Extrajudicial Settlement Among Heirs in the Philippines
1 | Concept & Scope
“Extrajudicial settlement” (EJS) is the out-of-court distribution of a decedent’s estate by the heirs themselves, in a single public instrument, without having to open probate or intestate proceedings. It is available whether the decedent died intestate or left a will that is either (a) not contested or (b) not yet probated, provided the statutory requisites (below) are met. (Extrajudicial Settlement Publication Requirement and Estate Tax)
2 | Statutory Foundations
| Source | Key provisions |
|---|---|
| Civil Code (Arts. 960-1106) | defines heirs, legitimes & rules on succession. |
| Rule 74, Rules of Court | Sec. 1 – “Extrajudicial settlement by agreement among heirs”; Sec. 4 – publication & liability. ([Extrajudicial (Rule 74) |
| National Internal Revenue Code (as amended by R.A. 10963, “TRAIN”) | imposes a flat 6 % estate tax on the net estate. (1801 Estate Tax Return - bir-cdn.bir.gov.ph) |
| Tax Amnesty Act (R.A. 11213) as twice extended by R.A. 11569 (2021) and R.A. 11956 (2023) | allows payment of a concessional estate-tax amnesty until 14 June 2025. ([ REPUBLIC ACT NO. 11956, August 05, 2023 ] - The Lawphil Project) |
3 | When Is Extrajudicial Settlement Allowed?
- No pending court case for the settlement of the same estate.
- All heirs are of age (or duly represented).
- Estate has no outstanding debts, or the heirs post a bond equal to the value of personal property (Rule 74 §1).
- Heirs agree unanimously on the partition and sign the instrument.
Tip: When the decedent left only one heir, the simpler “Affidavit of Self-Adjudication” may be executed (Rule 74 §1, last clause).
4 | Step-by-Step Procedure
| Stage | What Happens | Key Documents / Fees |
|---|---|---|
| a. Draft the Instrument | “Deed of Extrajudicial Settlement of Estate (with/without Sale)” or “Affidavit of Self-Adjudication”. Must list the heirs, inventory of assets, and the agreed shares. | Draft + valid IDs of heirs. |
| b. Notarization | Instrument must be acknowledged before a notary public. | Notarial fee (₱1,000–₱5,000 typical). |
| c. Bond (if needed) | File a surety bond if the estate has debts. | Bond premium (~1-2 % of amount). |
| d. Newspaper Publication | Publish the full text or a synopsis once a week for 3 consecutive weeks in a newspaper of general circulation. | Publication fee (₱6,000–₱20,000, varies). ([Extrajudicial (Rule 74) |
| e. Estate-Tax Clearance (BIR) | File BIR Form 1801 within 1 year of death (or under the amnesty). Tax = 6 % of net estate after deductions (₱5 M standard deduction, ₱10 M family-home exemption, etc.). | CAR fee; unpaid tax + interest/surcharge if late. (1801 Estate Tax Return - bir-cdn.bir.gov.ph) |
| f. Issuance of CAR | BIR issues the Certificate Authorizing Registration, the “green light” to transfer titles. | |
| g. LGU & Registry of Deeds | Pay transfer tax (0.5-0.75 % of zonal value/FMV) and register the deed. New OCT/TCT, tax declarations, and stock transfers are released. | |
| h. Report to SEC (if shares > 25 %) | File a “Deed of Assignment” and amended GIS. |
5 | Taxes & Amnesty Highlights
- Regular estate tax: 6 % of net estate.
- Amnesty window: Estates of persons who died on or before 31 May 2022 qualify for the amnesty rate (either 6 % of net estate or a minimum ₱5,000) until 14 June 2025. (BUREAU OF INTERNAL REVENUE - bir-cdn.bir.gov.ph)
- Documentary-stamp tax & donor’s tax are not imposed on pure partition; they arise only when property is transferred gratuitously beyond legitimes.
- Capital-gains tax (6 %) applies only if the settlement deed simultaneously sells real property to outsiders.
6 | Effect of Publication & Creditor Protection
- Within 2 years from the last publication date, creditors (or omitted heirs) may sue to annul the deed and recover their shares.
- After 2 years, the deed becomes binding but heirs remain solidarily liable to unpaid creditors up to the value of property they received (Rule 74 §4).
- Registration of new titles does not cure failure to publish; non-publication exposes the titles to collateral attack.
7 | Common Forms
- Affidavit of Self-Adjudication (solo heir).
- Deed of Extrajudicial Settlement (partition only).
- Deed of Extrajudicial Settlement with Sale/Donation** (partition + conveyance).
(Each must recite the facts of death, relationship of heirs, total estate, and partition; and end with the Rule 74 notice.)
8 | Recent Digital Improvements (2023-2025)
- eCAR: pilot electronic CAR issuance in major Revenue District Offices to cut processing time to < 5 days.
- RR 10-2023 issued 8 Sep 2023 details paperless filing for amnesty applications. (BUREAU OF INTERNAL REVENUE - bir-cdn.bir.gov.ph)
9 | Selected Supreme Court Decisions
| Case | G.R. No. | Doctrine |
|---|---|---|
| Heirs of Malate v. G.S.I.S. | 12289 (16 Jun 1959) | Titles issued without Rule 74 publication are void as against creditors & co-heirs. |
| Carvajal v. Luzon Dev. Bank | 102671 (30 Jan 1998) | Deed w/out publication may be collaterally attacked even after 2 years. |
| Vda. de Reyes v. C.A. | 91107 (9 Mar 1993) | Self-adjudicating heir must still publish and file estate-tax return. |
10 | Pros & Cons vs. Judicial Settlement
| Extrajudicial | Judicial (probate/intestate) |
|---|---|
| Faster (1-3 months) | 1-3 years typical |
| Cheaper (notarial & publication fees) | Court filing fees, lawyer’s fees |
| Private agreement | Court supervision ensures due process |
| Vulnerable if requisites absent | Decree of partition conclusive |
11 | Pitfalls & Practical Tips
- Always pay estate tax first – Registry of Deeds will not accept the deed without a CAR.
- Include all heirs, even illegitimate children; omission = ground for annulment.
- Use updated zonal values to avoid later BIR deficiency assessments.
- Keep proof of publication (publisher’s affidavit & copies of the newspaper).
- If foreign assets exist, comply with foreign probate rules or seek ancillary probate.
12 | Frequently Asked Questions
| Question | Short Answer |
|---|---|
| Can minors inherit extrajudicially? | Yes, but they must be represented by a judicial guardian or parent with court approval. |
| What if an heir refuses to sign? | Settlement must proceed judicially; EJS requires unanimity. |
| Is publication needed if there is only personal property? | Yes. Rule 74 does not distinguish. |
| Can the deed be amended? | Execute an Amended Deed + republish + secure new CAR. |
13 | Sample Skeleton (for guidance only)
AFFIDAVIT OF EXTRAJUDICIAL SETTLEMENT OF ESTATE
KNOW ALL MEN BY THESE PRESENTS:
We, ________, of legal age, Filipino citizens, residing at _______, after being duly sworn, depose:
1. That ______ (decedent) died on ______ in ______, Philippines, intestate, leaving the following heirs: …
2. That the decedent left the following properties: …
a) TCT No. ___, Lot ___, assessed value ₱_____ …
b) BPI Savings Account No. ___, balance ₱_____ …
3. That the estate has **no outstanding obligations**.
4. That pursuant to Rule 74, we hereby **partition** the above properties as follows: …
IN WITNESS WHEREOF … (signatures)
SUBSCRIBED AND SWORN to before me…(Add Acknowledgment & Rule 74 publication notice.)
14 | Key Take-aways
- Check the four requisites before opting for extrajudicial settlement.
- Publish & pay estate tax—these are the two Achilles’ heels that invalidate many deeds.
- Amnesty window closes 14 June 2025; avail now if the estate qualifies.
- When in doubt, seek competent counsel; EJS is a powerful shortcut but only if done right.
Disclaimer: This article is for informational purposes only and is not legal advice. Consult a Philippine lawyer or tax professional for specific cases.