Managing inherited land 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.
Understanding the Legal Framework
When a person passes away without leaving a will and has no unpaid debts, the heirs are not required to go to court. Instead, they can elect for an extrajudicial settlement. By signing a legal document, 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.
Advantages for Heirs and Buyers
Liquidating inherited land through this method offers several advantages:
Saved Time: It eliminates the need for two separate transactions and two sets of documentation.
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, granted all requirements are met.
How to Proceed
To properly 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 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 transferring inherited land 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 particular risk under Rule 74, Section 4 of the Rules of Court. This law extrajudicial settlement with deed of sale stipulates 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 require an heir's bond or delay until the two-year period has lapsed.
Final Thoughts
Executing an extrajudicial settlement with deed of sale is a smart move for families looking to sell inherited assets quickly. By learning the legal requirements, heirs can ensure a seamless transition of ownership while optimizing the value of their estate