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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 debts and 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 extra judicially settled (title number, value, location, lot
size,
technical
description,
etc.)
3.
Nature
of
the
4.
Name
5.
How
the
properties
6.
Posting
of
a
bond
7. Undertaking that the Deed will be
week for 3 consecutive weeks.

property
(if
conjugal
property)
of
the
heirs
shall
be
divided
amongst
the
heirs.
if
there
is
personal
property
involved.
published in a newspaper of general circulation once a

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.
It bears great emphasis that the Estate Tax Return must be filed within six (6) months from
the decedents 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.NoticeofDeath
2.CertifiedtruecopyoftheDeathCertificate
3.DeedofExtra-JudicialSettlementoftheEstate
4.Certifiedtruecopyofthelandtitlesinvolved
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.Photocopyofcertificateofstocks
8.Proofofvaluationofsharesofstocksatthetimeofdeath
a.ForlistedstocksnewspaperclippingsorcertificationfromtheStockExchange
b. For unlisted stocks latest audited Financial Statement of issuing corporation with
computation
of
book
value
pershare
9.Proofofvaluationofothertypesofpersonalproperty
10. CPA Statement on the itemized assets of the decedent, itemized deductions from gross
estate
and
the
amount
dueifthegrossvalueoftheestateexceedstwomillionpesos
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.
If you need any help in extrajudicial settlement of estate in the Philippines, call any of our
lawyers at (632) 4016392 or (632) 4706126 or e-mail us at info @ndvlaw.com.
Nicolas & De Vega Law Offices is a full-service law firm located at the 16th Flr. Suite 1607
AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, Pasig City, Metro Manila, Philippines.