When a person passed away, the estate of the decedent left needs to be settled. It is not common in the Philippines to execute a last will of testament. In order to settle the estate or property of the deceased person without going through court, an extrajudicial settlement shall be executed. This involves preparing a written agreement among heirs that specifies how the estate will be divided among the the heirs.
However, certain complications may arise, preventing an out-of-court agreement among the heirs during the partition. A common situation is when there are disputes or conflicts regarding the distribution of the estate among heirs. In this case, the heirs would file for a judicial settlement of estate where court intervention is required. The court will decide on the fair distribution according on the laws of succession in the Philippines.
Applicability of Extra-judicial Settlement
Pursuant to Section 1 Rule 74 of the Rules of Court of the Philippines, there are three (3) main requisites involved to undergo extrajudicial settlement of estate:
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The deceased or decedent was unable to leave a will and testament;
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The deceased or decedent was able to pay the remaining debts and tax expenses of the estate;
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The deceased or decedent’s heirs are all of legal age; for minors – a duly authorized legal representative shall represent them on their behalf.
In instances where the heir is identified as a “sole heir”, an affidavit of self-adjudication is necessary in order for the transfer to be valid.
Common Process of Extrajudicial Settlement
a.) There is an agreement of the settlement made in a public instrument. This may appear as a Deed of Extrajudicial Settlement or Extrajudicial Settlement of Estate filed with the Registry of Deeds – where the following foregoing legal details are stated:
a.1.) The basic description of the estate (i.e., title, account number, lot size, location, personal properties if applicable and etc.);
a.2) Properties accorded to by virtue of division amongst heirs;
a.3) Undertaking articulating the published Deed of Extrajudicial Settlement in a newspaper of general circulation.
Moreover, the deed must be validly Notarized before the Notary Public after all involved heir/s affix their signature thereof.
b.) The settlement is duly published in a newspaper of general circulation once (1) a week for three (3) consecutive weeks in the province where the property is located. Moreover, its publication is not equivalent to a constructive notice to unaware and/or non-participative heirs involved in the settlement, thus rendering the settlement non-binding only for them.
c.) Upon the transfer of the estate, the heirs must file an Estate Tax Return with the Bureau of Internal Revenue (BIR). After taxes has been paid, the BIR will issue a Electronic Certificate Authorizing Registration (eCAR) – which required for transferring ownership, either real or personal properties.
d.) After settling the estate taxes due and receiving an eCAR, parties may proceed with registering the title transfer with the Registry of Deeds where the property is located. Present the eCAR certificate and other legal documents required for the issuance of the Title Transfer certificate.
What are the requirements needed for the Extrajudicial Settlement of an estate?
When settling estate taxes due with the BIR, the following documents are required:
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The Deed of Extrajudicial Settlement of the Estate or Affidavit of Self-Adjudication;
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A Certified copy of the land titles involved;
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A Certified copy of the latest Tax Declaration at the time of the decedent’s death;
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Notice of Death of the Decedent;
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Certified copy of the Certificate of Death;
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A Certificate acquired from the Barangay Captain (in case real property claimed is labeled as Family/Ancestral Home);
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A Statement by a Certified Public Accountant (C.P.A.) on included itemized assets of the decedent (if applicable)
In case there are personal properties involved (if applicable):
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A Copy of Certificate of Stocks, if any;
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A Copy of the Proof of Valuation of Shares of Stocks, may it be listed or unlisted, at the decedent’s time of death;
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A Copy of Certificate of Registration (CAR) of vehicles, if any, and other documentary evidence showing their true value;
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A Copy of the Proof of Valuation of other types of personal property, if any.
When ready to proceed with the Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) with the Registry of Deeds:
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Valid BIR Certificate Authorizing Registration (eCAR) stating the settled estate taxes;
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Original owner’s copy of Title;
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Deed of Extrajudicial Settlement of the Estate or Affidavit of Self-Adjudication;
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Tax Clearance of Real Property;
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Duly validated with seal of the Transfer Tax Receipt;
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An Affidavit of Publication attached with newspaper clippings proving its consecutive publication.
May it be executed simultaneously with other preceding/subsequent contracts?
Yes. Heirs may execute the deed of extrajudicial settlement simultaneously with other contracts such as Deed of Sale, Deed of Donation and its waiver of rights. This may be executed with an authorized representative such as a Special Power of Attorney (SPA) or a lawyer to ameliorate either government or private entity transactions attached to the property.
You may also view our article entitled Difference between Judicial Settlement vs Extrajudicial Settlement to determine the classification on which settlement your property falls under.
Why do you need an assistance from an expert?
Legal experts ensures that the settlement complies with legal requirements, including drafting accurate documents like the settlement agreement and estate tax returns. This helps avoid costly errors in property distribution, such as missing heirs or assets, which could lead to disputes or court intervention later. Legal experts also assist with calculating estate taxes and ensuring compliance with the Bureau of Internal Revenue (BIR), which can be complex depending on the value and structure of the estate.
They also manage the publication of the required notice in a newspaper, a critical step to notify creditors and avoid future claims. Lawyers act as mediators if disputes arise among heirs, helping to resolve issues amicably. Finally, they ensure all necessary documents, such as land titles and certificates, are valid and error-free to facilitate a smooth transfer of ownership.
Sounds Overwhelming? It doesn’t have to be!
FileDocsPhil, in coordination with Duran & Duran-Schulze Law, can greatly assist you in the entire process of extrajudicial settlement of the estate. From drafting legal documents and legal advice and support to engaging with different government agencies, we got you all covered.
Let FileDocsPhil Do the Work!
Need further information and assistance in Extrajudicial Settlement of Estate? Talk to our team at FILEDOCSPHIL to know more about the requirements and process. Call us today at (+63) 917 149 2337 or send an email to info@filedocsphil.com or simply message us through the live chat for more information.
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