Extrajudicial Settlement & Property Transfer in the Philippines A Comprehensive Legal Guide (2025 Edition)
1. Overview
An extrajudicial settlement (EJS) is the Philippines’ administrative alternative to a full‐blown probate case. When the requisites of Rule 74 of the Rules of Court and related statutes are met, the heirs may divide and transfer the decedent’s estate—and have new titles, stock certificates, vehicle registrations, etc. issued—without going to court. The process is faster and far less expensive than judicial settlement, but it is rigidly formal: failure to comply can void transfers, expose the heirs to surcharges, or reopen the estate years later.
2. Legal Framework
| Source | Key Points |
|---|---|
| Civil Code (Arts. 960-1080) | Rules on succession, legitimes, collation, partition, rescission. |
| Rule 74, Rules of Court | Summary settlement procedures; publication; two-year creditor window; bond for personal property. |
| National Internal Revenue Code (NIRC) as amended by the TRAIN Law (RA 10963) | Estate-tax rate of 6 % of net estate; deadlines; Documentary Stamp Tax (DST). |
| BIR Revenue Regs. 12-2018 & 17-2021 | Unified estate-tax return (BIR Form 1801), issuance of Certificate Authorizing Registration (CAR). |
| Estate-Tax Amnesty Act (RA 11213, as extended) | Reduced rates & penalties for deaths on or before 31 Dec 2017. |
| Local Government Code (Sec. 135) | Transfer tax (max 0.75 % of zonal/fair market value) payable to the city/municipality. |
| Selected jurisprudence | Heirs of Malate v. Gamboa, Spouses Abalos v. CA, Heirs of Ypon v. Ricafort—confirming that defects in consent, forged signatures, or non-publication may nullify the settlement. |
3. When Extrajudicial Settlement Is Allowed
- No will (or the will did not dispose of all properties and the remainder is intestate).
- No outstanding debts or all debts have been paid.
- All heirs are of legal age, or minors are duly represented by a judicially appointed guardian or parent acting with court authority.
- Unanimous agreement among the heirs on how to divide the estate.
If any element is missing, resort to judicial settlement or a special proceeding for probate/letters of administration.
4. Common Instruments
| Instrument | Typical Use |
|---|---|
| Deed of Extrajudicial Settlement (EJS) | Heirs keep the estate in co-ownership; useful when awaiting sale. |
| EJS with Partition | Heirs physically or notionally divide specific assets—e.g., Lot 1 to A, Lot 2 to B. |
| EJS with Waiver of Rights | One or more heirs renounce their share in favour of co-heirs. |
| EJS with Sale (a.k.a. EJSWS) | Heirs settle the estate and simultaneously sell asset(s) to a third party. |
| Affidavit of Self-Adjudication (ASA) | Single heir heirs; must still comply with Rule 74 publication and taxes. |
All deeds must be in a public instrument (notarized) and accompanied by a sworn declaration that the estate has no debts or that debts have been paid.
5. Step-by-Step Procedure
Gather baseline documents
- PSA death certificate; marriage & birth certificates to prove filiation; titles, tax declarations, stock certificates, OR/CR for vehicles, bank statements.
Compute estate tax
- File BIR Form 1801 within one (1) year from death (extendible).
- Attach an itemized schedule of assets & liabilities, valuations (BIR zonal value, assessed value, or fair market value, whichever is higher).
Draft and notarize the Deed
- Include full description of each asset, the distributive shares, tax clause, publication undertaking, and Rule 74 debt statement.
Publish the full text or a synopsis in a newspaper of general circulation once a week for three consecutive weeks. Keep the publisher’s affidavit & copies of the issues.
Secure the Certificate Authorizing Registration (CAR) from the BIR
- Submit deed, tax receipts, certificate of no improvement (if land is raw), and IDs/TINs.
Pay local transfer tax to the city/municipal treasurer within 60 days of execution (may vary).
Register
- Real property: present CAR, EJS, owner’s duplicate title, tax clearance, and RPT receipts to the Registry of Deeds; new Transfer/Condominium Certificate of Title (TCT/CCT) issued in the heirs’ names.
- Shares: lodge the deed and CAR with the corporate secretary/transfer agent; new certificates in the heirs’ names.
- Motor vehicles: file at LTO with Deed, CAR/DST proof, official receipt/certificate of registration (OR/CR).
- Bank deposits: bank-specific forms + CAR; if amount ≤ ₱20,000 some banks accept a simplified affidavit under Sec. 97 NIRC.
Cancel or update tax records (Real Property Tax, Tax Declaration, BIR TIN registration).
6. Taxes & Fees Snapshot (2025)
| Item | Rate / Amount | When Paid |
|---|---|---|
| Estate Tax | 6 % of net estate | BIR, before CAR issuance |
| Documentary Stamp Tax | ₱15/₱20 per ₁₀₀₀ of property’s fair value (varies) | With estate tax |
| Transfer Tax (LGU) | ≤ 0.75 % | City/Municipal Treasurer |
| Registration Fees (RD/LTO/SEC) | Schedule of fees | At registration |
| Publication | Market rate (₱3 000 – ₱8 000 typical) | Upon filing for publication |
| Notarial Fees | Usually 1 % of total value or by agreement | At notarization |
| BIR Penalties | 25 % surcharge + 12 % interest p.a. for late filing/payment | Assessed by BIR |
(Estate-Tax Amnesty: a flat 6 % on net undeclared estate, minimum ₱5 000, for deaths on or before 31 Dec 2017; availment period currently runs until 14 June 2025.)
7. Publication & Creditor Protection
- Purpose: give creditors & omitted heirs notice; allow them to sue for their share.
- Two-Year Window: Under Rule 74 §4, any creditor or heir deprived due to the EJS may file an action to assert rights within two (2) years from the date of publication or registration, whichever is later. After two years, they may still sue, but only against the heirs directly—not against innocent purchasers for value.
- Bond for Personal Property: If the estate includes personal property > ₱10 000, heirs must file a bond equal to its value (court approval needed). In practice, the requirement is often waived when creditors execute quitclaims or when there is no creditor opposition.
8. Effects of Non-Compliance
| Defect | Consequence |
|---|---|
| No publication | Deed is void inter partes; assets may be reconveyed. |
| False statement on debts | Creditors may sue to annul settlement; heirs solidarily liable. |
| Forged/absent signature | Settlement void as to defrauded heir. |
| Failure to pay estate tax | RD/LTO/SEC will not register transfers; BIR may assess penalties, file criminal charges. |
9. Special Situations & Practical Notes
- Minor or Incapacitated Heirs: Must be represented by a guardian ad litem or court-appointed guardian; if share is sold, court approval of the sale is mandatory.
- Overseas Assets (lex rei sitae): Philippine EJS cannot directly convey foreign realty; record an authenticated copy abroad or follow foreign ancillary probate rules.
- Multiple Registry Districts: File one deed; secure separate CARs; register in each RD where property lies.
- Co-ownership After EJS: If heirs choose co-ownership, any heir may later demand partition (Art. 494 Civil Code).
- Conjugal/Community Property: Surviving spouse owns one-half; only the exclusive property and the decendent’s one-half of the conjugal/community mass form the estate.
- Small Bank Deposits: For accounts ≤ ₱20 000, banks may release funds upon a simple affidavit under NIRC §97.
- Pre-Exit Tax Clearance for Emigrants: Heirs applying from overseas must execute a Special Power of Attorney duly apostilled/consularized and secure a Taxpayer Identification Number (TIN).
- Statute of Limitations, Estate Tax: Ten years from filing, but no prescriptive period if no return was filed or fraudulent return was filed.
10. Judicial vs. Extrajudicial Settlement
| Aspect | Extrajudicial | Judicial |
|---|---|---|
| Venue | Administrative (BIR/RD) | Regional Trial Court (Special Proceedings) |
| Speed | ~2–6 months (simple estates) | 1–5 years or more |
| Cost | Taxes + publication + registration; relatively low | Court fees, commissioners’ fees, litigation costs |
| When Required | Will; contested heirs; unpaid debts; minors without guardian; ambiguous ownership | Same situations |
| Creditor Recourse | Suit within 2 years under Rule 74 §4 | Participate in probate; claim period set by court |
11. Selected Jurisprudence Highlights
Spouses Abalos v. CA (G.R. 104765, 20 Nov 1996)
- EJS that omitted an heir was void as to that heir notwithstanding registration.
Heirs of Malate v. Gamboa (G.R. 170139, 22 Jan 2014)
- Publication is jurisdictional; failure rendered the deed void though transferee had bought in good faith.
Heirs of Ypon v. Ricafort (G.R. 198680, 27 June 2012)
- EJS with forged signature nullified; subsequent buyers likewise held without title.
Dabon v. Court of Appeals (G.R. 116449, 23 Jan 1998)
- Debt statement must be truthful; creditor may sue heirs in solidum within two years.
12. Common Pitfalls & Tips
| Pitfall | Tip |
|---|---|
| Using an incomplete property list | Cross-check tax declarations, bank statements, LTO records. |
| Overlooking carried-over debts (credit cards, medical bills) | Settle or secure quitclaims from creditors before executing deed. |
| Estate tax paid late | Compute interest from 11th day after 1-year deadline; consider amnesty if applicable. |
| Waiver by an heir without spouse’s marital consent | Secure written marital consent; otherwise voidable under Art. 124 of the Family Code. |
| Publication in a local shoppers’ sheet not of general circulation | Use a broadsheet or provincial newspaper with NPC certification. |
| Leaving minors unrepresented | Petition for guardianship first; attach court order to EJS. |
13. Frequently Asked Questions
- Can we execute EJS if there is a will but everyone agrees to ignore it? No. A will must undergo probate; bypassing it by EJS risks nullity.
- Is a lawyer required? Not strictly, but professional drafting and tax computation save costly errors.
- Can heirs sell the property before estate taxes are paid? Buyers cannot register the sale without a CAR, so payment is effectively required first.
- How is property valued? Higher of BIR zonal value, LGU assessed value, or fair market value (for listed shares, closing price on date of death).
- What if an heir cannot be located? File judicial settlement or secure SPA/waiver duly authenticated; publication alone cannot substitute consent.
14. Conclusion
Extrajudicial settlement is a powerful tool for Filipino families to transfer property swiftly after a death, but it is not a mere formality: taxes, publication, unanimity, and truthful disclosure are mandatory. When in doubt—particularly if the estate involves minors, foreign assets, or creditor issues—seek formal advice or pivot to judicial settlement. Properly executed, an EJS clears title, minimizes family friction, and unlocks the estate’s value with a fraction of the cost and delay of probate.
This article is for informational purposes only and does not constitute legal advice. Laws and regulations change; always verify current rules with the BIR, Registry of Deeds, and competent counsel before acting.