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 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 agree 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.
Why Use a Combined Deed of Sale?
Liquidating inherited land through this method offers various advantages:
Time Efficiency: 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 successfully 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 of one mind 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 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 settlement of taxes. Aside from the Estate Tax, a transfer tax and Documentary Stamp Tax will be due because of the sale component. extra judicial settlement with deed of sale 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 unique risk under Rule 74, Section 4 of the Rules of Court. This law states that the property is subject to the claims of any excluded heir or creditor for a period of two years. To lessen this risk, many buyers require an heir's bond or wait until the two-year period has lapsed.
Final Thoughts
Executing an extrajudicial settlement of estate with deed of sale is a smart move for families looking to sell inherited assets quickly. By learning the necessary documentation, heirs can ensure a smooth transition of ownership while optimizing the value of their estate