An extrajudicial settlement of estate with waiver and indemnity is one of the most commonly used tools in Philippine practice to transfer a deceased person’s properties quickly and relatively cheaply—without going to court. But it’s also one of the most commonly mishandled.

Below is a comprehensive guide in article form, focused on Philippine law and practice.

I. What Is an Extrajudicial Settlement of Estate?

When someone dies, all their properties, rights, and obligations (which are not extinguished by death) form their estate. Under Philippine law, the default rule is that the estate is settled through judicial proceedings (testate or intestate).

However, Rule 74, Section 1 of the Rules of Court allows heirs to settle and partition the estate without going to court through a public instrument—this is what we call an extrajudicial settlement of estate.

When you add:

Waiver clause – where one or more heirs waive or renounce their hereditary rights, usually in favor of another heir or group of heirs; and
Indemnity clause – where parties agree to hold each other free and harmless, or indemnify each other against future claims or liabilities related to the estate,

you get what’s often titled:

“Deed of Extrajudicial Settlement of Estate with Waiver of Rights and Indemnity”

or some variant like “…with Waiver of Rights and Quitclaim,” etc.

II. Legal Bases

1. Rules of Court

Rule 74, Section 1 – Extrajudicial settlement by agreement between heirs (or self-adjudication by a sole heir) when:
- The decedent left no will;
- The decedent left no debts, or debts have been paid; and
- All heirs are of legal age, or minors are represented by judicial or legal guardians.
Rule 74, Section 4 – Distributes and heirs remain personally liable to creditors and other heirs for 2 years from the date of extrajudicial settlement, up to the value of what they received from the estate.

2. Civil Code Provisions

Key concepts from the Civil Code of the Philippines (New Civil Code):

Succession in general – Articles 774, 777, 960 and following.
Co-ownership and partition – Articles 484 and following (since heirs are co-owners until partition).
Renunciation/Waiver of hereditary rights:
- An heir may repudiate his inheritance (formal repudiation).
- An heir may assign or waive his share in favor of co-heirs or third persons (treated as donation or sale/assignment depending on whether there is consideration).

Tax consequences (estate tax, donor’s tax, etc.) are governed by the Tax Code and its amendments (including TRAIN), but the details change from time to time, so one must always check current BIR rules.

III. When Is Extrajudicial Settlement Allowed?

An extrajudicial settlement is permitted only if all of the following are true:

No Will (Intestate Estate)
- The decedent died without leaving a valid will, or any will is either void, not probated, or deliberately not being used (in practice, if there is a will, courts will expect probate).
No Debts, or All Debts Have Been Paid
- There are no outstanding debts of the decedent, or
- All legitimate debts have already been settled by the heirs or the estate.
- If there are unpaid creditors, they can later attack the settlement within the period allowed by law.
All Heirs Are of Legal Age or Duly Represented
- Every compulsory heir is:
  - 18 years or older, or
  - A minor represented by a judicially appointed guardian or legal representative.
- Presence of minor heirs is a red flag—a purely extrajudicial settlement can be risky if proper guardianship proceedings are not observed.
Heirs Agree on the Settlement
- No serious dispute among the heirs as to:
  - Who the heirs are, and
  - How the estate should be divided.
- If there is serious conflict, judicial settlement is safer and often required.

If ANY of these conditions is not satisfied, the safer course is judicial settlement of estate (testate or intestate proceedings).

IV. Who Are the “Heirs” in an Extrajudicial Settlement?

In an intestate estate (no will), heirs normally include:

Legitimate children and descendants
Surviving spouse
Illegitimate children
Parents and ascendants (if there are no descendants)
Collateral relatives (siblings, nephews/nieces) in certain situations

Everyone who has a legal right to the estate must be included. Omitting an heir is one of the biggest mistakes and opens the settlement to future challenge.

V. Waiver of Hereditary Rights

1. What Is Being Waived?

An heir can waive his/her share in:

The entire estate, or
Certain specific properties, or
The excess of what they would otherwise receive.

This waiver is usually contained in the same extrajudicial settlement deed and may be:

In favor of specific co-heirs (e.g., “I waive my rights in favor of my sisters A and B.”)
Pure renunciation without specific beneficiary, in which case the share is redistributed according to law.

2. Legal Character of the Waiver

Depending on how it is structured:

Pure renunciation (no specific person favored, no consideration) → Can be considered a repudiation of inheritance.
Waiver in favor of specific co-heirs without consideration → Often treated like a donation of hereditary rights. This may have donor’s tax implications.
Waiver in favor of co-heir with consideration → Resembles a sale or assignment of hereditary rights, potentially subject to capital gains or income tax, depending on circumstances.

Because this classification has tax impact, the wording of the waiver is carefully crafted in practice. The BIR may re-characterize the waiver depending on substance, not just labels.

3. Formal Requirements

Must be in a public instrument (notarized document) to be effective against third persons and registrable with the Registry of Deeds and other agencies.
If real properties are involved, the instrument must contain complete technical descriptions of the properties.

VI. Indemnity Provisions: Why They Matter

The indemnity clause in an extrajudicial settlement with waiver typically says, in effect:

The waiving heir:
- Acknowledges that he/she has no more claims over the estate or the properties; and
- Will not sue the other heirs or subsequent transferees in the future; and
- Will indemnify/hold them free and harmless if he/she later asserts any right.

The heirs who receive the properties:
- Agree to indemnify the waiving heir against any liabilities, debts, or claims connected with the estate; or
- Share in bearing any future estate liabilities.

These clauses are common in practice when:

One heir is fully bought out by others,
There is a subsequent buyer of the property who wants additional protection, or
The parties want to preserve peace within the family.

Important Limits

You cannot use an indemnity clause to defeat the rights of omitted heirs or legitimate creditors.
Under Rule 74, creditors and heirs not parties to the deed may still:
- Bring an action to annul or modify the settlement, or
- Go after the properties in the hands of distributees,
- Within the period allowed by law (generally two years from extrajudicial settlement, subject to certain exceptions).

So the indemnity clause mainly governs rights among the parties to the deed. It does not bar someone who was not a party from asserting their rights.

VII. Step-by-Step: How to Prepare an Extrajudicial Settlement with Waiver and Indemnity

Step 1: Gather Basic Documents

Typically required:

Death Certificate of the decedent
Birth/Marriage Certificates of heirs (PSA or civil registry copies), to prove filiations
Titles and documents of properties:
- Transfer/Original Certificates of Title (TCT/OCT) for land/condo
- Tax declarations and tax receipts
- Vehicle OR/CR (for cars, motorcycles, etc.)
- Bank account statements / passbooks / stock certificates, etc.
IDs and TINs of heirs (needed especially for BIR processing)

Step 2: Confirm Conditions for Extrajudicial Settlement

The family (and ideally a lawyer) should confirm:

No will, or no plan to probate any will
No outstanding debts, or they have been paid
All heirs are agreed on:
- Who the heirs are, and
- How the estate will be divided, and
- Which heir (if any) is waiving and in favor of whom

If these conditions aren’t met, a court proceeding may be necessary.

Step 3: Draft the Deed

The deed is usually titled:

“Deed of Extrajudicial Settlement of Estate with Waiver of Rights and Indemnity”

or similar.

Core parts:

Title and Introduction
- Identifies the parties as heirs of the decedent.
- Brief background: name of decedent, date/place of death, civil status, and a statement that he/she died intestate and without debts.
Recitals
- Statement of the relationship of heirs to the decedent.
- List that they are the only heirs to the best of their knowledge.
- Description of the properties comprising the estate (real and personal).
Statement of Legal Basis
- Reference to Rule 74, Section 1 of the Rules of Court, and possibly the Civil Code on succession.
Description and Valuation of Properties
- Detailed descriptions:
  - Real property: TCT/OCT No., location, area, technical description.
  - Personal property: bank accounts, vehicles, shares, etc.
- Often includes approximate values for tax and partition purposes.
Partition / Allocation Clause
- Specifies how each asset is allocated among the heirs:
  - “Parcel 1 shall belong to A and B in equal shares,” etc.
- Must match what will be implemented in the Registry of Deeds, BIR, LTO, banks, etc.
Waiver and Quitclaim Clause(s)
- Clear statement that:
  - A particular heir waives, renounces, and quitclaims all rights to specified properties or to the entire estate.
  - Indicates who benefits from the waiver (e.g. “in favor of my siblings X and Y”).
  - Optionally states if there is consideration (“for and in consideration of the sum of…”).
Indemnity / Hold Harmless Clause
- May contain provisions like:
  - The waiving heir:
    - Will forever abstain from making claims and
    - Will indemnify and hold the co-heirs free and harmless from any suit or liability arising from his/her claims.
  - The receiving heirs:
    - Will bear any future taxes or liabilities attributable to the properties adjudicated to them.
  - If there is a third-party buyer named, language may also extend protection to that buyer.
Publication Undertaking
- A statement that the parties will cause the publication of the extrajudicial settlement in a newspaper of general circulation once a week for three (3) consecutive weeks, as required by Rule 74.
Signatures and Acknowledgment
- All heirs sign the deed.
- The document contains a notarial acknowledgment:
  - Signed before a Philippine notary public,
  - With proper community tax certificates or IDs indicated,
  - Notarial details (Doc. No., Page No., Book No., Series of…).

Step 4: Notarization

All heirs (or their duly authorized representatives with special powers of attorney) sign in front of the notary.
Notarization converts it into a public document and makes it registrable and admissible in evidence.

Step 5: Publication in a Newspaper

The extrajudicial settlement must be published:
- In a newspaper of general circulation in the Philippines,
- Once a week for three consecutive weeks.
The newspaper will issue:
- Copies of the issues, and
- A publisher’s affidavit.
These are often required later by:
- Registry of Deeds, and
- BIR, and
- Some banks/government offices.

Step 6: Tax Compliance (BIR)

Before titles or registrations can be transferred:

Prepare and file the Estate Tax Return with the BIR.
- Estate tax is typically based on net estate, after allowable deductions.
- Rates and thresholds change over time, so always check current BIR rules.
Secure the Certificate Authorizing Registration (CAR) or Tax Clearance
- Required by Registry of Deeds, LTO, and others before transferring title.
Pay other taxes/fees as applicable:
- Estate tax
- Donor’s tax (if waiver is treated as donation)
- Capital gains tax/creditable withholding tax (if sale involved)
- Documentary stamp tax

Step 7: Transfer of Titles and Registrations

Real Properties
- Submit:
  - Notarized extrajudicial settlement,
  - Proof of publication,
  - BIR CAR,
  - Tax clearances (real property tax, etc.),
  - Owner’s duplicate titles,
- To the Registry of Deeds for issuance of new titles in the names of the heirs (or buyer, if already sold).
Personal Properties
- Vehicles – process with the LTO using the deed, death certificate, tax clearances, etc.
- Bank Accounts – banks often require:
  - Extrajudicial settlement,
  - Death certificate,
  - IDs and TINs of heirs,
  - BIR tax clearance for estate.
- Shares of stock / corporate interests – process with the corporate secretary and relevant regulators.

VIII. Limitations, Risks, and When Judicial Settlement Is Safer

1. Omitted Heirs and Creditors

Under Rule 74, if heirs or creditors are left out, they can:
- File an action to annul or revise the settlement and/or
- Recover the property or its value from the distributees.
The law generally gives two years from the extrajudicial settlement (or from its registration) for such actions, though there can be complexities and exceptions.

2. Minor or Incapacitated Heirs

If there are minors or incapacitated heirs, extrajudicial settlement is dangerous without proper guardianship and court approval.
Courts are protective of minors’ legitimes; any instrument that effectively deprives them can be void or voidable.

3. Existence of a Will

If there is a valid will, the general rule is that it must be probated.
Skipping probate and doing an extrajudicial settlement instead can make the settlement vulnerable to later annulment.

4. Disputes Among Heirs

If heirs do not agree on:
- Heirship,
- Collation of donations,
- Inclusion/exclusion of certain properties,
- Valuation, the proper remedy is usually a judicial settlement, where the court can resolve the disputes.

5. Tax Misclassification of Waiver

A poorly worded waiver may trigger:
- Donor’s tax (if it looks like a gift), or
- Capital gains tax/income tax (if it resembles a sale).
The BIR looks at substance; labels like “waiver” or “quitclaim” do not bind the government.

IX. Practical Drafting Tips for Waiver and Indemnity

Be precise about what is waived
- Is the heir waiving:
  - All rights to the entire estate?
  - Only a specific property?
  - Only the excess over his/her legitime?
Identify beneficiaries of the waiver
- “In favor of co-heirs A, B, and C in equal shares” (or specify proportions).
State whether there is consideration
- If there is payment in exchange for the waiver, describe it clearly.
- This affects tax treatment and legal characterization.
Draft a robust indemnity clause
- Clarify:
  - Who indemnifies whom;
  - Against what types of claims (future lawsuits, claims of ownership, etc.);
  - Whether it covers attorney’s fees, damages, and costs.
Avoid overreaching
- Remember: an heir cannot waive rights of other heirs.
- A waiving heir cannot bar future claims by those who never signed.
Make sure the waiver is conscious and voluntary
- The deed should show that the waiving heir:
  - Understands the consequences;
  - Has received full explanation; and
  - Signs freely and voluntarily.

X. Simple Annotated Outline of the Deed

Here is a high-level outline (not a ready-to-use template):

Title
- “Deed of Extrajudicial Settlement of Estate with Waiver of Rights and Indemnity”
Parties / Appearances
- Names, civil status, ages, citizenship, addresses, relationship to decedent.
Recitals
- Death of [Decedent]; date/place; intestate; no will.
- List of heirs and their relationship.
- Statement that decedent left no debts or that debts were paid.
- Statement that all heirs are of legal age or duly represented.
Description of Estate
- Enumerate properties:
  - Real: titles, locations, areas.
  - Personal: bank accounts, vehicles, shares, other assets.
Agreement to Settle Extrajudicially
- Statement that parties are availing of Rule 74, Section 1 and are settling the estate extrajudicially.
Partition and Adjudication
- How each asset is apportioned.
- Adjudication to particular heirs (or to a buyer, if already sold).
Waiver and Quitclaim
- Clear waiver language by certain heir(s).
- Identification of beneficiaries of waiver.
- Whether waiver is with or without consideration.
Indemnity and Hold Harmless Clause
- Mutual or one-sided indemnity.
- Scope of claims and liabilities covered.
Publication Clause
- Undertaking to publish the deed in a newspaper of general circulation once weekly for 3 consecutive weeks.
Binding Effect

Statement that the deed binds heirs, successors, and assigns.

Signatures

Signature blocks for all parties, with printed names.

Acknowledgment

Standard notarial acknowledgment under Philippine law.

XI. Final Notes and Practical Advice

An extrajudicial settlement with waiver and indemnity is a powerful but sensitive instrument.
- It allows a relatively fast transfer of properties;
- It gives flexibility in how heirs distribute the estate;
- But it can be challenged if legal requirements are not met.
Because of:
- The interplay of succession law,
- Property and registration law,
- Tax law (estate, donor’s, capital gains, DST),
- And potential family disputes,

it is highly advisable to have such a deed reviewed or drafted by a Philippine lawyer who practices in estate, tax, and property law, and to coordinate with the BIR, Registry of Deeds, and other agencies to ensure smooth implementation.

This explanation is for general information only and is not a substitute for specific legal advice on a concrete case. For an actual estate, the facts (like presence of a will, minors, foreign assets, foreign spouses, previous donations, unpaid debts, etc.) can drastically change the proper approach.