Managing inherited property in the Philippines can be a daunting 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 process allows heirs to divide 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 pending debts, the heirs are not required to go to court. Instead, they can elect 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 buyer waiting, they often sign an extrajudicial settlement with deed of sale. This simplifies 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
Selling inherited property Philippines through this method offers multiple advantages:
Time Efficiency: It removes the need for two separate transactions and two sets of notarization.
Reduced Costs: While taxes must still be paid, handling the legalities simultaneously can minimize administrative burdens.
Easier Consolidation: The Register of Deeds can update the transfer from the deceased directly to the new buyer, assuming all requirements are met.
The Step-by-Step Process
To extrajudicial settlement with deed of sale effectively 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 free of debt.
Agreement Among Heirs: All legal heirs must be of one mind regarding the sale and the division of proceeds.
Publication: The settlement must be advertised in a newspaper of general circulation for three successive weeks.
Payment of Taxes: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be registered.
Financial Obligations
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 due because of the sale component. Neglecting to settle these taxes will prevent the issuance of a new Certificate of Title in the buyer's name.
Ensuring a Valid Transaction
For buyers, purchasing through an extra judicial settlement with deed of sale carries a specific 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 period of two years. To reduce this risk, many buyers request an heir's bond or delay until the two-year period has expired.
Summary
Handling an extrajudicial settlement of estate with deed of sale is a smart move for families looking to liquidate inherited assets quickly. By mastering the procedural steps, heirs can ensure a smooth transition of ownership while securing the value of their inheritance