Understanding Extrajudicial Settlement with Deed of Sale in the Philippines

Managing inherited land in the Philippines can be a daunting process, especially when the heirs intend to sell the asset immediately. The most practical way to achieve this is through an extra judicial settlement 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, combined document.
What is an Extrajudicial Settlement?

When a person is deceased without leaving a will and has no outstanding debts, the heirs are not forced to go to court. Instead, they can opt 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 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 disposition into one legal instrument.
Advantages for Heirs and Buyers

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 handle the transfer from the deceased directly to the new buyer, provided 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 will and the estate must be cleared of liabilities.

Agreement Among Heirs: All legal heirs must be unanimous regarding the sale and the distribution 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.

Understanding the Tax Implications

One of the essential aspects of selling inherited property Philippines is the settlement of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will be due because of the sale component. Failure 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 via 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 reduce this risk, many buyers require an heir's bond extra judicial settlement with deed of sale or delay until the two-year period has lapsed.
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 hassle-free transition of ownership while maximizing the value of their inheritance