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 esta
te by agreement among the heirs. Said Rule states:
Sec. 1. Extrajudicial settlement by agreement between heirs. If the decedent lef
t no will and no debts and the heirs are all of age, or the minors are represent
ed by their judicial or legal representatives duly authorized for the purpose, t
he parties may, without securing letters of administration, divide the estate am
ong themselves as they see fit by means of a public instrument filed in the offi
ce of the register of deeds, and should they disagree, they may do so in an ordi
nary action of partition. If there is only one heir, he may adjudicate to himsel
f 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 instrum
ent or by stipulation in a pending action for partition, or the sole heir who ad
judicates the entire estate to himself by means of an affidavit shall file, simu
ltaneously with and as a condition precedent to the filing of the public instrum
ent, or stipulation in the action for partition, or of the affidavit in the offi
ce of the register of deeds, a bond with the said register of deeds, in an amoun
t equivalent to the value of the personal property involved as certified to unde
r oath by the parties concerned and conditioned upon the payment of any just cla
im 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 administr
ation 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 succeedin
g 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. Th
ere 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 ju
dicial 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 ju
dicial settlement of estate takes years before the case is concluded. Furthermor
e, this is more adversarial and is resorted to when the heirs disagree on the pr
operties to be partitioned and the corresponding shares of the respective heirs.
An extrajudicial settlement of estate is done by executing an Extrajudicial Settl
ement 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, va
lue, 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 circula
tion 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 c
onsult 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 wh
ere the land is located, it is necessary that the estate taxes be paid first. Un
der 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 testa
mentary disposition. According to the Bureau of Internal Revenue, estate tax is
not a tax on property but rather imposed on the privilege of transmitting proper
ty 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 no
ted that the estate itself is assigned its own Tax Identification Number (TIN).
The Estate Tax Return is filed with Revenue District Office (RDO) having jurisdi
ction over the place of residence of the decedent at the time of his death. If t
he decedent has no legal residence in the Philippines, then the return can be fi
led with:
1. The Office of the Revenue District Officer, Revenue District Office No. 39, S
outh 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. Howev
er, upon request and if the Commissioner of the BIR finds that payment on the du
e 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-judicial
ly. 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 P20
0,000
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 P10,0
00,000
The basis shall be the net estate. That means that there are allowable deduction
s on the estate. These deductions include funeral expenses, share of the survivi
ng 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 submitte
d 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 t
ime of death
6. Photo copy of Certificate of Registration of vehicles and other proofs showin
g 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 Exchang
e
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 fr
om 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 f
iling with the BIR and Register of Deeds may be simultaneous. The proof of payme
nt of the estate tax, Affidavit of Publication of the Deed, the Deed of Extrajud
icial Settlement of Estate are the basic requirements to be submitted to the Reg
ister of Deeds. When all pertinent documents are submitted, the Register of Deed
s 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. Furth
ermore, this can open the erring heirs to criminal liabilities.
If you need any help in extrajudicial settlement of estate in the Philippines, c
all any of our lawyers at (632) 4016392 or (632) 4706126 or e-mail us at info @n
dvlaw.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, Me
tro Manila, Philippines.