FIlipinoLegal » Transfer of Title Through Extrajudicial Settlement of Estate

Inheriting a property from the Philippines is a wonderful thing but inheriting and transferring title of the property into your name are two different things. The latter involves the tedious process of settlement of estate of your deceased loved one who left you the property. This article will provide you with general information about the process of estate settlement which will lead to transfer of title of the inherited property into your name.

Extrajudicial Settlement of Estate

In the Philippines, no properties left behind by a deceased person can pass on to his/her heir/s unless the deceased’s estate is settled first, either judicially (a court petition is required) or extrajudicially (you don’t have to go to court).

Estate is the collective term for all the properties and assets left by a deceased person at the time of death. The estate is usually settled by identifying and gathering all the properties and assets left by the deceased, paying off all debts and liabilities that the deceased may owe, paying the property and estate taxes due, and distributing the remaining properties to the heirs. This whole process is what is known as settlement of estate.

Fortunately, in the Philippines a deceased’s estate can be settled extrajudicially regardless of the value of the estate. The only requirements are: (1) the deceased left no will; (2) all heirs are in agreement; and (3) the deceased had no outstanding debts.

If all the above conditions are present, the heirs can proceed to settle the estate by merely signing a deed of extrajudicial settlement of estate and, after paying all taxes and publication of an excerpt of the deed, can register the estate settlement with the appropriate registry of properties known as Registry of Deeds.

Estate Tax

One of the major taxes that must be paid in the estate settlement is the estate tax. This is a tax on the privilege of the deceased (known as the decedent) to transmit his/her properties at death to his/her lawful heirs or beneficiaries. The estate tax rate is 6% based on the net value of the estate of the decedent based at the time of death.

Estate Tax Amnesty

The estate tax return must be filed and the estate tax paid within one year from the death of the decedent. Failure to file the estate tax return within this time will result in a penalty surcharge of 25% of the estate tax due. Also, an interest of 20% per annum on the unpaid tax will be imposed, from the due date until fully paid.

In the Philippines, it is common that many estates remain unsettled for several years after the death of the decedent. That is why an estate tax amnesty was enacted into law to encourage people to settle the estates of their deceased loved ones without incurring estate tax penalties and interests, which could run into several thousand pesos.

This amnesty has been extended several times and under the most recent one, it applies to the estate of all persons who have died on or before May 31, 2022. The amnesty must be availed of no later than June 14, 2025.

Certificate Authorizing Registration (CAR)

Once the estate tax has been paid, the Bureau of Internal Revenue or BIR will issue a Certificate Authorizing Registration or CAR. The CAR will be your authority to register the estate settlement with the Registry of Deeds.

Transfer Certificate of Title

Together with the CAR, deed of extrajudicial settlement and other supporting documents, the heir/s must submit to the Registry of Deeds the original title to the inherited property, which is known as Original Certificate of Title or Transfer Certificate of Title, so that the same can be cancelled and a new one will be issued bearing the name of the heir/s as the new registered owner.

Take note that if the original title is missing it will delay the transfer of title to the heir/s. A petition in court must be filed for the re-issuance of a new certificate of title. It is, therefore, important to safeguard the original titles to all properties left by the decedent.