Cost of Extrajudicial Estate Settlement and Estate Tax in the Philippines
(Comprehensive Legal Guide, updated to July 5 2025)
1. Why focus on extrajudicial settlement (EJS)?
Under Rule 74 of the Rules of Court, heirs may settle an estate without court intervention when all these are true:
- No will has been left or a will has been rejected.
- All heirs are of legal age (or minors are duly represented).
- No outstanding debts, or the debts have been fully paid.
When any condition is missing, judicial settlement becomes mandatory, bringing dramatically higher litigation expenses and longer timelines. EJS therefore remains the option of choice for the vast majority of small- to mid-sized Filipino estates.
2. Core documentary requirements
| Document | Key points | Typical out-of-pocket cost (₱) |
|---|---|---|
| Notice of Death (BIR Form 1949) | File within 2 months of death in the RDO where the decedent was domiciled. | None (walk-in) |
| Deed of Extrajudicial Settlement (with or without Waiver of Rights) | Must be notarised and later published in a newspaper of general circulation once a week for 3 consecutive weeks. | Notarial: 300 – 1 000 Publication (Metro Manila): 8 000 – 15 000 Publication (provincial): 4 000 – 10 000 |
| Estate Tax Return (BIR Form 1801) | Due one year from date of death, extendible (for meritorious reasons) by 30–180 days. | None; but subject to tax and surcharges |
| Tax-free exchange / CAR application | Certificate Authorizing Registration (CAR) is issued per asset class (real property, shares, bank deposits, vehicles). | Filing fee 100/CAR + output taxes below |
| Transfer documents (LGU, LRA, LTO, SEC, etc.) | Separate offices collect their own transfer fees. | Varies (see §§ 4–5) |
Practice tip: Draft the Deed of EJS after you have gathered the certified true copy of every title, updated tax declarations, and any pending loan statements, so the partition matches the asset list precisely.
3. Estate tax basics (TRAIN & CREATE era)
| Item | Rate or amount (post-TRAIN, R.A. 10963, effective 1 Jan 2018) |
|---|---|
| Tax rate | 6 % of net estate (single flat rate replacing the old 5-20 % brackets) |
| Standard deduction | ₱ 5 000 000 |
| Family-home deduction | Up to ₱ 10 000 000 (property must be decedent’s family home) |
| Medical expenses deduction | Abolished (already subsumed by larger standard deduction) |
| Judicial or extrajudicial expenses | Deductible if actually paid (proof required) |
| Claims against estate | Deductible if incurred bona fide and enforceable |
| Estate tax amnesty | Extended by R.A. 11956 to 14 June 2025; 6 % amnesty on net undeclared estate plus waiver of penalties and interest |
Key takeaway: For many middle-class estates, the combined ₱ 15 million blanket deductions wipe out the taxable base altogether, driving the estate tax to zero—but you must still file to obtain CARs and effect transfers.
Sample computation
Assume decedent left:
- House & lot (fair market value) – ₱ 6 500 000
- Bank deposit – ₱ 900 000
- Ordinary sedan – ₱ 350 000
- Funeral, etc. actually paid – ₱ 180 000
Gross estate ………………… ₱ 7 750 000 Less standard deduction …… (5 000 000) Less family-home deduction… (6 500 000) capped at 10 M but limited by taxable portion Net estate ……………………… ₱ 0
Estate tax due: ₱ 0 (but file Form 1801 and pay associated DST + local fees).
4. National taxes and fees other than estate tax
| Levy | Basis | Rate / formula | Payable to |
|---|---|---|---|
| Documentary Stamp Tax (DST) – Deed of EJS (Sec. 63, NIRC) | Fair market value of estate property | ₱ 15 for first ₱ 1 000 + ₱ 15 every add’l ₱ 1 000 OR 1.5 % on consideration, whichever applies | BIR |
| DST – new share certificates (Sec. 174) | Par or issued value | ₱ 0.75 per ₱ 200 | BIR |
| Certification fee | Per CAR issued | ₱ 100 | BIR |
Current policy notes (2025): The BIR still accepts manual DST franking for EJS deeds, but most RDOs now require eDST enrolment for estates >₱ 3 million. Factor in about 1–3 extra days for e-sign-off.
5. Local and registration charges
| Charge | Who collects | Typical rate / schedule |
|---|---|---|
| Transfer tax | City / municipal treasurer | 0.5 % of zonal value or selling price (whichever higher) |
| Registration fee (real property) | Register of Deeds | Sliding scale under LRA; e.g., ₱ 8 610 for first ₱ 1 M + ₱ 8 per additional ₱ 1 000 |
| IT fee (for computerized RDs) | Register of Deeds | ₱ 20 per parcel |
| Annotation fees | Register of Deeds | ₱ 50 – 100 per annotation |
| Motor vehicle transfer | LTO | ₱ 530–1 200 depending on vehicle type |
| SEC stock transfer to heirs | SEC + issuing corporation | SEC filing fee 1/5 of 1 % on par value; transfer agent fees vary (₱ 1 000 – 3 000) |
6. Professional-services envelope
| Service | Range (private-sector quotes 2024–2025) |
|---|---|
| Notarial fee (EJS deed) | ₱ 300 – 2 000 |
| Lawyer drafting & end-to-end processing | 3 % – 8 % of gross estate (fixed minimums of ₱ 30 000 – 60 000 for small estates) |
| Certified public accountant opinion / valuation | ₱ 10 000 – 50 000 (optional but prudent for estates >₱ 10 M) |
| Title verification / liaison services | ₱ 4 000 – 10 000 per property (if outsourced) |
Tip: A lean, do-it-yourself settlement can be accomplished for ₱ 15 000–40 000 (plus any estate tax) if heirs handle errands personally and estate values are modest.
7. Timeline checkpoints & penalties
| Action | Statutory deadline | Late-filing surcharge | Interest |
|---|---|---|---|
| File Notice of Death | 2 months from death | 25 % of estate tax (if assessed) | 12 % p.a. on deficiency |
| File Estate Tax Return & pay | 1 year from death | 25 % surcharge | 12 % p.a. from original due date |
| Publish EJS | Before presentation to BIR | Not applicable, but failure delays CAR | – |
| Settle estate tax deficiency (if any) | Upon demand | Additional 50 % surcharge for fraud | 12 % p.a. |
Since July 2024 the BIR imposes eFPS/eBIR mandatory electronic filing for estates above ₱ 5 million or with at least one property in Metro Manila.
8. Estate tax amnesty snapshot (R.A. 11213 & 11956)
- Coverage: Estates of decedents who died on or before 31 May 2022, with or without prior EJS filing.
- Rate: Flat 6 % on net undeclared estate value, not on the whole estate.
- Deadline: 14 June 2025 (non-extendible unless Congress amends again).
- Effect: Waiver of all penalties, interest, and surcharge; issuance of CARs.
Practical use case: Families who failed to file within 1 year (say, COVID-era deaths) can regularise titles at minimal cost. After 14 June 2025, ordinary estate-tax rates and penalties re-apply.
9. Step-by-step cost-aware workflow
Inventory & valuation
- Secure certified true copies of titles, stock certificates, bank statements, OR/CR (vehicles).
- Engage a licensed appraiser if zonal values seem outdated.
Draft & notarise Deed of EJS
- Attach approved subdivision plans if splitting a single lot.
Publish for 3 weeks
- Keep the entire newspaper (not just clippings); BIR sometimes asks for intact copies.
File Notice of Death + Estate Tax Return
- Pay DST, estate tax (if any), and request CAR issuance. Expect 1–4 weeks for CAR.
Local transfer & registration
- Pay local transfer tax within 60 days of CAR release.
- Register new titles / share certificates / vehicle change-of-ownership.
Final accounting
- Keep all ORs for documentary expense deduction should the BIR open an audit.
10. Common pitfalls that inflate costs
| Pitfall | Cost impact | Mitigation |
|---|---|---|
| Publishing in a national broadsheet unnecessarily | Adds ₱ 10 000 – 20 000 | Choose any paper of “general circulation” in the province— |
| courts accept reputable community papers | ||
| Missed 1-year estate-tax deadline | 25 % surcharge + 12 % p.a. interest | Mark the death anniversary on your calendar; request extension early if needed |
| Undervaluing real property | BIR issues deficiency assessment + penalties | Use whichever is higher among zonal, FMV from latest tax dec, or BIR-commissioned appraisal |
| Forgetting bank deposits | Cannot withdraw funds; bank asks for CAR | Include all intangibles in 1801 even if tax-exempt |
11. Special issues
- Foreign assets of Filipino decedents are taxable globally, but foreign‐situs real property is usually claimed as a deduction if proven taxed abroad (tax credit).
- Dual citizenship heirs still pay Philippine estate tax on Philippine-situs assets.
- Minor heirs: Instead of EJS, consider constituting a guardianship bond (3–10 % premium of minor’s share) to satisfy Rule 74.
- Agrarian land can be transferred via CARP-specific procedures at DAR, often taking 6–12 months.
- Digital assets & cryptocurrency: BIR has yet to issue dedicated valuation rules; practitioners adapt securities-tax analogies or use FMV at date of death plus appraisal report.
12. Ball-park cost matrix (illustrative only)
| Estate size | Likely national taxes | Incidental fees & professional charges | Total outlay estimate |
|---|---|---|---|
| ≤ ₱ 5 M | Often ₱ 0 (fully shielded by deductions) | ₱ 15 000 – 40 000 | ₱ 15 000 – 40 000 |
| ₱ 10 M | 6 % on ₱ (10 M – 15 M deductions) → ₱ 0 | ₱ 40 000 – 120 000 | ₱ 40 000 – 120 000 |
| ₱ 30 M (two condos + stocks) | 6 % on ₱ 15 M → ₱ 900 000 | 1 %–3 % professional + reg. ≈ ₱ 500 000 | ≈ ₱ 1.4 M |
| ₱ 100 M | 6 % on ₱ 85 M → ₱ 5.1 M | 1 %–3 % professional + reg. ≈ ₱ 2 M | ≈ ₱ 7 M |
13. Take-aways for 2025 and beyond
- Flat 6 % estate tax + generous deductions mean many estates owe little to no national tax, but heirs must still file to clear titles.
- Publication, local transfer tax, and registration fees—not the estate tax—are the largest cash-flow items for modest estates.
- Estate-tax amnesty remains a game-changer until June 14 2025; act fast if a loved one died on or before May 31 2022 and remains unsettled.
- Digital filing and eDST have shortened processing queues but require more accurate data entry; errors trigger costly recomputation.
- Early professional guidance, even on a limited-scope basis, saves money by preventing surcharges and ensuring valuations stand up to BIR review.
Disclaimer
This article is for general informational purposes and does not create a lawyer-client relationship. Tax rules evolve, and local government fee schedules vary. Always verify the latest issuances from the Bureau of Internal Revenue, Department of Finance, Land Registration Authority, and your local treasurer before proceeding.