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Settlement of an estate need not undergo judicial proceedings all the time.

Rule 74, Section 1


of the Rules of Court allows the extrajudicial settlement of estate by agreement among the
heirs. Said Rule states:

Sec. 1. Extrajudicial settlement by agreement between heirs. – If the decedent left no


will and no debtsand the heirs are all of age, or the minors are represented by their judicial
or legal representatives duly authorized for the purpose, the parties may, without securing
letters of administration, divide the estate among themselves as they see fit by means of a
public instrument filed in the office of the register of deeds, and should they disagree, they
may do so in an ordinary action of partition. If there is only one heir, he may adjudicate to
himself the entire estate by means of an affidavit filed in the office of the register of
deeds. The parties to an extrajudicial settlement, whether by public instrument or by stipulation
in a pending action for partition, or the sole heir who adjudicates the entire estate to himself by
means of an affidavit shall file, simultaneously with and as a condition precedent to the filing of
the public instrument, or stipulation in the action for partition, or of the affidavit in the office of
the register of deeds, a bond with the said register of deeds, in an amount equivalent to the value
of the personal property involved as certified to under oath by the parties concerned and
conditioned upon the payment of any just claim that may be filed under Section 4 of this rule. It
shall be presumed that the decedent left no debts if no creditor files a petition for letters of
administration within two (2) years after the death of the decedent.

The fact of the extrajudicial settlement or administration shall be published in a newspaper of


general circulation in the manner provided in the next succeeding section; but no extrajudicial
settlement shall be binding upon any person who has not participated therein or had no notice
thereof.

However, extrajudicial settlement of estate cannot be resorted to every time. There are
conditions which must be satisfied such as:

1. The decedent left no will.

2. The decedent has no debts or his debts have been fully paid.

3. The heirs are all of legal age or the minors are duly represented by their judicial or legal
representatives.

4. A public instrument is duly executed by the heirs and filed with the Register of Deeds.

Extrajudicial settlement of estate is often recommended to expedite the transfer of


properties of the decedent to his heirs. This is in view of the fact that judicial settlement of
estate takes years before the case is concluded. Furthermore, this is more adversarial and is
resorted to when the heirs disagree on the properties to be partitioned and the corresponding
shares of the respective heirs.

An extrajudicial settlement of estate is done by executing an “Extrajudicial Settlement Among


Heirs”. This is a legal document specifying:

1. Compliance with the legal conditions for an extrajudicial settlement


2. Description of the properties to be extrajudicially settled (title number, value, location, lot
size, technical description, etc.)
3. Nature of the property (if conjugal property)
4. Name of the heirs
5. How the properties shall be divided amongst the heirs.
6. Posting of a bond if there is personal property involved.
7. Undertaking that the Deed will be published in a newspaper of general circulation once a week
for 3 consecutive weeks.

It must be noted that the Deed of Extrajudicial Settlement must be published in a newspaper
of general circulation once a week for 3 consecutive weeks. Kindly consult with the Register
of Deeds where the property is located for the listing of these newspapers.

Before filing the Deed of Extrajudicial Settlement with the Register of Deeds where the land
is located, it is necessary that the estate taxes be paid first. Under Philippine laws, estate tax is
defined as a tax on the right of the deceased person to transmit his estate to his lawful heirs and
beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to
testamentary disposition. According to the Bureau of Internal Revenue, estate tax is not a tax
on property but rather imposed on the privilege of transmitting property upon the death of
the owner.

IMPORTANT: The discussion below on the estate taxes, deduction and procedure before
the BIR is relevant only to those who died before 01 January 2018 since Republic Act No.
10963, otherwise known as the Tax Reform for Acceleration and Inclusion Law (TRAIN
Law), amended the Tax Code, including the procedure, tax rates and deductions for estate
taxes. The TRAIN Law became effective on 01 January 2018.

It bears great emphasis that the Estate Tax Return must be filed within six (6) months from
the decedent’s death. The deadline may be extended by the Commissioner of the BIR, in
meritorious cases, not exceeding thirty (30) days. It must be noted that the estate itself is
assigned its own Tax Identification Number (TIN). The Estate Tax Return is filed with
Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at
the time of his death. If the decedent has no legal residence in the Philippines, then the return
can be filed with:

1. The Office of the Revenue District Officer, Revenue District Office No. 39, South Quezon
City; or

2. The Philippine Embassy or Consulate in the country where decedent is residing at the time of
his death.

Furthermore, the estate tax shall be paid at the time the return is filed. However, upon request
and if the Commissioner of the BIR finds that payment on the due date of the Estate Tax or of
any part thereof would impose undue hardship upon the estate or any of the heirs, he may extend
the time for payment of such tax or any part thereof not to exceed five (5) years, in case the
estate is settled through the courts or two (2) years in case the estate is settled extra-judicially. If
an extension is granted, the BIR Commissioner may require a bond in such amount, not
exceeding double the amount of tax, as it deems necessary.

The estate tax is based on the value of the net estate as follows:

1. If not over P200,000, it is exempt


2. If over P200,000 but not over P500,000, then tax is 5% of the excess over P200,000
3. If over P500,000 but not over P2,000,000, then tax is P15,000 PLUS 8% of the excess over
P500,000
4. If over P2,000,000 but not over P5,000,000, then tax is P135,000 PLUS 11% of the excess
over P2,000,000
5. If over P5,000,000 but not over P10,000,000, then tax is P465,000 PLUS 15% of the excess
over P5,000,000
6. If over P10,000,000, then tax is P1,215,000 PLUS 20% of the excess over P10,000,000

The basis shall be the net estate. That means that there are allowable deductions on the estate.
These deductions include funeral expenses, share of the surviving spouse, medical expenses
incurred by the decedent within 1 year prior to his death, family home deduction of not more
than P1,000,000.00, standard deduction of P1,000,000.00, among others. It is best to consult with
an accountant on this matter to determine the accurate estate tax.

For extrajudicial settlement of estate, the following documents must be submitted with the
BIR:

1. Notice of Death
2. Certified true copy of the Death Certificate
3. Deed of Extra-Judicial Settlement of the Estate
4. Certified true copy of the land titles involved
5. Certified true copy of the latest Tax Declaration of real properties at the time of death
6. Photo copy of Certificate of Registration of vehicles and other proofs showing their correct
value
7. Photo copy of certificate of stocks
8. Proof of valuation of shares of stocks at the time of death
a. For listed stocks – newspaper clippings or certification from the Stock Exchange
b. For unlisted stocks – latest audited Financial Statement of issuing corporation with
computation of book value per share
9. Proof of valuation of other types of personal property
10. CPA Statement on the itemized assets of the decedent, itemized deductions from gross estate
and the amount due if the gross value of the estate exceeds two million pesos
11. Certification of Barangay Captain for claimed Family Home

Other documents may also be requested by the BIR.

After the estate taxes have been paid, the heirs may proceed to the Register of Deeds where
the land is situated. If the Register of Deeds would allow it, the filing with the BIR and Register
of Deeds may be simultaneous. The proof of payment of the estate tax, Affidavit of
Publication of the Deed, the Deed of Extrajudicial Settlement of Estate are the basic
requirements to be submitted to the Register of Deeds. When all pertinent documents are
submitted, the Register of Deeds will correspondingly issue the Transfer of Certificates of Title
to the proper heirs.

On a final note, it must be borne in mind that the extrajudicial settlement can be nullified if it
was done in fraud of creditors or other rightful heirs. Furthermore, this can open the erring heirs
to criminal liabilities.

When buying a piece of property, one of the most crucial steps to complete the process is the
transfer of land title from the previous owner to the buyer. This legal process is essential as it
provides the buyer with a public record declaring him or her as the new owner of a particular
property. By having a new land title that carries your name, you can protect your investment and
avoid any ownership issues that may arise in the future.
According to OMI Land Title Services General Manager Hardy Lipana, it is advisable for a buyer to
begin the process of transferring the title right after the Deed of Sale has been executed. “Once the
Deed of Sale is executed and notarized, the deadline for the payment of the transfer taxes will be in
effect. There will be corresponding penalties and interest charges for late payments of transfer
taxes,” he said.

To start, you need to have the following requirements on hand:


• Original copy of the notarized Deed of Absolute Sale (DAS), plus two photocopies
• Owner’s duplicate copy of the Transfer Certificate of Title (TCT) or the Condominium
Certificate of Title (CCT) in case of sale of condominium units, plus two photocopies
• Certified True Copies of the latest Tax Declaration for land and improvement of the real property
plus two photocopies. If the property sold is a vacant lot or no improvements have been made on it,
a Sworn Declaration of No Improvement by at least one of the transferees or Certificate of No
Improvement issued by the city or municipal assessor
• Tax Identification Numbers (TIN) of the Seller and Buyer
Additional requirements (if applicable):
• Special Power of Attorney (SPA), if the person signing on the document is not the owner as
appearing on the TCT or CCT
• Certification of the Philippine Consulate if the SPA is executed abroad
• Location plan or vicinity map if zonal value cannot readily be determined from the documents
submitted
• Such other requirements as may be required by law, rulings, regulations, or other issuances
• For documents required in case of mortgage, judicial or extra-judicial settlement of estate, judicial
and extra-judicial foreclosure of mortgage, consolidation of ownership, execution sale and
condominium project, please refer to Documentary Requirements for the Registration of Real
Property with the Register of Deeds

Once you have completed your documentary requirements, these are the steps you need to take.
I. At the Bureau of Internal Revenue (BIR)
Present your requirements to a BIR representative, who will compute the Capital Gains Tax (CGT)
and Documentary Stamp Tax (DST). Once the computations have been done based on the
documents you have given, the BIR representative will have you sign three copies each of BIR Form
1706 for the CGT and BIR Form 2000 for the DST.
Once both BIR Forms 1706 and 2000 have been filled out, the BIR representative will give you back
all your documents and ask you to pay the CGT and DST at the authorized agent bank (AAB).

II. At the Authorized Agent Bank (AAB)


At the AAB, a representative will ask you to fill out two separate AAB payment forms for the CGT
and the DST. Once you have filled out both forms, present them to the AAB along with your cash
payments for both the CGT and DST. Don’t forget to get a copy of the AAB CGT and DST payment
forms back, and make sure they have been stamped received by the AAB.

III. Back at the BIR


Go back to the BIR and return all of your documents, including the original copies of the two AAB
payment forms. The BIR representative will then give you a claim slip indicating the date when you
can claim the Certificate Authorizing Registration (CAR). The CAR is required by the Register of
Deeds for title registration and the issuance of a new Owner’s Duplicate Original Copy of the TCT or
CCT.
As dictated by BIR Memorandum Order No. 15-03, BIR Revenue District Offices are required to
release CARs for all One Time Transaction (ONETT) within 5 days of submitting all of your
documentary requirements.
On the day of the release of the CAR, you will receive said document, along with the following:
• Original copy of the Deed of Absolute Sale stamped received by the BIR
• Owner’s Duplicate Copy of the TCT or the CCT
• Original Copies of the BIR Form 1706 (CGT) and Form 2000 (DST) stamped received by the BIR
• Copies of the Tax Declaration for land and improvement

IV. At the Local Treasurer’s Office


Pay the Transfer Fee and to secure a copy of the Tax Clearance, which you will receive after paying
a certain fee for its issuance and once you’ve presented the following documents:
• Original and one photocopy of the Deed of Absolute Sale
• Photocopy of the Tax Declaration
• Official Receipt of Payment of Real Property Tax and Special Education Fund Tax for the current
year

V. At the Registry of Deeds


To receive the new Owner’s Duplicate Copy of the TCT or CCT in your name, present the following
documents:
• Original Copy of the Deed of Absolute Sale stamped received by the BIR, plus three photocopies
• Seller’s Owner’s Duplicate Copy of the TCT or CCT
• Original Copy of the CAR
• Original Copy of the Tax Clearance
• Original Copies of Official Receipts of Payments of CGT, DST, Tax Clearance Certificate, and
Transfer Fee
• Original Copies of the Current Tax Declaration for land and improvement issued by the local
assessor’s office
• If the seller or buyer is a corporation, submit the following requirements:
a. Secretary’s Certificate authorizing the sale of the real property
b. Certified True Copy of the Articles of Incorporation and By Laws of the seller or buyer corporation
Pay the required Registration Fee. Once the registration fee has been paid and the documents
submitted, a new Owner’s Duplicate Copy of the TCT or CCT will be released to you within 5 days.
VI. At the Local Assessor’s Office
For the issuance of the Tax Declaration in your name, submit the following documents:
• Photocopy of the Deed of Absolute Sale
• Photocopy of the TCT or the CCT
• Photocopy of the CAR
• Photocopy of the Transfer Tax Receipt
• Photocopy of the latest Tax Receipt or Tax Clearance
• Some local assessor’s offices, such as that of Makati City, require these additional documents:
a. Subdivision Plan, if lot is subdivided
b. Full-color photos of the house, lot, or condominium unit
Depending on the workload of Local Assessor’s office, it is possible to receive the Tax Declaration
on the same day as the application, or the following workday.

Final Advice
It will take a lot of patience to go through all these procedures. According to Lipana, once you get the
ball rolling, you can expect the process to take from 2.5 to 4 months, and that depends on how many
buyers are going through the process at the BIR and the Register of Deeds.
“Hopefully, this will be shortened given the [Duterte] Administration’s policy to streamline business
processes and documentary requirements at various government agencies to facilitate processing of
transactions,” he expressed.
There’s no question that the whole experience is going to be tedious, but there are ways to make it
more bearable, starting with having everything in order before starting the procedure.
“Make sure that all the documentary requirements in the checklist are complete before filing the
documents with the government agencies to avoid going back and forth. Also, pay the transfer taxes
on time to avoid penalties and delay in processing of the documents,” Lipana advised.
Try to have more than the required number of photocopies for each document for emergencies. To
minimize hassles, bring several pens for signing documents, as well as a calculator if you want to
check the accuracy of payment computations.
Lipana adds the importance of securing official assessments at the BIR to make sure you’re paying
the correct taxes, as well as remitting payments at the right venue. Keep in mind that you need to
proceed to the government office’s local branch that has jurisdiction over the area where your
purchased property is located. The BIR has a revenue district office (RDO) for every city or
municipality in the Philippines, while some cities have more than one RDO. Also, Assessors’ Offices
are often located in an area’s city or municipal hall.
Remember, ownership is not complete until the buyer registers the land title under his or her name.
Here’s how land titles are transferred in the Philippines.

Note: This article is an updated version of the one published last March 11, 2015.

Disclaimer: Although much effort has been made in the creation of this guide, Lamudi Philippines and
OMI Land Title Services advise homebuyers to always consult with professionals, such as real estate
brokers and lawyers.

Most people know that buying a property is not a simple task, but very few appreciate how much more
complicated the process of transferring land titles from the seller’s name to the buyer’s name is. The
importance of land title transfer should not be underestimated. Remember, this is where you, as a buyer,
will start claiming the property as your own. The issuance of a new land title under your name will be your
proof of ownership; otherwise, you might be facing technical, legal, and financial problems later on,
because of an improper land title transfer or the absence of it.

Where Does It Start?

The process of buying a property does not end with paying the seller and executing a Deed of Sale. What
is important for you to remember is that once the Deed of Sale has been signed and notarized, deadlines
for tax payments are already in effect. Should you fail to meet these deadlines, the penalties and
surcharges that you will incur will certainly make a dent on your pocket. Sometimes, if payment has been
delayed for several years, this amount might be even greater than the value of the property at the time it
was bought.
Ideally, even before the property is purchased, you should already plan a land title transfer. This is just to
make sure that even if you are not be able to do it yourself, you have someone doing it for you whom you
can trust. Remember, ownership is not complete until you register the title under your name.

These are the steps for transferring a land title:

1. File and secure the documentary


requirements at the Bureau of Internal
Revenue Regional District Office (BIR RDO)
These are the documents you need to have on hand:

 Original copy of the notarized Deed of Absolute Sale (DAS), plus two photocopies
 Owner’s duplicate copy of the Transfer Certificate of Title (TCT) or the Condominium
Certificate of Title (CCT) in case of sale of condominium units, plus two photocopies
 Certified True Copies of the latest Tax Declaration for land and improvement of the real
property plus two photocopies. If the property sold is a vacant lot or no improvements have
been made on it, a Sworn Declaration of No Improvement by at least one of the transferees
or Certificate of No Improvement issued by the city or municipal assessor
 Tax Identification Numbers (TIN) of the Seller and Buyer

In some cases, additional requirements may need to be submitted, including the following:

 Special Power of Attorney (SPA), if the person signing on the document is not the owner as it
appears on the TCT or CCT
 Certification of the Philippine Consulate if the SPA is executed abroad
 Location plan or vicinity map if zonal value cannot readily be determined from the documents
submitted
 Such other requirements as may be required by law, rulings, regulations, or other issuances
 For documents required in case of mortgage, judicial or extra-judicial settlement of estate,
judicial and extra-judicial foreclosure of mortgage, consolidation of ownership, execution
sale, and condominium project, please refer to Documentary Requirements for the
Registration of Real Property with the Register of Deeds

2. Secure assessment of transfer taxes at the


BIR and Authorized Agent Bank (AAB) or
Municipal or City Treasurer’s Office
After filing your documentary requirements, a BIR representative will calculate your Capital Gains Tax
(CGT) and Documentary Stamp Tax (DST), after which they will ask you to sign three copies each of the
BIR Form 1706 (CGT) and BIR Form 2000 (DST). These will have to be filed at AAB. For areas where
there are no AABs, they will be filed with the Authorized City or Municipal Treasurer.

3. File documents at the BIR for the issuance


of Certificate Authorizing Registration (CAR)
or BIR Clearance
You will receive a claim slip with the claim date of the CAR, which will be released along with the following
documents:

 Original copy of the Deed of Absolute Sale stamped as received by the BIR
 Owner’s Duplicate Copy of the TCT or the CCT
 Original copies of the BIR Form 1706 (CGT) and Form 2000 (DST) stamped as received by
the BIR
 Copies of the Tax Declaration for land and improvement
According to BIR Memorandum Order No. 15-03, BIR RDOs should release CARs for all One Time
Transaction (ONETT) within five days of submitting all documentary requirements.

4. Pay the Transfer Taxes and secure the Tax


Clearance at the Local Treasurer’s Office
Aside from paying the Transfer Tax, you also need to produce the following documents for the issuance
of the Tax Clearance:

 Original and one photocopy of the Deed of Absolute Sale


 Photocopy of the Tax Declaration
 Official Receipt of Payment of Real Property Tax and Special Education Fund Tax for the
current year

5. File documents at the Registry of Deeds for


the issuance of new land title
The new Owner’s Duplicate copy of the TCT and CCT in your name will be released once you have
presented all of the following documents:

 Original Copy of the Deed of Absolute Sale stamped as received by the BIR, plus three
photocopies
 Seller’s Owner’s Duplicate Copy of the TCT or CCT
 Original Copy of the CAR
 Original Copy of the Tax Clearance
 Original Copies of Official Receipts of Payments of CGT, DST, Tax Clearance Certificate,
and Transfer Fee
 Original Copies of the Current Tax Declaration for land and improvement issued by the local
assessor’s office
 If the seller or buyer is a corporation, submit the following requirements: (a) Secretary’s
Certificate authorizing the sale of the real property; and (b) Certified True Copy of the Articles
of Incorporation and By Laws of the seller or buyer corporation

6. File documents at the Municipal or


Provincial Assessor’s Office for the issuance
of new Tax Declaration
For the release of the new Tax Declaration, you need to present the following documents:

 Photocopy of the Deed of Absolute Sale


 Photocopy of the TCT or the CCT
 Photocopy of the CAR
 Photocopy of the Transfer Tax Receipt
 Photocopy of the latest Tax Receipt or Tax Clearance

Some local assessor’s offices, such as that of Makati City, require these additional documents: (a)
Subdivision Plan, if lot is subdivided; and (b) Full-color photos of the house, lot, or condominium unit

It is important to note that the last step is often missed out. Transferring ownership of a Tax Declaration
should always be done after Land Title Transfer as the name on the Land Title should coincide with the
name indicated on the Tax Declaration.

These steps will require you to go back and forth between multiple government agencies. In addition, the
whole procedure could take several months to complete, more so if there are problems with the property’s
existing documents or records. The process might also require constant follow-ups with the government
agencies, and sometimes it is necessary to personally visit the respective agencies to follow up and
speed up the process.
If accomplishing these tasks personally is not possible for you, then it would be wise to look for someone,
a duly registered company preferably, who has expertise in this matter. Remember, you must transfer
ownership immediately after buying a property to avoid encountering problems later on and paying a huge
penalty for late transfer.

OMI Land Title Services assists in solving a wide range of land and property issues, including title
transfer, title verification, lost titles, extrajudicial settlement, and unpaid property taxes. Call them at +632
884 1106 to learn more about land title transfers.