Extrajudicial Settlement of Estate in the Philippines
A comprehensive legal guide for heirs, practitioners, and interested readers
1. Legal Foundations
| Source of Law | Key Provisions |
|---|---|
| Civil Code of the Philippines (Book III, Succession) | Defines succession, heirs, legitimes, legitime reduction, collation, partition, rights of co-heirs. |
| Rule 74, Rules of Court | Governs “Summary Settlement of Estates”—the core rule for extrajudicial settlement (EJS). |
| National Internal Revenue Code (NIRC), as amended by the TRAIN Law (Republic Act 10963) and RA 11956 (2023 Estate-Tax Amnesty extension) | Prescribes estate-tax filing, payment, and clearance requirements. |
| Land Registration Act & Property Registration Decree (PD 1529) | Set procedures for registering real property conveyed through an EJS. |
| Local Government Code | Imposes local transfer taxes and fees on conveyances. |
Concept An extrajudicial settlement is a private contract among heirs (or a lone heir via “Self-Adjudication”) to divide the decedent’s estate without court intervention, provided statutory conditions are met.
2. When Extrajudicial Settlement Is Allowed
- No Will (intestate) or there is a will already probated but its dispositive provisions leave partition to the heirs.
- All heirs are of legal age or legally represented (e.g., guardians ad litem for minors).
- No outstanding debts—or all known debts have been paid.
- The estate is not under judicial administration or subject to litigation.
Tip: If any heir is missing, incapacitated without representation, or if creditors oppose, the heirs must file for judicial settlement instead.
3. Forms of Extrajudicial Settlement
| Mode | Who signs | Typical use-case |
|---|---|---|
| Deed of Extrajudicial Settlement & Partition (EJS) | Two or more heirs | Decedent left multiple heirs wanting to co-own or partition assets. |
| Deed of Extrajudicial Settlement with Sale | Heirs + buyer | Simultaneous partition and sale of an asset (often real property or vehicle). |
| Affidavit of Self-Adjudication (ASA) | Single surviving heir | Only one compulsory heir (e.g., surviving spouse with no descendants/ascendants). |
All deeds must be notarized and later annotated on certificates of title, shares, or similar instruments.
4. Step-by-Step Procedure
Secure a PSA-issued death certificate and gather the decedent’s proof of ownership (titles, bank statements, stock certificates, OR/CR for vehicles, etc.).
Identify and classify heirs according to Civil Code intestate rules; prepare SPA/guardianship papers if needed.
Prepare the Deed (EJS or ASA)
- State jurisdictional facts: identity of decedent, date/place of death, debt-free declaration, list of heirs and assets.
- Outline the partition plan (equal shares, specific allocations, or co-ownership).
- Include an undertaking to publish and a 2-year warranty clause (Rule 74 §4) covering claims of omitted creditors/heirs.
Notarize the deed. The notary should require competent IDs of all signatories and a community tax certificate (CTC).
Publish a Notice in a newspaper of general circulation once a week for three (3) consecutive weeks (Rule 74 §1). Attach proof of publication (Affidavit of Publisher + clippings) to the deed.
File the Estate-Tax Return (BIR Form 1801)
- Deadline: within one (1) year from death (extendible by BIR for meritorious cause).
- Documents: EJS, death certificate, TIN of estate and heirs, asset valuation (zonal/FMV), “Clearance of Real Property Tax” for land, etc.
- Taxes: 6 % estate tax on net estate; donor’s tax if unequal portions are given gratuitously; documentary stamp tax on shares and vehicles; local transfer tax (0.5–0.75 % of FMV).
- Estate-Tax Amnesty (until June 14 2026) may be availed for decedents who died on or before May 31 2022.
Obtain BIR Electronic Certificate Authorizing Registration (eCAR) for each property or asset class.
Register the deed
- Real property: present eCAR + EJS + title + tax clearance to the Registry of Deeds; pay registration fees; secure new TCTs/CCTs.
- Condominiums: also secure HOA/condo-corp certificates.
- Vehicles: submit to LTO; obtain updated OR/CR in heirs’ names.
- Shares of stock: record with corporate secretary + SEC Notice.
- Bank deposits: bank may require a BIR CAR and deed before releasing funds.
Post-registration housekeeping
- Update tax declarations with the assessor’s office.
- Record transfers with homeowners’ associations and utilities.
- Maintain copies of all filings for at least ten (10) years for audit.
5. Publication & Bond-Related Nuances
| Issue | Rule | Practical Note |
|---|---|---|
| Bond Requirement | Rule 74 does not obligate heirs to post a bond unless minors or incapacitated heirs are involved. Courts sometimes require one when later disputes arise. | |
| Two-Year Window for Creditors | Creditors or omitted heirs may sue within 2 years from the date of publication to recover their shares. Beyond that, they may only sue the distributees (not innocent purchasers). | |
| Contested Debts | Heirs may still proceed with EJS if they reserve sufficient funds, but most opt for judicial settlement for certainty. | |
| Foreign Assets/Heirs Abroad | Consularized Special Power of Attorney (SPA) or Apostilled approvals needed; foreign-situs assets follow lex situs and may require ancillary probate abroad. |
6. Comparison With Other Settlement Modes
| Feature | Extrajudicial | Summary Settlement (Heirs’ Petition) | Regular Judicial Administration |
|---|---|---|---|
| Court Involvement | None (purely notarized deed) | Minimal—petition under Rule 74 §2 for estates ≤ ₱10 million (traditionally ₱10 k but adjusted by jurisprudence for inflation) | Full probate court supervision |
| Speed & Cost | Fast; notarial & admin fees only | Moderate; requires order approving partition | Slow; filing fees, publication, bond, admin compensation |
| Creditor Protection | 2-year recourse after publication | Court approves payment schedule | Court supervises claims; highest protection |
| Use When | Heirs amicable, estate simple, debt-free | Estate small but needs court imprimatur | Heirs in conflict, minors, large unpaid debts, contested will |
7. Common Pitfalls and How to Avoid Them
- Failure to Publish → renders deed void as to creditors/defrauded heirs; may block title transfer.
- Late Estate-Tax Filing → 25 % surcharge + 20 % p.a. interest; cannot register property without eCAR.
- Undisclosed Debts → aggrieved creditors can levy on heirs’ personal assets within 2 years.
- Overlooking Legitimes → compulsory heirs may sue for reduction or annulment of partition.
- Minor Heirs Ignored → deed void; court will likely order guardianship and judicial settlement.
- Bank Freezing of Accounts under BSP Circular 960 → banks require BIR clearance even for releases below ₱20,000.
8. Remedies and Post-Settlement Litigation
- Action for Reconveyance or Annulment (Art. 1390 Civil Code) within 4 years from discovery of fraud.
- Action to Reduce Partition if legitime impaired (Art. 1097).
- Petition for Letters of Administration if extrajudicial route proves impossible; the court may revoke deed.
- Quieting of Title proceedings for real property disputes.
- Criminal Liability under Art. 315(2)(a) RPC (Estafa through deceit) for fraudulent omission of heirs.
9. Tax & Fee Cheatsheet (2025 rates)
| Item | Rate | When Due | Where Paid |
|---|---|---|---|
| Estate Tax | 6 % of net estate | Within 1 year from death | BIR RDO of decedent’s residence |
| DST (Shares) | ₱1.50 per ₱200 par/FMV | On execution of deed | BIR eDST |
| Local Transfer Tax | 0.5 % (provinces) – 0.75 % (cities) of FMV | Upon registration | Treasurer’s Office |
| Registration Fee (RoD) | 0.25 % of FMV | On annotation | Registry of Deeds |
| Publication | ₱8,000–₱15,000 avg. | Before eCAR issuance | Newspaper |
(Rates vary by LGU and inflation; verify current schedules.)
10. Practical Checklist for Practitioners
- ☐ Verify complete roster of heirs.
- ☐ Obtain notarized SPA/Affidavit of Guardianship for minors.
- ☐ Draft EJS with clear asset descriptions (technical lot data, plate numbers, bank branch & account no., certificate nos.).
- ☐ Schedule simultaneous signing and fingerprinting.
- ☐ Arrange newspaper publication early to avoid missing BIR deadline.
- ☐ Prepare valuation docs: BIR Zonal Valuation printouts, assessor’s certifications, audited financials for businesses.
- ☐ Double-check title encumbrances (liens, adverse claims).
- ☐ Submit eCAR copies to LGU assessor and LRA.
- ☐ Keep certified true copies of everything.
11. Frequently Asked Questions
| Question | Answer (Philippine context) |
|---|---|
| Can the heirs waive publication? | No. Publication is a mandatory, jurisdictional requirement under Rule 74. |
| Is a lawyer mandatory? | Not legally, but strongly recommended; notaries may refuse complex deeds absent counsel. |
| What if new debts surface after EJS? | Creditors may sue distributees within 2 years; heirs shoulder liability pro-rata up to the value received. |
| Does the BIR compute estate tax per heir? | No. Estate tax is on the net estate; partition affects donor’s tax only if unequal shares. |
| Can real property be titled in co-ownership? | Yes, the heirs may request a single TCT “in the names of A, B, and C, all of legal age, Filipinos, in equal shares.” |
12. Conclusion
Extrajudicial settlement is the fastest and least expensive route to transfer a decedent’s assets in the Philippines—but only when the statutory prerequisites are strictly met. Heirs should balance speed against legal safeguards for creditors and future disputes. Careful documentation, timely tax compliance, and adherence to Rule 74 formalities ensure a smooth and legally defensible transfer of wealth.
This article synthesizes prevailing statutes, regulations, and mainstream jurisprudence as of July 31 2025. For nuanced scenarios—especially estates with foreign elements, complex debts, or disputed heirship—seek professional legal and tax advice.