Table of Contents
What is an Extrajudicial Settlement of Estate?
An Extrajudicial Settlement of Estate is a notarized document that transfers a deceased’s person’s property to new heirs when there is no will and is signed by all the heirs or their representatives.
- Notarization is required
- Property information and details such as the title number, tax declaration and technical descriptions should be in the EJS
- All properties should be listed in the EJS and property documents should be complete.
- All heirs must sign and agree
- If settled more than a year after the death, late fees are added every year it is unsettled aside from BIR Estate taxes.
The above requirements are very difficult for families to accomplish.
Some properties are never titled in the heirs’ names and some heirs even go to court (especially when there is disagreement).
But an Extrajudicial Settlement of Estate is very important to do.
It is a requirement to transfer a title to the new heirs. It also may be required for an Agricultural Free Patent, a Residential Free Patent or to access a deceased’s bank account. Without an EJS, the land can eventually be lost.
Note that there are different Extrajudicial Settlements that are possible:
- An Extrajudicial Settlement of Estate with Deed of Sale when you are settling the estate and have a buyer who is willing to do this process with you
- An Extrajudicial Settlement of Estate with Waiver of Rights when you are settling the estate and have heirs who wish to waive their rights or donate to others.
What are the requirements for Extrajudicial Settlement in the Philippines?
The requirements for Extrajudicial Settlement in the Philippines are all the property documents, all family Registrar documents, IDs and the EJS itself.
Let’s go through the exact documents needed:
- Original Land Title and Certified True Copies of Land Title from the Registry of Deeds
- Certified True Copies of Tax Declarations from the City Assessor’s Office
- Certificate of Land Holdings from City Assessor’s Office
- Certificate of No Improvement
- Certified True Copy of Mortgage and Statement of Account documents from the bank, if applicable
- Original Certificates of shares of stock
- Audited Financial Statements for unlisted shares of stock
- PSA Death Certificate of the deceased and PSA Marriage Certificate, as applicable
- PSA Birth Certificate, PSA Marriage Certificate, and PSA death Certificate of all his heirs, as applicable
- Payment of all outstanding realty taxes
- Certification of a registered accountant for the tax computation, if applicable
- Notarized Extrajudicial Settlement of Estate with the signature of all the heirs.
- IDs and TINs of all the heirs
If you are reading this and don’t have some of the requirements or the requirements are imperfect, then you can check out the FAQ section below, where we talk about common situations such as:
- What if you do not have the original land title?
- Do all heirs have to sign the EJS?
- What if there are errors in the PSA documents or what if you have a PSA document of No Result?
- What if names are misspelled on the property documents?
- What if tax declarations are in someone else’s name?
- And other common questions
All of the above can cause problems.
If there are several issues with your documents or the family situation is complicated, a consultation with an Inheritance Lawyer is important.
Getting the documents is about 60% of the work and you might need advice on what to do if you have trouble.
Note also – you must gather all of this within a year for deaths covered by TRAIN since after that late fees are added every year that the estate is unsettled in addition to BIR Estate Taxes.
What is the process of Extrajudicial Settlement in the Philippines?
The process of Extrajudicial Settlement in the Philippines is the documents are gathered, the BIR estate taxes are paid, the BIR e-CAR is registered in each Registry of Deeds.
The process of Extrajudicial Settlement of Estate is as follows:
- Gather ALL the documents
- Send documents to an Inheritance Lawyer to draft the EJS as the lawyer will need all the above requirements for an Extrajudicial Settlement of Estate. The main reason an Inheritance Lawyer might not be able to finish drafting the EJS is the lack of documents.
- Have ALL the heirs sign the EJS and notarize it
- Pay the BIR Estate Taxes
- Register the e-CAR at the Registry of Deeds for each location
It sounds so simple, does it?
And yet, settling an estate can take several months mainly because there can be a lot of back and forth at each step.
For example, if I was to ask you to get all the above property and PSA documents, you would probably take some time to do it.
Likewise, it also takes some time at the BIR or Registry of Deeds as they may ask for additional documents or compliances.
So much depends on the situation.
How much does it cost to transfer land title to heirs in the Philippines?
The cost to transfer land title to heirs in the Philippines is made up of the BIR estate taxes, Registry of Deeds transfer fees, payment of unpaid realty taxes, payment to gather documents, payment to the certified accountant, publication costs and fees paid to an Inheritance Lawyer.
The amount you can expect to pay depends on the date of death.
For deaths after Dec 31, 2017 (other tax regimes apply before that date), you can expect the following:
· BIR estate taxes are 6% of the value of the net estate
· Registry of Deeds transfer fees
· Payment of unpaid realty taxes
· Payment to a certified accountant, costs depend on location
· Payment to an Inheritance lawyer for drafting and advice
· Cost of gathering documents
The biggest cost is the BIR estate tax.
I explain this in my article on BIR Estate Taxes since taxes will differ depending on the situation (For instance, an EJS with Waiver of Rights will have a different calculation depending on the situation) and the applicable law.
The applicable law depends on the date of death of the deceased – for example deaths from Jan 1 1986 to July 27, 1992 are covered by PD 1994.
Currently, the law in force is the TRAIN law. I’ll talk briefly here about some major things that can affect BIR Estate Taxes for Philippine citizens and resident aliens:
· Php 5,000,000 standard deduction
· Php 10,000,000 for the family home
· Surviving spouse’s share of the estate
· Mortgages or claims against the estate
· Properties previously taxed and transferred within 5 years of the death may have available deductions depending on the date of transfer
Please note that the deductions are affected by the date of the deceased death and whether or not the deceased was a citizen of the Philippines or non-resident alien. Non-Resident Aliens Estate Taxes have different deductions.
The deductions above are the major and most common ones that affect the estate.
There are others but they are rarely used – the majority are going to be using the above.
For an assessment of your situation talk to an Inheritance Lawyer to understand factors that can reduce costs.
A detailed Estate Tax cost at the BIR is possible only after the Inheritance Lawyer actually accepts your case however because he has to go through all the documents and sit down and do a deep analysis.
How long is the process of Extrajudicial Settlement of Estate in the Philippines?
The process of Extrajudicial Settlement of Estate can be a few months if the family all agrees, has the documents and has the money to pay for the taxes required.
Common causes of delay are:
- The family does not agree on how to settle the estate and so much settle the estate through the court with the help of an Inheritance Lawyer. This can take years and the family really struggles – for all my clients, I urge them to really try their best to come to a compromise.
- The property documents are missing and they don’t have the Original (not a photocopy) of the Owner’s Transfer Copy of Title. Getting a new OCT requires going to court so this should be discussed with your Inheritance lawyer.
- The property documents and PSA documents have misspellings on the name or factual inconsistencies which can require other documents to be prepared and additional time spent.
- PSA documents cannot be found such as when there is a PSA Certificate of No Record
- There is not enough money to pay the realty taxes, the BIR, the lawyer or the CPA. Expect that nothing will be completed without the money to settle the estate properly although the BIR does accept partial payment or the sale of assets to pay for the tax.
You are not alone if a lot of this is applicable to your situation, since so many people struggle with the same issues.
You and your family must solve the issues of getting the family to agree on how to divide the estate and how to pay for the estate taxes and the professional fees.
You and your family alone must agree (although perhaps an Inheritance lawyer may advise or represent you and help get an agreement, at the end of the day this must be solved by the family).
An Inheritance lawyer can help you with other things and give you good advice on what to do.
FAQs on Extrajudicial Settlement in the Philippines
Who is the legal owner of the property after death?
The legal owner of the property after death is the compulsory heir if there is no will or the heirs stated in the will.
Note that only a valid will can disinherit Compulsory Heirs and that this will must go through Probate with an Inheritance Lawyer. Note also that it is hard to disinherit – there are very specific grounds that you can use.
Who are the legal heirs of a deceased person in the Philippines?
If the deceased has a valid will that has successfully gone through Probate, then his heirs are those specified in the Will.
I there is no will, then his heirs are the compulsory heirs are specified in Philippine Succession law.
Do all the heirs have to sign the Extrajudicial Settlement?
Yes, all the heirs have to sign the EJS.
If there is disagreement, then the EJS cannot proceed and you will have to go to court. The court is more expensive, more time-consuming and more difficult than an EJS. I strongly, strongly urge you to just agree.
Do all heirs have to agree to sell property in the Philippines?
Yes, they do as they must sign documents so that the buyer wants to be able to transfer to his name.
If they do not agree to sell the property, then it is possible that they go to court to settle the issue. The court is expensive and time-consuming. It is better to agree.
What happens if the Original Land Title is missing?
You will be able to pay the estate taxes but you won’t be able to transfer the title to your name since the Original Land Title is missing.
You can go to court in a Reissuance case to get a new Original Land Title while the EJS is being done. Discuss this with your Inheritance Lawyer.
How do you divide inherited property between siblings in the Philippines?
If siblings cannot agree, it is possible to subdivide a mother title.
However, the process for this is not at all fast. A new survey has to be done and the results submitted to the CENRO/DENR office. Then the process of subdivision starts. There are so many requirements for this as well.
Can you sell a property if the owner is deceased?
Yes, you can sell a property if the owner is deceased but the new owner will eventually need to settle the estate if he wants to transfer it to his name.
Some people do an Extrajudicial Settlement of Estate with Deed of Sale so that they can settle the estate and do the sale at the same time. This reduces the taxes that need to be paid but requires a firm buyer and a lot of coordination.
Can you withdraw money from a deceased person’s account?
Although TRAIN law allows the withdrawal of funds subject to the 6% BIR Estate Tax, in practice the banks will not allow withdrawal without the Extrajudicial Settlement.
You must settle the estate first.
Can the wife claim her husband’s property after his death?
If you are legally married – you are not a common law wife – then you are a compulsory heir unless a valid will disinherits you.
But you are likely inheriting with other co-heirs such as children of your spouse (yes, including illegitimate children) or his siblings if he has no children.
What happens to a jointly owned property if one owner dies in the Philippines?
If one of the owners dies, then the property will now be owned by the surviving co-owner and the heirs of the deceased as specified in the valid will or as determined by the Laws on Succession for Compulsory Heirs.
What if there are errors in the PSA documents or what if you have a PSA document of No Result?
Basic documents can sometimes be extremely hard to get when the documents are old.
It can be very, very challenging to get something as simple as a birth certificate – we know since we got one for a lady who was 98 which required months and months of legwork.
If this is your situation, check out my article PSA Certificate of No Record.
If there are errors on the PSA documents, you might have to correct in extreme cases (depending on the error) or you might actually not even be able to transfer through an EJS.
What if names are misspelled on the property documents?
If the names are misspelled, it depends on how bad the misspellings are. This can cause quite a lot of delay.
What if tax declarations are in someone else’s name?
If the tax declaration is in a name other than the deceased, you have to prove that the deceased acquired the property before it can be transferred to the new owners.
You may have to show an EJS, a Deed of Sale, etc. so that it can be proved that it was validly the deceased and it can be transferred to the new heirs.