Dealing with inherited real estate in the Philippines can be a challenging 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 distribute the estate of a deceased person and convey it to a buyer in a single, combined document.
What is an Extrajudicial Settlement?
When a person dies 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 buyer waiting, they often perform an extrajudicial settlement with deed of sale. This simplifies the process by combining the adjudication of the property and the subsequent sale into one legal instrument.
The Benefits of Combining the Settlement and Sale
Trading inherited assets through this method offers multiple advantages:
Time Efficiency: It removes the need for two separate transactions and two sets of documentation.
Lower Expenses: While taxes must still be paid, handling the legalities simultaneously can lower 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 properly execute an extrajudicial settlement with deed of sale, certain requirements must be met selling inherited property philippines 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 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.
Payment of Taxes: The inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be transferred.
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 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 reduce this risk, many buyers demand an heir's bond or delay until the two-year period has lapsed.
Conclusion
Handling an extrajudicial settlement with deed of sale is a smart 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