure a smooth transition of ownership while optimizing the value of their estate