Dealing with inherited property in the Philippines can be a daunting process, especially when the heirs intend to sell the asset immediately. The most efficient way to achieve this is through an extrajudicial settlement of estate with deed of sale. This legal mechanism allows heirs to partition the estate of a deceased person and sell it to a buyer in a single, integrated 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 choose 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 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.
How to Proceed
To properly execute an extrajudicial settlement with deed of sale, certain criteria must be met under Philippine law:
Absence of extrajudicial settlement of estate with deed of sale a Will: The deceased must have left no testament and the estate must be cleared of liabilities.
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 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 payment 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 prevent the issuance of a new Certificate of Title in the buyer's name.
Ensuring a Valid Transaction
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 states that the property is subject to the rights of any excluded heir or creditor for a duration of two years. To lessen this risk, many buyers request an heir's bond or wait until the two-year period has expired.
Summary
Executing an extrajudicial settlement of estate with deed of sale is a strategic move for families looking to sell inherited assets quickly. By mastering the legal requirements, heirs can ensure a smooth transition of ownership while optimizing the value of their estate