Extrajudicial Settlement of Estate with Waiver of Rights (Philippines): A Complete Guide

This article explains how heirs in the Philippines can transfer a decedent’s assets without going to court by executing an Extrajudicial Settlement of Estate, including cases where some heirs waive their share (“Waiver of Rights”). It walks through legal bases, requirements, tax and registration steps, risks, and practical checklists.

1) What “Extrajudicial Settlement” Means

An extrajudicial settlement is the out-of-court partition and transfer of a decedent’s estate by the heirs through a notarized public instrument (a deed), instead of a full court probate/intestate proceeding.

Two common formats:

Affidavit of Self-Adjudication (ASA) – used when there is only one heir.
Deed of Extrajudicial Settlement (EJS) – used when there are two or more heirs, who agree on how to divide the estate. This document can include waivers (some heirs renounce their share) or conveyances (heirs assign/sell their share).

2) When You Can—and Cannot—Use It

You generally may use an EJS/ASA if:

The decedent died intestate (no will), or there is a will but it is not being used for transfer (note: in practice, a will must be probated before it can transfer property; if a valid will exists and dispositions will be followed, go through probate).
The decedent left no unpaid debts, or known debts have been paid/settled (creditors remain protected—see “Two-Year Lien” below).
All heirs are of legal age, or minors are represented by a judicially appointed guardian (and court approval is obtained for any disposition of a minor’s share).
All heirs agree on the partition (for multi-heir settlements).

You cannot use an EJS if:

There is a will intended to be followed (probate is mandatory before property can pass under a will).
There are serious disputes among heirs or unpaid, unresolved debts that require court supervision.
There are heirs unknown/absent and representation cannot be arranged.

3) Core Legal Concepts to Know (Plain-English)

Public Instrument & Notarization – The settlement must be in a notarized deed (public instrument).
Publication – The fact of extrajudicial settlement must be published in a newspaper of general circulation once a week for three (3) consecutive weeks. This protects creditors/unknown heirs by giving public notice.
Two-Year Lien – Within two (2) years from the last publication, any heir or creditor who was unduly deprived may sue to recover; properties transferred via EJS are generally annotated with a note that transfers are subject to the two-year lien.
Liability of Heirs – Even after distribution, heirs can be held proportionally liable for valid claims of creditors and omitted heirs, up to the value they received.
Compulsory Heirs and Legitime – In intestacy, the Civil Code’s rules on legitimes (minimum reserved shares) influence the baseline allocation; while heirs may waive their own shares, they cannot waive someone else’s legitime or use a settlement to defeat legitimes.

4) “Waiver of Rights” Explained

A waiver (also called renunciation) is when an heir relinquishes their hereditary share. It can take several forms with different tax effects:

Pure/General Repudiation – The heir rejects the inheritance without designating a beneficiary (“I repudiate my hereditary share”).
- Tax view (general rule): Not subject to donor’s tax because it’s not a transfer to a specific person; the share simply accrues to the co-heirs by law.
Specific Waiver in Favor of Another Heir (Gratuitous) – The heir renounces in favor of identified heir(s) without consideration.
- Tax view: Usually treated as a donation to that/those heir(s) and may be subject to donor’s tax.
Assignment/Sale of Inheritance – The heir assigns or sells their hereditary rights for consideration.
- Tax view: Treated like a sale (e.g., capital gains tax if it effectively conveys real property interest) and applicable documentary taxes.

Form requirements:

Put the waiver in the same EJS or in a separate notarized Deed of Waiver/Assignment.
If it covers real property, a public instrument is required and it will be used in title transfer.
If the waiving heir is married: inheritance itself is exclusive property, so spousal consent is typically not required for a gratuitous waiver; but if it’s a sale or there are post-inheritance transactions involving conjugal property, consider spousal consent and property regime issues.

5) Taxes & BIR Compliance (Estate → Heirs)

A) Estate Tax (TRAIN Law basics)

Rate: Flat 6% on the net estate of the decedent.
Key deductions: Standard deduction ₱5,000,000; Family home deduction up to ₱10,000,000 (subject to conditions); allowable claims/expenses per current rules.
Valuation date: Assets are valued as of date of death (e.g., real property at higher of zonal value or assessor’s FMV on death; shares at market/book per rules; deposits at balance on death).
Filing deadline: Within one (1) year from death (extensions for filing/payment may be requested).
Output: Electronic Certificate Authorizing Registration (eCAR) issued by the BIR per property/class of property, which is required for registration/transfer.

B) After-Tax Conveyance Characterization

If the waiver is a general repudiation (no named beneficiary): typically no donor’s tax implications.
If in favor of specific heir(s) without consideration: donor’s tax may apply (on the value of waived share).
If for consideration: treated as sale/assignment; taxes (e.g., capital gains on real property, documentary stamp tax) may apply to the conveyance portion.

Practice tip: Decide early whether a “waiver” will be a pure repudiation, a donation, or a sale/assignment—this drives the tax forms, rates, and clearances you’ll need in addition to the estate tax eCAR.

6) The Complete Process—Step by Step

Phase 1: Prepare the Estate Dossier

Gather civil records: PSA Death Certificate; marriage/birth certificates to prove filiation; IDs/TINs of heirs; decedent’s TIN.
Inventory & valuation (as of date of death):
- Real properties (titles, tax declarations, lot plans; check liens/encumbrances).
- Bank accounts/investments (statements, certificate of balance at death).
- Shares/business interests, vehicles, jewelry, receivables, etc.
- Liabilities (loans, taxes due) for net estate computation.
Heirship map: Identify all heirs (including illegitimate children) and compute intestate shares as baseline.

Phase 2: Choose the Instrument

ASA if single heir; EJS if multiple heirs.
Decide on waiver/assignment mechanics and counterparties.
Draft to cover: parties and capacity, description of properties, basis of heirship, partition scheme, waivers/assignments, assumption of liabilities, publication covenant, two-year lien acknowledgment, and tax/registration undertakings.

Phase 3: Settle Estate Tax with BIR

File Estate Tax Return (BIR Form 1801) with attachments (inventory, valuations, certificates).
Pay estate tax (or obtain approval for installment/extension if applicable).
Secure eCAR(s)—often one eCAR per real property; separate eCARs for personal properties as needed.

Phase 4: Notarize & Publish

Notarize the ASA/EJS (and any Waiver/Assignment Deed).
Publish the fact of the extrajudicial settlement in a newspaper of general circulation once a week for three consecutive weeks. Keep the affidavit of publication and clippings.

Phase 5: Transfer/Release of Assets

A) Real Property (per property):

Submit to the LGU Treasurer/Assessor: eCAR, notarized deed(s), certified true copy of title (OCT/TCT/CCT), latest Real Property Tax (RPT) clearance, tax declarations, IDs, and forms to compute local transfer tax (separate from estate tax).
Proceed to the Register of Deeds to cancel old title and issue new title(s) in heirs’ names (respecting waivers/assignments). Expect annotation re: Rule 74, Sec. 4 (two-year lien).
Update Assessor’s records for new tax declarations.

B) Personal Property:

Banks: Present eCAR, notarized EJS/ASA, IDs, and bank forms to release deposits.
Vehicles (LTO): Deed(s), eCAR, CR/OR, stencils, IDs, and LTO transfer forms.
Shares/Companies: Deed(s), eCAR, corporate secretary’s certifications, stock certificates/cancellations, and transfer book entries.

7) Special Situations

Minors as heirs – Obtain a court-appointed guardian; court approval is typically required for any disposition of a minor’s share, even in an extrajudicial context.
Unknown/absent heirs – Publication helps, but consider judicial intervention if representation is impossible.
Foreign assets or foreign death – Check conflict-of-laws rules and consular/legalization/apostille requirements; valuation and tax rules may differ abroad.
Community/Conjugal property – First liquidate the spouses’ property relations (identify decedent’s net share) before partition among heirs.
Liens/encumbrances – Satisfy or have the creditor issue releases before or in parallel with transfer; consider escrow if timing is tight.

8) Common Pitfalls (and How to Avoid Them)

Skipping publication or misplacing proof of publication.
Omitting an heir (e.g., an illegitimate child) which can unravel transfers later.
Using a “waiver in favor” but forgetting the donor’s tax implications.
Confusing estate tax vs. transfer/donor’s/capital gains taxes—map tax events clearly.
Wrong valuations (not as-of date of death) causing BIR issues.
Failing to annotate or complete transfers at the Register of Deeds/Assessor, leaving titles in the decedent’s name.
Transacting with minors’ shares without court approval.

9) Practical Checklists

Documents You’ll Typically Need

PSA Death Certificate
IDs & TINs of heirs; Estate TIN
Proof of heirship (PSA birth/marriage; adoption decrees, if any)
Property proofs: titles, tax declarations, tax clearances; bank certifications; corporate/share docs; vehicle CR/OR
Inventory and valuations (date-of-death)
EJS/ASA and Waiver/Assignment deeds (drafts)
Estate Tax Return (BIR Form 1801) & eCAR(s)
Publication proofs (affidavits/clippings)
RPT clearance, local transfer tax receipts
Other clearances/releases (creditors, mortgagees)

Key Clauses to Include in an EJS

Parties/heirship recitals and capacity
Full inventory and property descriptions
Partition scheme and modes of conveyance (waiver/assignment/sale)
Representations: no unpaid debts, accuracy of heirship/inventory
Publication covenant and two-year lien acknowledgment
Tax/fees responsibility allocation
Indemnity among heirs for later claims
Governing law and venue; dispute resolution

10) Sample Outline: Deed of Extrajudicial Settlement with Waiver of Rights

Title: “Deed of Extrajudicial Settlement of Estate with Waiver of Rights”
Parties & Capacities (names, ages, civil status, addresses; guardians if any)
Recitals: death facts; intestacy; no debts; heirship basis
Inventory: real and personal properties; valuations
Partition: how properties are allocated among heirs
Waiver/Assignment Provisions:
- Heir A waives (general) or waives in favor of Heir B (gratuitous) or assigns/sells to Heir B (for ₱___)
- Tax responsibilities for the waiver/assignment
Warranties & Undertakings: debts settled; cooperation for BIR eCARs; registration steps
Publication: commitment to publish 3 consecutive weeks; attach proof after publication
Two-Year Lien: acknowledgment under Rule 74; proportionate liability for later claims
Signatures & Acknowledgment: notarization block; community property/spousal consents if applicable
Annexes: inventory schedule; certified copies of titles, tax declarations, valuations

11) FAQs

Do we file the deed in court? No court filing is required, but you must publish the fact of settlement and register with BIR/LGU/RD/LTO/banks as applicable.
Is publication needed for a sole-heir ASA? Yes—the fact of self-adjudication must also be published weekly for three consecutive weeks.
Can we do EJS if there’s a will but everyone agrees to ignore it? A will must be probated to have effect for transfers under the will. If parties are not using the will’s dispositions, seek legal advice—this can raise validity and risk issues.
What if we discover a creditor after transfer? Creditors can claim against the distributees within the two-year period (and, in some cases, even after, subject to limitations). Heirs may have to reconvey or pay proportionally.
Is the spouse’s consent needed for a waiver? Inherited property is usually exclusive to the heir; a gratuitous waiver of that inheritance typically does not need spousal consent. But if the heir sells/assigns hereditary rights or later mixes them with conjugal assets, consent or other formalities may be needed.

12) Sensible Action Plan

Confirm heirship and prepare the inventory/valuations (date-of-death).
Draft the EJS/ASA and any waiver/assignment with the tax characterization in mind.
File & pay the estate tax; obtain eCAR(s).
Notarize the deed(s); publish for 3 weeks and keep proofs.
Register/transfer properties (RD/Assessor, banks, LTO, corporations).
Keep records and monitor the two-year period.

13) Final Notes & Cautions

Small factual differences (e.g., a minor heir, an old unpaid loan, a will tucked in a drawer) can change the correct path from extrajudicial to judicial settlement.
Tax rules (rates/forms/interpretations) evolve; ensure your computations reflect current regulations at the time you file.
When in doubt—especially with waivers in favor (donor’s tax) or assignments (capital gains/DST)—get advice from a Philippine estate/tax practitioner to structure the documents and filings correctly.

This guide is for general information in the Philippine context and is not a substitute for legal advice on a specific estate.