Introduction

An Extrajudicial Settlement of Estate (EJS) is a legal mechanism in the Philippines allowing heirs to divide and distribute a deceased person's estate without court intervention, provided there is no will, no outstanding debts, and all heirs agree. This process is efficient for small estates but requires notarization to become a public document, binding on third parties and eligible for registration with the Registry of Deeds. Notarization ensures authenticity and compliance with formalities, but it incurs costs that vary based on the estate's value, document complexity, and location.

In the Philippine context, the cost to notarize an EJS encompasses notarial fees, documentary stamp taxes, and incidental expenses. While notarial fees are regulated, total costs can range from PHP 2,000 for simple settlements to over PHP 50,000 for valuable estates, influenced by professional charges and government impositions. This article exhaustively details all aspects of these costs, including legal bases, breakdowns, factors affecting amounts, procedural implications, and practical considerations. It draws from the Civil Code (Republic Act No. 386), the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC), the National Internal Revenue Code (Republic Act No. 8424, as amended), and relevant jurisprudence from the Supreme Court. Understanding these costs is crucial for heirs to budget effectively and avoid delays in estate distribution, aligning with the policy of speedy succession under Article 777 of the Civil Code.

EJS is preferred for its simplicity, but improper notarization can render it void, leading to intestate proceedings and higher overall expenses.

Legal Basis for Extrajudicial Settlement and Notarization

Provisions Under the Civil Code

The Civil Code governs EJS:

Article 777: Rights to succession are transmitted from death, allowing heirs to settle extrajudicially.
Article 1056-1060: For intestate succession without debts or disputes, heirs may partition via public instrument (notarized deed).
Article 1358: Acts affecting real property, like estate division, must be in a public instrument to be valid against third parties.

Notarization transforms the EJS into a public document, essential for title transfers and tax clearances.

Rules on Notarial Practice

A.M. No. 02-8-13-SC (2004 Rules): Regulates notarial fees for deeds like EJS. Fees are based on the document's value (estate worth), with schedules ensuring affordability while compensating notaries.
Notaries must be lawyers or authorized officials, adhering to ethical standards (Code of Professional Responsibility, Canon 20).

Tax Implications

Section 196, Tax Code: Documentary Stamp Tax (DST) at 1.5% of the property's fair market value or zonal value, whichever higher, applies to EJS as a conveyance deed.
Section 88, Tax Code: Estate tax clearance required before notarization if estate exceeds PHP 200,000, adding indirect costs.

Supreme Court rulings reinforce formalities: In Heirs of Teofilo Gabatan v. Court of Appeals (G.R. No. 150206, 2009), an unnotarized EJS was deemed ineffective for title registration, emphasizing notarization's role.

Requirements for Extrajudicial Settlement

Before notarization, heirs must prepare:

Death certificate of the decedent (PSA-issued).
Affidavit of self-adjudication (if sole heir) or deed of extrajudicial settlement (if multiple heirs), listing assets, heirs, and shares.
Proof of no debts (affidavits from heirs).
Publication in a newspaper of general circulation (once a week for three weeks) if real property involved (Rule 74, Section 1, Rules of Court).
BIR tax clearances and payments (estate tax if applicable).
Titles and tax declarations for properties.

These prerequisites influence costs, as publication alone can exceed PHP 5,000-10,000.

Notarization Process for Extrajudicial Settlement

Drafting the Document: Heirs or a lawyer prepares the EJS deed, detailing partition.
Execution: Heirs sign before a notary public, who verifies identities and voluntariness.
Acknowledgment: Notary affixes seal, registering the act in their notarial book.
Payment of Fees: At execution, based on value.
Post-Notarization: Register with Registry of Deeds for real property, pay transfer taxes.

Process takes 1-2 hours, but preparation (including publication) spans 1-3 months.

Breakdown of Costs

Costs vary by estate value, location (higher in urban areas), and notary rates. Estimates as of current practices:

1. Notarial Fees

Standard Rates (2004 Rules): For deeds valued:
- Up to PHP 100,000: PHP 200-500.
- PHP 100,001-500,000: 1% of value, capped at PHP 2,000.
- Over PHP 500,000: 0.5-1% , with practical caps at PHP 5,000-10,000 for estates.
Additional Charges: PHP 100-300 per page for drafting assistance; PHP 500 for travel if notary visits.
Example: For a PHP 1,000,000 estate, notarial fee around PHP 5,000-8,000.

2. Documentary Stamp Tax (DST)

Rate: 1.5% of the higher of fair market value, zonal value (BIR), or assessed value (LGU).
Computation: Paid to BIR before or at notarization; e.g., PHP 15,000 for PHP 1,000,000 property.
Exemptions: None typically for EJS, but small estates under PHP 200,000 may avoid estate tax linkage.

3. Publication Costs

Requirement: For real property, publish EJS in a newspaper (Rule 74).
Cost: PHP 3,000-15,000, depending on newspaper (national vs. local) and length (three insertions).
Affidavit of Publication: Additional PHP 500-1,000.

4. Legal and Professional Fees

Attorney's Fees: If hiring a lawyer to draft/review, PHP 5,000-20,000 for simple cases; higher for complex partitions.
Accountant's Fees: For tax computations, PHP 2,000-5,000.

5. Incidental and Administrative Costs

PSA Documents: Death/birth/marriage certificates: PHP 150-300 each.
BIR Clearances: Estate tax filing: PHP 1,000-5,000 in fees, plus tax if due (6% on net estate over PHP 5 million under TRAIN Law, RA 10963).
Photocopies, Notarial Copies: PHP 100-500.
Travel/Transportation: PHP 500-2,000.

Total Estimated Costs

Small Estate (under PHP 500,000): PHP 5,000-15,000.
Medium (PHP 500,000-2,000,000): PHP 15,000-30,000.
Large (over PHP 2,000,000): PHP 30,000-100,000+, including taxes.

Costs are higher in Metro Manila due to premium notary rates.

Factors Affecting Notarization Costs

Estate Value and Complexity: Higher values increase DST and fees; multiple heirs or properties add drafting costs.
Location: Urban notaries charge more; rural areas cheaper but may require travel.
Urgency: Expedited services incur premiums.
Tax Status: If estate tax due, significant addition (progressive rates 0-20% pre-TRAIN adjustments).
Professional Involvement: DIY reduces costs but risks invalidity.

Procedures After Notarization

BIR Tax Compliance: Secure Certificate Authorizing Registration (CAR).
Registration with Registry of Deeds: Annotate titles; fees PHP 1,000-5,000.
Transfer Tax: 0.5-0.75% of value, paid to LGU.
New Titles: Issuance in heirs' names.

Failure to notarize properly leads to judicial settlement, costing PHP 20,000-100,000 in court fees.

Challenges and Risks

Disputes Among Heirs: Delays notarization; requires all signatures.
Tax Audits: BIR scrutiny increases costs.
Invalidity: If debts surface post-EJS, void under Rule 74; heirs liable.
Fraud: Forged signatures lead to criminal charges (Article 172, RPC).
Jurisprudence: In Heirs of Spouses Reyes v. Reyes (G.R. No. 158377, 2006), unnotarized EJS ineffective against third parties.

Practical Considerations

Budget Planning: Factor all fees; consult lawyers early.
Free Services: Notaries in government offices cheaper; PAO aids indigents.
Alternatives: Judicial settlement if disputes; self-adjudication for sole heirs cheaper.
Timeline: 1-6 months total.

Conclusion

The cost to notarize an extrajudicial settlement in the Philippines is multifaceted, encompassing regulated notarial fees, taxes, and ancillary expenses, tailored to the estate's scale. Rooted in the Civil Code's emphasis on formal partition, notarization ensures legal efficacy while imposing financial burdens that heirs must anticipate. By understanding these costs and procedures, families can navigate succession efficiently, minimizing delays and disputes. This mechanism promotes orderly inheritance, aligning with civil law principles of equity and finality. Heirs are advised to engage professionals for accuracy, ensuring the process honors the decedent's legacy without undue hardship.