Handling inherited property in the Philippines can be a daunting process, especially when the heirs decide 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 divide the estate of a deceased person and convey it to a buyer in a single, combined document.
Understanding the Legal Framework
When a person passes away without leaving a will and has no unpaid debts, the heirs are not forced to go to court. Instead, they can choose for an extrajudicial settlement. By signing a legal document, the heirs decide on how to divide the properties among themselves.
However, when the heirs already have a purchaser waiting, they often sign an extrajudicial settlement 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, 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 liabilities.
Agreement Among Heirs: All legal extra judicial settlement with deed of sale 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.
Understanding the Tax Implications
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 applicable because of the sale component. Forgetting to settle these taxes will hinder the issuance of a new Certificate of Title in the buyer's name.
Risks and Safeguards
For buyers, purchasing through an extrajudicial settlement of estate 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 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 necessary documentation, heirs can ensure a smooth transition of ownership while maximizing the value of their inheritance