Extrajudicial Settlement of Estate in the Philippines
A comprehensive guide to the statutory basis, eligibility rules, documentary requirements, tax obligations, procedural steps, practical tips, and common pitfalls
1. Legal Framework
| Source of Law | Key Provisions |
|---|---|
| Civil Code | Book III (Succession) – esp. Arts. 960 – 1070 (transmission of rights), Art. 1091 (solidary liability of heirs for debts), Art. 1311 (contracts bind heirs). |
| Rules of Court | Rule 74 (“Settlement of Estate of Deceased Persons in Court When No Administrator Is Necessary”) – § 1 governs extrajudicial settlement by heirs; § 4 on two-year lien for unpaid claims. |
| Tax Laws & BIR Issuances | NIRC, as amended; Revenue Regulations (RR) 12-2018 & 17-2021 (estate-tax reforms and amnesty), Revenue Memorandum Order (RMO) 15-2022 (document checklist). |
| Property Registration Decree | P.D. 1529 (for registration and issuance of new titles). |
| Notarial Law | R.A. 9497 & 2004 Rules on Notarial Practice. |
| Barangay Micro Business Enterprises (BMBE) Law, Cooperative Code, Corporate Code | Relevant if estate includes such entities. |
Definition. An extrajudicial settlement (EJS) is a private agreement of heirs (or a sole heir) to divide and distribute the decedent’s estate without having to open a full probate or intestate proceeding, provided statutory conditions are satisfied.
2. When Extrajudicial Settlement Is Allowed
- No will or the will has been lost, denied probate, or does not dispose of all property.
- All heirs are of legal age (18 +) OR minors/legally incapacitated heirs are duly represented by judicially appointed guardians or legal representatives.
- The estate has no outstanding debts or all debts (including taxes) have been fully paid.
- The heirs agree on the partition and there is no controversy requiring court intervention.
Note: Rule 74 § 1 mentions a ₱10,000 ceiling for small estates. In practice, courts and registries have long accepted EJS even for estates worth millions, so long as the four conditions above are met; the monetary cap is considered directory, not mandatory.
3. Two Variants of Extrajudicial Settlement
| Variant | When Used | Instrument |
|---|---|---|
| Self-Adjudication | Only one legal heir (e.g., surviving spouse with no children, or acknowledged illegitimate child with no other heirs). | Affidavit of Self-Adjudication (ASA) |
| Settlement Among Heirs | Two or more heirs sharing in the estate. | Deed of Extrajudicial Settlement (EJS), sometimes coupled with a Deed of Sale/Donation if heirs immediately transfer property to a third party. |
4. Core Documentary Requirements
| Stage | Key Documents | Remarks |
|---|---|---|
| Pre-execution | PSA-issued Death Certificate; IDs & TINs of heirs; Marriage Certificate & Birth Certificates proving filiation; List & valuation of assets/liabilities; Tax Identification Number (TIN) of the Estate (obtain via BIR registration). | Accurate asset inventory avoids later BIR deficiencies. |
| Execution | Drafted ASA/EJS; Judicial Surety Bond if guardian represents minors; Waivers/Consents if any heir renounces share; Special Power of Attorney (SPA) for heirs abroad. | All signatories must appear before a notary public. |
| Notarization & Publication | Notarial acknowledgment; Publication in a newspaper of general circulation once a week for three consecutive weeks (Rule 74 § 1). | Keep the Affidavit of Publication & full newspaper issues. |
| Tax Processing | BIR Form 1801 (Estate Tax Return); eCAR (electronic Certificate Authorizing Registration) per property; Proof of payment of estate tax, DST, capital gains (if simultaneous sale), and certification of no tax liability for personal property. | Settle within one year of death (or within the amnesty window) to avoid surcharge/interest. |
| Transfer & Registration | Original owner’s duplicate titles; Tax Clearance & updated Real Property Tax (RPT) payments; eCAR & CARIT (if condominium); Annotated EJS/ASA; New tax declarations; Stock transfer documents or bank waiver forms for personalty. | File with Registry of Deeds (real property) or corporate secretary/stock transfer agent (shares). |
5. Step-by-Step Procedure
Gather Facts & Documents. Secure PSA certificates, titles, bank certifications, corporate stock certificates, car OR/CR, etc.
Compute & Pay Estate Tax.
- Tax base: Net estate = gross estate less deductions (standard deduction ₱5 million; family home deduction ₱10 million; funeral, medical expenses, etc.).
- Rate: Flat 6 % of net estate (post-TRAIN Law, effective Jan 1 2018).
- Deadline: Within one year from death; extensions require BIR approval and bond.
Draft ASA/EJS. Include: (a) facts of death; (b) declaration that conditions for EJS are met; (c) complete list of properties with technical descriptions; (d) schedule of distribution; (e) assumption of liabilities; (f) undertaking re Rule 74 § 4 two-year lien.
Notarize. All heirs (or their attorneys-in-fact) sign before a notary.
Publish. Arrange publication; obtain affidavit of publisher and three full paper copies.
Annotate Titles & Transfer Ownership.
- Present eCAR, RPT clearance, annotated deed, tax declarations to Registry of Deeds or LRA satellite office.
- Obtain new titles in the heirs’ names.
- For personal property (stocks, bank deposits): submit deed, tax clearance, board resolution (for corporations), and request transfer.
Post-Settlement Care. Keep originals; notify insurers, SEC, BMBE, co-op registrars, or franchising agencies if relevant.
6. Statutory Lien & Residual Liability
- Two-Year Lien (Rule 74 § 4). Creditors or omitted heirs may file an action within two years from the date of publication to recover their share; titles remain subject to this lien.
- Solidary Liability of Heirs (Civil Code Art. 1311 & 1091). Even after distribution, heirs are proportionately liable for undisclosed debts up to the value of the property they received.
- Fraudulent Settlements. Courts may annul an EJS for fraud, mistake, or preterition of compulsory heirs; criminal liability may attach under the Revised Penal Code for estafa or falsification.
7. Special Issues & Practical Tips
| Scenario | Practical Guidance |
|---|---|
| Minor Heirs | Secure court-approved letters of guardianship; guardian signs on behalf of minor; proceeds often deposited in a fiduciary account until age of majority. |
| Heir Abroad | Apostilled SPA is acceptable; consularization is no longer mandatory under the Apostille Convention (PH acceded 2019). |
| Property with Mortgage or Lis Pendens | Satisfy or assume encumbrances first; get lender’s conformity; cancel adverse notices before transfer. |
| Estate under Estate-Tax Amnesty (R.A. 11213, extended to June 14 2025, then further extension) | Flat 6 % on net undeclared estate with immunity from penalties; EJS is still required for transfer. |
| Inheritance with Business Interests | Check company by-laws for right-of-first-refusal; record EJS in SEC to update stock & articles. |
| Maritime or Overseas Assets | Foreign‐sited property follows lex rei sitae; you may need ancillary probate in that jurisdiction and recognition in PH courts before inclusion. |
| Estate with Ongoing Litigation | File a Notice of Pendency and consider partial EJS for uncontested assets, reserving disputed property for judicial partition. |
8. Common Mistakes to Avoid
- Ignoring estate tax before notarization. BIR generally refuses to accept deeds dated after the 1-year deadline unless penalties are paid.
- Mis-publishing. The notice must contain the substance of the deed and list of properties; mere “Notice is hereby given…” without details may be rejected by registries.
- Omitting heirs. An illegitimate child, adopted child, or surviving spouse left out can nullify the settlement.
- Using vague property descriptions. Titles will not be registered if the technical description does not match the certificate of title word-for-word.
- Assuming the two-year lien protects against the BIR. The lien is for civil creditors; tax liabilities survive beyond two years.
9. Timeline Snapshot (Typical, No Complications)
| Task | Indicative Duration |
|---|---|
| Document gathering, valuation | 2 – 4 weeks |
| Estate tax computation & payment | 1 week |
| Drafting & notarization | 2 – 5 days |
| Newspaper publication (3 insertions) | 3 weeks |
| BIR eCAR release | 2 – 6 weeks (varies by RDO) |
| Transfer of titles & tax declarations | 4 – 8 weeks |
10. Frequently Asked Questions
| Question | Short Answer |
|---|---|
| Is court approval ever needed? | Yes, if heirs are in dispute, a will exists, or minors’ interest is not adequately protected. |
| Can we skip publication if the estate is all bank deposits? | No. Rule 74 applies to any property. Banks often demand proof of publication before release. |
| What if a creditor appears after two years? | Heirs are still liable up to the value received, but property is free from the Rule 74 lien. |
| Are notarization and publication required for Self-Adjudication with a sole heir? | Yes – both steps are expressly required. |
| May I immediately sell the property after EJS? | Yes, heirs may execute a Deed of Absolute Sale simultaneously and pay capital gains/DST; BIR will issue two eCARs (EJS then sale). |
11. Checklist for Heirs & Practitioners
- 🔲 Secure PSA death certificate and heirs’ civil registry documents.
- 🔲 Inventory assets & secure valuations (BIR zonal, FMV, car Blue Book, bank balances).
- 🔲 Obtain estate TIN; fill out BIR Form 1904 if none.
- 🔲 Compute estate tax; gather deductible proof (receipts, debts).
- 🔲 Draft ASA/EJS; have minors represented; annex detailed Schedule of Properties.
- 🔲 Notarize deed.
- 🔲 Publish notice for 3 consecutive weeks; file publisher’s affidavit.
- 🔲 File estate tax return & pay taxes, DST, penalties if any; secure eCAR.
- 🔲 Present documents to Registry of Deeds/LRA or transfer agents; obtain new titles, tax declarations, or stock certificates.
- 🔲 Keep records for at least 10 years for potential audits or claims.
12. Final Remarks & Disclaimer
Extrajudicial settlement is a cost-effective alternative to full court administration only when the statutory prerequisites are strictly met. It spares heirs the delay and expense of probate but imposes personal liability if misused. Because every estate presents unique factual and tax issues (e.g., foreign assets, trust interests, pending suits), heirs should consult a Philippine lawyer and a licensed tax professional before signing any deed or paying taxes.
This article is for informational purposes only and does not create an attorney-client relationship nor constitute legal advice. Readers should seek professional counsel for specific situations.