Extra-Judicial Settlement with Absolute Sale (Philippines): When One Spouse Is Deceased
This guide explains the legal basis, requirements, tax treatment, step-by-step process, and provides a practitioner-style template for a Deed of Extrajudicial Settlement of Estate with Absolute Sale (EJS+Sale) when one spouse has died. It is written for the Philippine context and reflects standard practice under the Rules of Court, the Civil Code/Family Code, and the National Internal Revenue Code (NIRC).
1) What “extrajudicial settlement with absolute sale” means
- Extrajudicial settlement (EJS) is a non-court division of a decedent’s estate by the heirs when the law’s conditions are met.
- With absolute sale means the heirs simultaneously sell the estate property (often real property) to a buyer in the same public instrument.
This device is commonly used to (a) settle the estate of the deceased spouse, (b) transfer the decedent’s share to the heirs (and/or surviving spouse), and (c) immediately convey the property to a third-party buyer—allowing taxes and transfer to be processed in one workflow.
2) Legal bases you should know (plain-English summary)
- Rule 74, Section 1, Rules of Court – permits extrajudicial settlement if the decedent died without a will, left no debts (or debts are paid), and all heirs are of legal age (or minors are duly represented). The settlement must be in a public instrument and published once a week for three consecutive weeks in a newspaper of general circulation.
- Rule 74, Section 4, Rules of Court – protects creditors and other persons unduly deprived: they may sue within two (2) years from the date of the EJS to enforce their claims.
- Family Code & Civil Code (property regimes and succession) – determine (i) what portion of the property belonged to the deceased versus the surviving spouse, and (ii) who the compulsory heirs are and their legitimes.
- NIRC (Tax Code) – governs estate tax on the transfer at death and taxes on the subsequent sale (e.g., capital gains tax or creditable withholding tax, documentary stamp tax, local transfer tax), as well as the issuance of the electronic Certificate Authorizing Registration (eCAR) by the BIR, which is required for registration with the Registry of Deeds (RoD).
3) When you may use EJS (checkbox logic)
Use EJS (and EJS+Sale) only if all are true:
- Intestate: The deceased spouse left no will (or the will is not being probated).
- No debts: The decedent left no outstanding debts, or they are fully paid/settled.
- Heirs are capacitated: All heirs are of legal age; minors must act through a court-appointed guardian, and any sale of a minor’s share requires court approval.
- Publish: You can comply with publication once a week for 3 consecutive weeks in a newspaper of general circulation.
- Notarization & registration: You will have the deed notarized and present it (with proof of publication and tax clearances) to the BIR, LGU, and RoD.
If any of these cannot be satisfied (e.g., there are unpaid creditors, there’s a will, or a dispute among heirs), judicial administration/probate is generally required.
4) Special issues when one spouse has died
Property regime matters
- Married on/after 3 Aug 1988 (Family Code): default is Absolute Community of Property (ACP) unless there’s a valid marriage settlement.
- Married before 3 Aug 1988: default was Conjugal Partnership of Gains (CPG) unless stipulated otherwise.
- Practical effect: usually one-half belongs to the surviving spouse as his/her conjugal/community share; the other half is the estate of the deceased spouse to be inherited by the heirs.
Heirs and shares (intestate)
- Compulsory heirs commonly include the surviving spouse and legitimate/legitimated/legally adopted children (or descendants by representation).
- If there are no descendants, ascendants and collateral rules apply.
- In EJS+Sale, you don’t need to litigate exact arithmetic in the body of the deed, but you must be correct for tax computations and to avoid later challenges.
Minors
- A minor heir cannot validly self-consent to the sale. A judicial guardianship is required, and court approval is needed for the sale of the minor’s share.
Heirs abroad / name changes
- Use a Special Power of Attorney (SPA) authorizing a Philippine attorney-in-fact to sign the EJS+Sale; have the SPA apostilled (or consularized, if applicable).
Waiver of rights
- A pure and simple repudiation/disclaimer of inheritance (not in favor of anyone) is generally not taxable, but must be in a public instrument.
- A waiver in favor of a specific person (co-heir or buyer) without adequate consideration is treated as a donation and may be subject to donor’s tax—often a costly mistake.
5) Documentary checklist (typical for real property)
Identity & civil status
- Government IDs of surviving spouse and heirs
- PSA Marriage Certificate of spouses
- PSA Birth Certificates of children/heirs
- PSA Death Certificate of deceased spouse
- TINs of decedent, surviving spouse, and heirs
Property & valuation
- Owner’s duplicate TCT/CTC (or CCT for condo)
- Latest Tax Declaration(s) (land and improvement)
- Real Property Tax clearance / latest receipts
- Zonal valuation basis and/or appraisal, as needed
Estate
- Deed of Extrajudicial Settlement with Absolute Sale (notarized)
- Publication proof: newspaper issues (3 weeks) + Affidavit of Publication
- Schedule of assets and liabilities (for estate tax return)
- Affidavit of no debts / or proof of settlement of debts
If minors / heirs abroad
- Court-issued guardianship and court approval of sale
- SPA (apostilled/consularized), if signing by agent
Taxes & transfer
- BIR estate tax return and proof of payment (if any)
- BIR eCAR(s) (estate transfer; and usually a separate one for the sale)
- Capital Gains Tax (or Creditable Withholding Tax, if the seller is engaged in real estate business and property is ordinary asset)
- Documentary Stamp Tax (DST) on sale
- Local Transfer Tax (province/city/municipality)
- Registration fees (Registry of Deeds) and annotation fees
- Cancellation/issuance of new Tax Declaration(s) (Assessor)
6) Taxes and typical rates (quick primer)
Actual computations depend on classifications, valuations, and current issuances. Always compute on the higher of zonal value, fair market value (Tax Declaration), or gross selling price, as applicable.
A) Estate stage
- Estate tax: historically a flat 6% of the net estate (gross estate minus allowable deductions).
- BIR eCAR: Issued upon estate tax compliance. For EJS+Sale, practice commonly results in two eCARs—one to cover the estate transfer and another for the sale (direct transfer may be structured but expect dual clearances in many RDOs).
B) Sale stage (real property held as capital asset)
- Capital Gains Tax (CGT): typically 6% of the gross selling price or current fair market value (whichever is higher).
- Documentary Stamp Tax (DST) on sale: generally ₱15 per ₱1,000 (i.e., 1.5%) of the consideration or fair market value, whichever is higher.
- Local Transfer Tax: commonly up to ~0.5% (province/municipality) and up to ~0.75% in cities/Metro Manila, subject to local ordinances.
- Registration fees: per LRA schedule.
If the property is an ordinary asset of a real-estate dealer: the income from sale is typically subject to creditable withholding tax/VAT rules instead of CGT; confirm classification before filing.
7) Standard procedure (estate → sale → registration)
Assess eligibility for EJS
- Confirm no will, no unpaid debts, heirs’ capacity/guardianship if needed, and property regime allocations.
Draft the Deed of EJS with Absolute Sale
- Identify parties: surviving spouse and all heirs as sellers, and the buyer.
- Acknowledge the marital property regime, identify the decedent’s share, recite heirs’ successional rights, and express the sale to buyer for a specified price.
Publication
- Publish once a week for 3 consecutive weeks; keep originals of the newspaper issues and Affidavit of Publication.
BIR processing
- File the estate tax return (and pay, if due), submit required attachments, and secure eCAR covering the estate transfer.
- File the sale documents, pay CGT/DST, and secure eCAR for the sale.
LGU & Registry of Deeds
- Pay local transfer tax; secure tax clearances.
- Present the notarized deed, proof of publication, eCAR(s), IDs, tax receipts, and owner’s duplicate title to the RoD for registration.
- After issuance of the new title in the buyer’s name, process new Tax Declarations with the Assessor.
8) Common pitfalls (and how to avoid them)
- Skipping publication – RoD will typically refuse registration, and the deed remains vulnerable to challenge.
- Unsettled debts/claims – Creditors can attack the EJS within 2 years; consider paying or reserving for debts before executing EJS.
- Minors’ shares sold without court approval – The buyer’s title can be questioned; always obtain guardianship and a court order approving the sale.
- Wrong property regime assumption – Misallocating the conjugal/community share leads to tax/ownership defects; check marriage date and any prenuptial agreement.
- Heir waives “in favor of” a co-heir for free – This is commonly treated as a donation (donor’s tax risk). Prefer pure disclaimer (not in favor of anyone) or sell/assign for value.
- Using outdated valuations – Taxes are based on highest of zonal value, fair market value (Tax Dec), or price; verify current figures before filing.
- Name mismatches / ID gaps – Ensure consistent names across PSA certificates, title, IDs, and deed; attach proofs of identity/aliases if needed.
9) Drafting tips
- Keep the chronology tight: marriage → acquisition of property → death → identification of heirs → settlement → sale.
- If there are multiple properties, append a Schedule of Properties with titles and descriptions.
- For condominium units, attach Condo Cert of Management and clearances if the developer requires them.
- If there are multiple buyers or installment terms, mirror the commercial terms (price, payment timetable, default, possession, taxes) clearly.
10) Template: Deed of Extrajudicial Settlement of Estate with Absolute Sale
(When one spouse is deceased; for real property; adapt as needed. Use on law office letterhead.)
DEED OF EXTRAJUDICIAL SETTLEMENT OF ESTATE WITH ABSOLUTE SALE
KNOW ALL MEN BY THESE PRESENTS:
1. Parties. — We, [Surviving Spouse’s Full Name], Filipino, of legal age, [civil status], residing at [address], with TIN [TIN], and the following heirs of the late [Deceased Spouse’s Full Name] (the “Decedent”): [Heir 1 Full Name], Filipino, of legal age, [civil status], residing at [address], TIN [TIN]; [Heir 2 Full Name], … (list all heirs; if represented, state capacity and attach SPA/guardianship order) collectively, the “Heirs/Sellers”;
and [Buyer’s Full Name(s)], Filipino, of legal age, [civil status], residing at [address], with TIN [TIN], the “Buyer.”
2. Death and Relationship. — The Decedent died on [date of death] in [place], as evidenced by PSA Death Certificate attached as Annex “A.” The Heirs/Sellers are the compulsory heirs of the Decedent as shown by PSA certificates attached as Annexes “B” (marriage) and “C” (birth/adoption).
3. Property Regime and Ownership. — The Decedent and [Surviving Spouse] were married on [date] under [ACP/CPG or as per marriage settlement, Annex “D”]. The real property described below was acquired on [date] during the marriage and formed part of their [absolute community/conjugal partnership]:
4. Property. — A parcel of land located at [Municipality/City, Province], covered by [TCT/CCT No. ______], more particularly described in Annex “E” (including boundaries, area, and technical description), together with all improvements thereon (the “Property”).
5. Extrajudicial Settlement. — The Heirs/Sellers declare that the Decedent left no will and no outstanding debts, or that all debts and obligations have been fully paid; that all heirs are of legal age (or minors duly represented per Annex “F” guardianship order and court approval of sale); and that pursuant to Rule 74 of the Rules of Court, they settle and adjudicate the Decedent’s [one-half] share* in the Property among themselves in accordance with law.
[Bracketed note: state the precise fractional share if not exactly one-half due to regime or exclusive property. If exclusive/paraphernal, adjust recitals accordingly.]
6. Sale to Buyer. — For and in consideration of the total sum of PHILIPPINE PESOS: [Amount in Words] (₱[Amount in Figures]), receipt of which is hereby acknowledged, the Heirs/Sellers, including [Surviving Spouse] to the extent of his/her [community/conjugal] share, by these presents SELL, TRANSFER, and CONVEY, by way of absolute sale, the entire Property unto the Buyer, free from all liens and encumbrances, subject to taxes and fees imposed by law.
7. Possession and Risk. — Possession shall be delivered to Buyer upon [full payment/this signing]; risk shall pass upon [delivery/registration]. The Heirs/Sellers warrant peaceful possession and defend Buyer’s title against lawful claims.
8. Taxes and Fees. — The parties agree that [allocate who pays CGT/DST/Local Transfer Tax/registration fees as negotiated]. Estate taxes, if any, shall be for the Heirs/Sellers; taxes on the sale generally for the [Seller/Buyer] per agreement, without prejudice to statutory liability.
9. Publication. — In compliance with Rule 74, an Abstract of this deed shall be published once a week for three (3) consecutive weeks in a newspaper of general circulation; proof of publication shall be attached to this deed and/or presented to relevant offices.
10. Claims Under Rule 74. — This settlement is without prejudice to any lawful claims under Section 4, Rule 74 within two (2) years from the date hereof.
11. Special Provisions. — [Insert guardianship/court-approval clauses if a minor heir is involved; SPA details for heirs abroad; disclosure of known encumbrances; holdbacks or escrow instructions if any.]
12. Binding Effect; Registration. — The parties shall secure BIR eCAR(s), pay applicable taxes, and cause registration with the Registry of Deeds and annotation/cancellation/issuance of new title(s) and Tax Declaration(s).
IN WITNESS WHEREOF, the parties have signed this instrument on [date] at [city], Philippines.
(Signatures of Heirs/Sellers and Buyer with names and TINs) (With marital consent where applicable)
ACKNOWLEDGMENT (Standard notarial acknowledgment with competent evidence of identity; notary’s details and PTR/IBP/commission)
ABSTRACT FOR PUBLICATION (attach to the newspaper) Title of deed; date; parties (heirs/sellers and buyer); brief property description (location, TCT/CCT number, area); consideration; a note that this is an extrajudicial settlement pursuant to Rule 74 with absolute sale, and that claims under Rule 74, Sec. 4 may be filed within 2 years.
11) Edge-case drafting clauses (drop-in language)
- Affidavit of No Debts / or Debts Fully Paid – attach as a separate jurat affidavit signed by all heirs (and surviving spouse).
- Guardianship & Court Approval – “The share of minor [Name] is represented by [Guardian] under Special Proceeding No. [___]; the Regional Trial Court/Family Court by Order dated [date] approved this sale, copy attached as Annex “F.””
- SPA for Overseas Heir – recite details of SPA (executed on [date], apostilled/consularized), attach as Annex “G.”
- Reservation for Unknown Claimants – optional escrow/holdback clause pending completion of publication.
12) Practical Q&A
Q1: Can we execute EJS if there are debts? Not safely. If debts exist and are unpaid, the correct route is usually judicial administration, or first settle debts (document payment or waivers) before EJS.
Q2: Do we always need two eCARs? For EJS+Sale, many BIR offices process separate clearances: one for the estate transfer and another for the sale. Plan for dual compliance unless your RDO allows a direct transfer path.
Q3: What if the property is exclusive (not conjugal/community)? Adjust Clause 3 so only the decedent is the source of title to be settled; the surviving spouse remains a compulsory heir but has no conjugal/community half in that exclusive property.
Q4: How long must we wait after publication? There is no statutory waiting period before registration, but you must present the three issues and affidavit of publication to the BIR/RoD. The two-year period is not a waiting period; it’s a window for claims under Rule 74, Sec. 4.
Q5: Can an heir “waive in favor of” a sibling to simplify? If without consideration, that is typically treated as a donation (donor’s tax exposure). A pure disclaimer (not in favor of anyone) avoids donor’s tax but reshuffles shares under intestacy; or execute a sale/assignment for value.
13) Filing roadmap (one-page summary)
- Draft & Notarize the EJS+Sale (attach IDs, PSA docs, title copy).
- Publish the abstract 1×/week for 3 weeks; secure affidavit and newspapers.
- BIR (Estate): file estate tax return, pay estate tax if due, obtain eCAR (estate).
- BIR (Sale): pay CGT (or CWT), DST, obtain eCAR (sale).
- LGU: pay local transfer tax, secure clearances.
- RoD: present deed + proof of publication + eCAR(s) + title + receipts; register and obtain new title in Buyer’s name.
- Assessor: update Tax Declarations.
14) Final reminders
- Match names and details across PSA certificates, title, IDs, TINs, and deed.
- If any heir objects, or there’s a will, or debts are unpaid, stop and consider court proceedings.
- For minors, get guardianship and court approval before notarization.
- Keep a tidy annex folder: PSA docs, IDs, title & tax decs, proof of publication, tax filings/receipts, eCAR(s), SPA/guardianship orders.