Managing inherited property in the Philippines can be a complex process, especially when the heirs wish to sell the asset immediately. The most practical way to achieve this is through an extra judicial settlement with deed of sale. This legal mechanism allows heirs to distribute the estate of a deceased person and sell it to a buyer in a single, consolidated document.
The Basics of Estate Settlement
When a person is deceased without leaving a will and has no pending debts, the heirs are not obligated to go to court. Instead, they can opt 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 interested party waiting, they often perform an extrajudicial settlement of estate with deed of sale. This speeds up the process by combining the adjudication of the property and the subsequent sale into one legal instrument.
Why Use a Combined Deed of Sale?
Liquidating inherited land through this method offers multiple advantages:
Time Efficiency: It eliminates the need for two separate transactions and two sets of documentation.
Lower Expenses: While taxes must still be paid, handling the paperwork simultaneously can reduce administrative burdens.
Easier Consolidation: The Register of Deeds can handle the transfer from the deceased directly to the new buyer, provided all requirements are met.
Key Requirements and Steps
To properly 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 unanimous regarding the sale and the distribution of proceeds.
Public Notice: The settlement must be published in a newspaper of general circulation for three consecutive weeks.
Payment of Taxes: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be transferred.
The Role of Taxes
One of the essential aspects of transferring inherited land is the settlement of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will be required because of the sale component. Failure to settle these taxes will hinder the issuance of a new Certificate of Title in the buyer's name.
Risks and Safeguards
For buyers, purchasing via 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 provides that the property is subject to the rights of any excluded heir or creditor for a period of two years. To lessen this risk, many buyers demand an heir's bond or wait until the two-year period has expired.
Final Thoughts
Navigating an extrajudicial settlement with deed of sale is a practical move for extrajudicial settlement of estate with deed of sale families looking to dispose of inherited assets quickly. By learning the necessary documentation, heirs can ensure a hassle-free transition of ownership while optimizing the value of their estate