When a loved one passes away without leaving a will (intestate succession), the transfer of their property does not happen automatically. In the Philippines, the law requires the heirs to undergo estate settlement before assets such as land, condominium units, bank accounts, or shares of stock can be transferred to their rightful owners.
Two of the most commonly used methods for intestate estate settlement are the Extrajudicial Settlement of Estate and Affidavit of Self-Adjudication. While these options are often mentioned interchangeably, they are not the same, and choosing the wrong process can lead to void settlements, title problems, tax penalties, or future legal disputes.
This guide explains the difference between extrajudicial settlement and self-adjudication in the Philippines, outlines their legal requirements, discusses relevant laws and Supreme Court rulings, and shows how a professional service provider can simplify the entire process.
What is Estate Settlement Under the Philippines Law?
As a general rule, judicial settlement is required when a person dies intestate. This means the court appoints an administrator to manage and distribute the estate.
However, Rule 74 of the Revised Rules of Court provides exceptions allowing heirs to settle the estate without going to court, provided certain conditions are met.
This article focuses on the extrajudicial settlement of estate and affidavit of self-adjudication, which fall under Section 1, Rule 74.
What is an Extrajudicial Settlement of Estate?
An Extrajudicial Settlement (EJS) is a legal process where the heirs of a deceased person agree among themselves how to divide the estate’s assets without going to court. This is governed primarily by Section 1, Rule 74 of the Revised Rules of Court.
When Can You Use Extrajudicial Settlement?
This shall be allowed when the:
- Decedent died intestate (no will)
- Decedent left no debts
- Heirs are all of age, or minors are represented by their legal or judicial representatives; and
- All heirs agree (Sec. 1, Rule 74)
Failure to meet any one of these conditions makes the extrajudicial settlement invalid.
What is an Affidavit of Self-Adjudication?
While an EJS involves multiple heirs, an Affidavit of Self-Adjudication is the specific legal tool used when there is only one sole heir.
Under the same Section 1, Rule 74, if there is only one heir (e.g., an only child whose parents have both passed), that heir may adjudicate the entire estate to themselves by filing an affidavit with the Office of the Registry of Deeds.
As clarified in the case of Delgado Vda. de la Rosa v. Heirs of Marciana Rustia Vda. de Damian (2006), an affidavit of self-adjudication is only valid if the person is truly the sole heir. If other heirs are discovered later, the adjudication can be contested or declared void regarding the shares of the excluded heirs.
The Step-by-Step Process for Estate Settlement in the Philippines
To successfully settle an estate extrajudicially, heirs must follow a strict administrative workflow. Failure to follow these steps can lead to penalties from the Bureau of Internal Revenue (BIR) or issues with title transfers.
1. Documentation and Inventory
Gather all titles, tax declarations, and certificates of stock or bank records. Ensure you have the Death Certificate (issued by PSA) and proof of relationship (Birth Certificates or Marriage Contracts).
2. Execution of the Deed or Affidavit
The heirs must sign the Deed of Extrajudicial Settlement or the Affidavit of Self-Adjudication. This document must specifically describe the properties involved (Technical Descriptions for land) and how they are to be divided.
3. Publication of the Notice
Under the Rules of Court, the settlement must be published in a newspaper of general circulation in the province where the deceased resided. This must run once a week for three (3) consecutive weeks. This serves as a notice to any creditors or other heirs who might have been overlooked.
4. Payment of Estate Tax and BIR eCAR
Before any title can be transferred, the estate tax must be settled. Currently, under the TRAIN Law, the estate tax is a flat rate of 6% of the net estate value.
- eCAR (Electronic Certificate Authorizing Registration): Once taxes are paid, the BIR issues the eCAR. This is the “golden ticket” required by the Registry of Deeds to transfer ownership.
5. Filing the Bond
If the estate includes personal property (like cash or cars), the heirs must file a bond with the Registry of Deeds. The bond amount is equivalent to the value of the personal property.
6. Registration with the Registry of Deeds
Finally, the notarized deed, the eCAR, proof of publication, and the bond are submitted to the Registry of Deeds to issue new Transfer Certificate of Title (TCT) in the names of the heirs.
Legal Risks and Jurisprudence for Estate Settlement
It is important to involve all legal heirs. In Neri v. Heirs of Spouses Yusop, the Supreme Court ruled that an extrajudicial settlement is not valid and binding upon heirs who were excluded or minor heirs who were not properly represented.
Furthermore, if there is a disagreement among heirs regarding the division of assets, an EJS is no longer an option. The heirs must instead file an Action for Partition in court, which is a more adversarial and expensive judicial process.
Summary Settlement of Estates (Small Value)
If the gross value of the estate does not exceed P10,000, Section 2, Rule 74 allows for a “Summary Settlement of Estate.” This is a simplified judicial process that does not require a full-blown administration, but it still requires a court petition. Note that in modern times, this threshold is rarely met given current property values.
Sounds Overwhelming? It doesn’t have to be!
An Extrajudicial Settlement may avoid court proceedings, but it is not simple paperwork. One mistake can delay title transfer, trigger BIR penalties, or invalidate the settlement.
At FileDocsPhil, we simplify this bureaucracy by providing end-to-end support for heirs. Our team handles everything from drafting the legally sound Deed of Extrajudicial Settlement or Affidavit of Self-Adjudication to securing the crucial BIR eCAR (Electronic Certificate Authorizing Registration) and navigating the specific requirements of the Registry of Deeds. By letting us manage the “legwork” at the Assessor’s Office and the Bureau of Internal Revenue, you ensure that the property transfer is legally airtight, preventing future disputes and ensuring a smooth transition of wealth to the next generation.
Let FileDocsPhil Do the Work!
Contact FileDocsPhil today and let our experts handle the entire extrajudicial settlement process—from documents to title transfer.
