Handling inherited real estate in the Philippines can be a complex 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 distribute the estate of a deceased person and convey it to a buyer in a single, consolidated document.
The Basics of Estate 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 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 with deed of sale. This simplifies the process by combining the adjudication of the property and the subsequent sale into one legal instrument.
The Benefits of Combining the Settlement and Sale
Trading inherited assets through this method offers multiple advantages:
Speedier Process: It removes the need for two separate transactions and two sets of documentation.
Lower Expenses: While taxes must still be paid, handling the legalities 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 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 selling inherited property philippines 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 selling inherited property Philippines 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 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 demand an heir's bond or delay until the two-year period has lapsed.
Conclusion
Handling an extrajudicial settlement with deed of sale is a smart move for families looking to liquidate inherited assets quickly. By learning the necessary documentation, heirs can ensure a smooth transition of ownership while optimizing the value of their estate