Dealing with 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 procedure allows heirs to partition 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 interested party waiting, they often execute an extrajudicial settlement of estate with deed of sale. This speeds up the process by combining the adjudication of the property and the subsequent disposition into one legal instrument.
Advantages for Heirs and Buyers
Trading inherited assets through this method offers several advantages:
Speedier Process: It eliminates the need for two separate transactions and two sets of documentation.
Cost-Effectiveness: While taxes must still be paid, handling the legalities simultaneously can reduce administrative burdens.
Easier Consolidation: The Register of Deeds can handle the transfer from the deceased directly to the new buyer, granted all requirements are met.
How to Proceed
To successfully 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 will 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 consecutive weeks.
Settling Tax Obligations: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before extrajudicial settlement with deed of sale the property can be transferred.
Financial Obligations
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 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 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 require an heir's bond or wait until the two-year period has expired.
Summary
Executing 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 seamless transition of ownership while securing the value of their estate