Estate Settlement & Selling Estate Assets in the Philippines
All-in-one legal primer (updated as of 16 July 2025)
1. Key Concepts & Governing Laws
| Concept | Core Statute / Rule | Essence |
|---|---|---|
| Succession | Civil Code of the Philippines (Book III, Arts. 774-1105) | Transfer of a decedent’s property, rights & obligations to the heirs. |
| Estate Settlement | • Judicial: Rules of Court (esp. Rules 73-91) • Extra-Judicial: Rule 74, Sec. 1 |
Process of determining heirs, inventorying assets, paying debts & taxes, and distributing what remains. |
| Estate Tax | NIRC as amended by the TRAIN Law (RA 10963) + Revenue Regs. 12-2018, 17-2023 | Flat 6 % on the net estate; return & payment due within 1 year from death (extensions possible). |
| Estate Tax Amnesty | RA 11213 (2019) as extended by RA 11956 (2023) | Covered deaths on/before 31 May 2022; program expired 14 June 2025. |
| Sale of Estate Property | Civil Code Arts. 1058-1105; Rules of Court 75-89 | Only the executor/administrator (judicial) or all heirs acting jointly (extra-judicial) can validly sell; minors need court-appointed guardian approval. |
| Registration & Transfer | PD 1529 (Property Registration Decree), LRA, SEC, LTO, Registry of Deeds | Transfer requires Bureau of Internal Revenue CAR (Certificate Authorizing Registration) + payment of all taxes & fees. |
2. Settlement Pathways
| Path | When Used | Core Requirements | Typical Timeline |
|---|---|---|---|
| Judicial Probate / Intestate Proceedings | • There is a will (probate) • OR contested heirs/debts/assets • OR a minor/incompetent heir |
✔ File petition with Regional Trial Court (RTC) or MTC (small estates) ✔ Letters testamentary / administration ✔ Inventory & appraisal ✔ Notice to creditors ✔ Court approval for asset sales |
6 months – several years |
| Extra-Judicial Settlement (EJS) | • No will and no outstanding debts and heirs are all of age or duly represented by guardians | ✔ Public instrument titled “Deed of Extra-Judicial Settlement” (or “EJS with Sale”) ✔ Signed by all heirs (with SPA if abroad) ✔ Bond (≈ estate value) if personal property involved ✔ Publication in a newspaper of general circulation once a week for 3 consecutive weeks (Rule 74, Sec. 1) ✔ BIR CAR & LGU clearances |
1 – 3 months if uncontested |
| Small-Estate Settlement (Rule 74 §2) | Gross estate ≤ ₱10 million (as of 2023 amendment) | Summary petition in the MTC; order of distribution after hearing | ~2 months |
3. Authority to Sell Estate Assets
Before Settlement Is Closed
All property belongs to the estate as a distinct juridical entity.
Individual heirs have no separate, disposable share yet.
A sale executed by a single heir (or even majority) without:
- Court approval (judicial) or
- Written consent of every heir (extra-judicial), is voidable and may be annulled within 4 years from discovery (Civil Code Art. 1390).
During Judicial Proceedings
- The executor/administrator files a verified motion to sell (Rule 89).
- Court must find the sale advantageous—e.g., to pay creditors or avoid depreciation.
- Sale proceeds are applied in this statutory order: administrative expenses → funeral & medical → debts → taxes → delivery of legacies → residue to heirs.
During / After EJS
- Heirs may: a. Adjudicate property in common then execute a Deed of Absolute Sale (DAS) to a buyer; or b. Draft an EJS with Sale—one instrument settling & immediately conveying to the purchaser.
- Both deeds must still secure a CAR before transfer at the Registry of Deeds/LTO/SEC.
Minors or Incompetent Heirs
- A guardianship petition is mandatory (Family Code Arts. 225-236).
- Guardian needs RTC approval to join the sale (Rule 95).
Non-Resident Heirs
- Special Power of Attorney (SPA) notarized abroad & apostilled/legalized is required.
4. Tax & Fee Matrix (Typical Real-Property Sale)
| Item | Rate / Basis | Due Stage |
|---|---|---|
| Estate Tax | 6 % of net estate | Before any transfer (BIR Form 1801) |
| Capital Gains Tax (property is capital asset) | 6 % of gross selling price or zonal value (whichever higher) | Within 30 days of notarized DAS (BIR Form 1706) |
| Documentary Stamp Tax | 1.5 % of selling price or zonal value | Same as CGT filing |
| Local Transfer Tax | 0.5 % – 0.75 % (LGU-dependent) | On presentation of CAR |
| Registration Fees (RoD) | ≈ 0.25 % of value + entry fees | After CAR & taxes paid |
| Notarial Fees | 1 % or by agreement (but subject to 12 % VAT) | At signing |
Tip: Pay estate tax first; the BIR will not accept CGT/DST filings unless a CAR for the estate is on record.
5. Documentary Checklist
| Judicial Sale | Extra-Judicial Sale |
|---|---|
| ✔ Letters Testamentary/Administration ✔ RTC Order approving sale ✔ Certified inventory & appraisal ✔ Original Owner’s Duplicate TCT/CCT or ORCR & CR (vehicle) ✔ Latest Real-Property/Amilyar tax clearance |
✔ Death Certificate ✔ Deed of EJS (or EJS with Sale) ✔ Notarized SPA, if any heir absent ✔ Publication proof (affidavit + newspaper clippings) ✔ Owner’s Duplicate TCT/CCT, tax clearance |
| Common BIR Attachments: – BIR Form 1801 + tax computation sheet – BIR Form 1904 / TIN for Estate – Sworn Declaration of No Improvements (if applicable) – Vicinity map / zonal valuation print-out – Signed computation & routing slips |
6. Other Asset Classes
| Asset | Special Notes on Sale / Transfer |
|---|---|
| Bank Deposits | Bank requires BIR CAR + Tax Identification Number (TIN) of each heir; executor may endorse cashier’s checks to buyer if cash sale. |
| Shares of Stock | For unlisted shares: 15 % capital gains tax on net capital gains (BIR Form 1707-A) plus DST; for listed shares sold through the estate before distribution, 0.6 % stock transaction tax at PSE. |
| Vehicles | LTO transfer: original ORCR, Deed of Sale, estate CAR, insurance, emission test. |
| Condominium Corp. Shares | Need Secretary’s Certificate re: sale + clearance of condo dues. |
7. Partition vs. Sale
Partition in Kind – assets are divided among heirs according to legitimes & free portions.
Sale & Divide Cash – often preferred if:
- Asset is indivisible or co-ownership is impractical.
- Estate needs liquidity for taxes/debts.
- Heirs disagree on use/retention.
Right of Redemption (Art. 1620) – If a co-heir sells his hereditary right to a third person before partition, other heirs may redeem within 1 month from notice.
8. Creditor Protection & Contest Periods
| Action | Prescriptive Period |
|---|---|
| Heir or creditor attacks an EJS for fraud | 2 years (Rule 74, §4) from date of registration in RoD if property undisposed; otherwise the action is vs. the bond within the same period. |
| Unpaid Estate Tax assessment | 3 years from filing, 10 years if false/ fraudulent. |
| Action for reconveyance due to invalid sale | 4 years from discovery of fraud, but not > 10 years from registration. |
9. Practical Workflow (Timeline Illustration)
graph TD
A[Death of Decedent] -->|Within 1 yr| B[File Estate Tax Return & Pay]
B --> C{Choose Settlement Mode}
C -->|Judicial| D[Probate / Intestate Case]
C -->|Extra-Judicial| E[Deed of EJS + Publication]
D --> F[Court-Approved Sale (if needed)]
E --> F
F --> G[BIR CGT/DST & CAR for Sale]
G --> H[Register Deed & New Title]
H --> I[Final Accounting / Partition]10. Recent & Anticipated Changes (as of 2025)
- Estate Tax Amnesty Ended – RA 11956’s final deadline lapsed 14 June 2025; Congress has yet to enact a further extension.
- Electronic CAR (eCAR) roll-out is now nationwide; BIR accepts scanned notarized deeds uploaded via eCAR Portal.
- Digital Notarization under the 2024 Rules on Remote Notarial Acts is valid for EJS and Deeds of Sale, provided signatories appear via two-way video and the notary is within Philippine territory.
- Ongoing proposals to raise “small-estate” threshold to ₱20 million—not yet law as of this writing.
11. Common Pitfalls & How to Avoid Them
- Ignoring Estate Tax: Without a CAR no buyer can register the title; value depreciates & penalties are stiff (25 % surcharge + 12 % annual interest).
- Partial Consent: Even a single dissenting heir can void the sale; always secure notarized conformity or SPA.
- Selling Before Publication Ends: Publication is a jurisdictional requirement; premature sale risks annulment.
- Mismatch of Values: BIR uses whichever is higher of zonal value, fair market value, or selling price—avoid under-declaring.
- Minor Heirs: Guardian ad litem must be appointed; otherwise sale is void.
- Undisclosed Debts: Extra-judicial settlement barred if estate has outstanding obligations; creditors may sue heirs personally up to the value of inheritance received.
12. Checklist for Lawyers & Heirs
- Confirm no outstanding debts (or secure creditor consent/court approval).
- Obtain TIN for the Estate (BIR Form 1904).
- Prepare complete asset & liability inventory with valuation.
- Decide judicial vs. extra-judicial route early.
- Gather original titles, stock certificates, ORCR, bank statements.
- Draft & notarize EJS/EJS-with-Sale or Motion to Sell.
- Arrange publication & bond (if EJS).
- Compute & pay estate tax; secure CAR.
- Within 30 days of deed: pay CGT & DST; obtain CAR for sale.
- Register deed, secure new TCT/CCT/CR, turn over to buyer.
- File final accounting in court (judicial) or keep notarized “Settlement-Sale Packet” for at least 10 years.
13. Conclusion
Selling estate assets in the Philippines is rarely a simple buy-and-sell transaction. It sits at the intersection of succession law, tax compliance, and property registration. The golden rules are:
- Settle first, sell later—or get proper authority.
- Pay estate tax before any conveyance.
- Secure unanimous consent (or court approval).
Handling these steps diligently safeguards the heirs from lawsuits, tax assessments, and registration headaches, while giving buyers clean, marketable title.
Disclaimer: This article is for educational purposes only and does not constitute formal legal advice. Consult a Philippine lawyer or tax professional for advice tailored to your specific circumstances.