Managing inherited land in the Philippines can be a challenging 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.
Understanding the Legal Framework
When a person is deceased without leaving a will and has no pending debts, the heirs are not required to go to court. Instead, they can choose for an extrajudicial settlement. By signing a public instrument, the heirs concur on how to divide the properties among themselves.
However, when the heirs already have a purchaser waiting, they often sign an extrajudicial settlement of estate with deed of sale. This streamlines the process by combining the adjudication of the property and the subsequent transfer into one legal instrument.
Why Use a Combined Deed of Sale?
Selling inherited property Philippines through this method offers various advantages:
Time Efficiency: It avoids the need for two separate transactions and two sets of notarization.
Lower Expenses: 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, provided 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 extrajudicial settlement with deed of sale estate must be free of debt.
Agreement Among Heirs: 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 inheritance tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be sold.
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 due 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.
Ensuring a Valid Transaction
For buyers, purchasing via 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 lessen this risk, many buyers require an heir's bond or wait until the two-year period has expired.
Summary
Executing an extrajudicial settlement of estate with deed of sale is a strategic move for families looking to dispose of inherited assets quickly. By understanding the procedural steps, heirs can ensure a hassle-free transition of ownership while securing the value of their inheritance