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 distribute the estate of a deceased person and convey 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 obligated to go to court. Instead, they can opt for an extrajudicial settlement. By signing a notarized deed, 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 streamlines the process by combining the adjudication of the property and the subsequent disposition 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.
Easier Consolidation: The Register of Deeds can update the transfer from the deceased directly to the new buyer, assuming all requirements are met.
The Step-by-Step Process
To effectively execute an extrajudicial settlement with deed of sale, certain requirements must be met under Philippine law:
Absence of a Will: The deceased must have left no testament and the estate must be free of debt.
Agreement Among Heirs: All legal heirs must be in agreement regarding the sale and the distribution of proceeds.
Public Notice: The settlement must be advertised in a newspaper of general circulation for three successive weeks.
Settling Tax Obligations: The Estate Tax must be paid to the Bureau of Internal Revenue (BIR) before the property can be registered.
Understanding the Tax Implications
One of the essential aspects of selling inherited property Philippines is the settlement 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 prevent the issuance of a new Certificate of Title in the buyer's name.
Protecting the Buyer
For buyers, purchasing through an extra judicial settlement with deed 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 period of two years. To reduce this selling inherited property philippines risk, many buyers request an heir's bond or delay until the two-year period has lapsed.
Summary
Executing an extrajudicial settlement with deed of sale is a practical move for families looking to liquidate inherited assets quickly. By understanding the necessary documentation, heirs can ensure a smooth transition of ownership while optimizing the value of their estate