Managing 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 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 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
Trading inherited assets through this method offers several advantages:
Speedier Process: It eliminates the need for two separate transactions and two sets of documentation.
Cost-Effectiveness: While taxes must still be paid, handling the legalities 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.
Unanimous Consent: 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.
Settling Tax Obligations: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be sold.
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 via an extrajudicial settlement of estate with deed extrajudicial settlement with deed of sale of sale carries a specific risk under Rule 74, Section 4 of the Rules of Court. This law provides that the property is 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
Handling an extrajudicial settlement with deed of sale is a practical move for families looking to liquidate inherited assets quickly. By learning the procedural steps, heirs can ensure a hassle-free transition of ownership while maximizing the value of their inheritance