Handling inherited land in the Philippines can be a daunting process, especially when the heirs wish to sell the asset immediately. The most common way to achieve this is through an extra judicial settlement with deed of sale. This legal process 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 unpaid debts, the heirs are not required to go to court. Instead, they can choose 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 buyer waiting, they often execute an extrajudicial settlement of estate with deed of sale. This simplifies the process by combining the adjudication of the property and the subsequent disposition into one legal instrument.
Why Use a Combined Deed of Sale?
Trading inherited assets through this method offers various advantages:
Saved Time: It eliminates the need for two separate transactions and two sets of notarization.
Cost-Effectiveness: While taxes must still be paid, handling the documentation simultaneously can reduce administrative burdens.
Easier Consolidation: The Register of Deeds can process the transfer from the deceased directly to the new buyer, assuming all requirements are met.
Key Requirements and Steps
To effectively 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.
Agreement Among Heirs: All legal heirs must be unanimous regarding the sale and the distribution of proceeds.
Publication: The settlement must be published in a newspaper of general circulation for three successive weeks.
Payment of Taxes: The inheritance 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 payment of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will be applicable because of the sale component. Neglecting to settle these taxes will hinder the issuance of a new Certificate of Title in the buyer's name.
Protecting the Buyer
For buyers, purchasing through 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 extrajudicial settlement of estate with deed of sale subject to the rights of any excluded heir or creditor for a duration of two years. To mitigate this risk, many buyers demand an heir's bond or delay until the two-year period has passed.
Conclusion
Navigating an extrajudicial settlement with deed of sale is a practical move for families looking to liquidate inherited assets quickly. By understanding the necessary documentation, heirs can ensure a smooth transition of ownership while maximizing the value of their inheritance