Dealing with inherited property in the Philippines can be a daunting process, especially when the heirs decide to sell the asset immediately. The most practical 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
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 a Will: The deceased must have left no will and the estate must be free of debt.
Unanimous Consent: All legal heirs must be of one mind regarding the sale and the division of proceeds.
Public Notice: 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.
Financial Obligations
One of the vital aspects of transferring inherited land is the settlement 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 claims 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 extrajudicial settlement of estate with deed of sale quickly. By learning the legal requirements, heirs can ensure a smooth transition of ownership while optimizing the value of their estate