Dealing with 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, integrated 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 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.
Why Use a Combined Deed of Sale?
Selling inherited property Philippines through this method offers various advantages:
Time Efficiency: It avoids the need for two separate transactions and two sets of notarization.
Lower Expenses: While taxes must still be paid, handling the paperwork simultaneously can lower administrative burdens.
Clear Title Transfer: The Register of Deeds can handle the transfer from the deceased directly to the new buyer, granted all requirements are met.
Key Requirements and Steps
To properly execute an extrajudicial settlement with deed of sale, certain criteria must be met under Philippine law:
Absence of a Will: The deceased must have left no testament and the estate must be cleared of liabilities.
Unanimous Consent: All legal heirs must be in agreement regarding the sale and the distribution of proceeds.
Public Notice: The settlement must be published in a newspaper of general circulation for three successive weeks.
Settling Tax Obligations: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be sold.
The Role of Taxes
One of the vital 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 provides that the property is subject to the rights of any excluded heir or creditor for a period of two years. To mitigate this risk, many buyers demand an heir's bond or delay until the two-year selling inherited property philippines period has passed.
Conclusion
Handling an extrajudicial settlement with deed of sale is a practical move for families looking to liquidate inherited assets quickly. By understanding the procedural steps, heirs can ensure a hassle-free transition of ownership while maximizing the value of their inheritance