When a loved one passes away, the emotional toll is often accompanied by the practical reality of settling their worldly affairs. In the Philippines, the transfer of a deceased person’s property to their rightful heirs does not happen automatically. It requires a legal process.

While going to court via judicial settlement is an option, Philippine law provides a swifter, more amicable, and less expensive alternative: the Extrajudicial Settlement of Estate (EJS).

Here is everything you need to know about the EJS process, its requirements, costs, and legal implications.

What is an Extrajudicial Settlement of Estate?

An Extrajudicial Settlement of Estate is a private agreement between the heirs of a deceased person (the decedent) detailing how the estate (properties, funds, and assets) will be divided among themselves. This process is done outside of court, saving the family from protracted, expensive legal battles.

The Legal Basis

The EJS is governed primarily by Rule 74, Section 1 of the Rules of Court in the Philippines. It allows heirs to divide the estate among themselves via a public instrument (a notarized deed) without judicial intervention, provided specific legal conditions are met.

Essential Requisites for an EJS

An estate cannot be settled extrajudicially just because the heirs wish to do so. The law imposes strict prerequisites to protect creditors and all rightful heirs.

To qualify for an EJS, the following conditions must all be present:

No Will: The deceased must have died intestate (without leaving a valid Last Will and Testament).
No Outstanding Debts: The deceased must have left no unpaid debts at the time of death. If there were debts, they must have been fully settled beforehand.
All Heirs are of Legal Age: All surviving heirs must be of legal age. If there are minor or incapacitated heirs, they must be legally represented by a judicially appointed guardian or a legal representative.
Unanimity: All heirs must agree on how the property will be divided. If even one heir disagrees, the settlement must go through the courts via a judicial partition.
Public Instrument: The agreement must be written down in a public instrument (a notarized document called a Deed of Extrajudicial Settlement of Estate) and filed with the proper Register of Deeds.

Special Variations of Extrajudicial Settlement

Depending on the family situation, the settlement may take a slightly different form:

1. Affidavit of Self-Adjudication

If the deceased left only one sole surviving heir, an EJS is not applicable since there are no multiple parties to agree. Instead, the sole heir executes an Affidavit of Self-Adjudication, stating that they are the only heir and are adjudicating the entire estate to themselves.

2. Deed of Extrajudicial Settlement with Waiver of Rights

It is common for some heirs to forego their share of the inheritance in favor of another sibling, a surviving parent, or a third party. In this case, the document drafted is a Deed of Extrajudicial Settlement with Waiver of Rights.

Important Note on Taxes: A waiver of rights can be viewed by the Bureau of Internal Revenue (BIR) as a donation. If an heir waives their share generally in favor of all other co-heirs, it is usually not subject to Donor’s Tax. However, if they waive it in favor of a specific person, it constitutes a taxable donation, triggering Donor's Tax on top of the Estate Tax.

Step-by-Step Process of EJS in the Philippines

Settling an estate extrajudicially involves a clear series of legal, financial, and administrative steps.

Step 1: Gather Mandatory Documents

Before drafting the deed, the heirs must secure the standard documentary requirements:

Certified True Copy of the Deceased’s Death Certificate.
Certified True Copy of the Birth Certificates of the heirs (to prove relationship).
Marriage Certificate of the surviving spouse (if applicable).
Certified True Copies of Titles (TCT/CCT) for real property.
Tax Declarations for real property (land and improvements).
Certificates of Stock, bank passbooks, or vehicle registration (for personal property).
Certificate of No Improvement (for vacant lands).

Step 2: Draft and Sign the Deed

The heirs, with the assistance of a lawyer, draft the Deed of Extrajudicial Settlement of Estate. This document must clearly list all the properties being settled, their descriptions, valuations, and the exact manner of distribution among the heirs. All heirs must sign the document.

Step 3: Notarization

Once signed, the document must be notarized by a Notary Public. Notarization converts the deed from a private document into a public instrument, making it legally binding and enforceable.

Step 4: Publication of the Deed

Under the Rules of Court, the notarized EJS must be published in a newspaper of general circulation once a week for three (3) consecutive weeks.

Why is this necessary? Publication serves as a constructive notice to the public. If there are unknown creditors or excluded heirs, the publication gives them the opportunity to come forward and contest the settlement.

Step 5: Payment of Estate Taxes

The heirs must file an Estate Tax Return and pay the corresponding taxes at the Bureau of Internal Revenue (BIR) Revenue District Office (RDO) having jurisdiction over the deceased’s last known residence.

Tax Rate: Under the TRAIN Law, the estate tax is a flat rate of 6% computed based on the net value of the estate.
The Reward: Upon successful verification and payment, the BIR will issue an Electronic Certificate Authorizing Registration (e-CAR). The e-CAR is a vital document; without it, no title can be transferred.

Step 6: Transfer of Ownership at the Register of Deeds

Once the e-CAR is secured, the heirs must submit the EJS, proof of publication, the e-CAR, and the original titles to the Register of Deeds (RD) where the properties are located. The RD will cancel the old titles under the deceased's name and issue new titles to the heirs.

Finally, the heirs must visit the Local Assessor’s Office to update the Tax Declarations under their names.

Estimated Costs and Expenses

An EJS is not free, and heirs should budget for the following expenses:

Expense Item	Description / Rate
Notarial Fees	Usually ranges from 1% to 2% of the total value of the estate, but can be negotiated with the notary public.
Publication Fees	Paid to the newspaper publisher; usually costs around Php 5,000 to Php 15,000 depending on the publication.
Estate Tax	6% of the Net Estate (under the TRAIN Law).
Registration Fees	Paid to the Register of Deeds for the issuance of new titles (gradient scale based on property value).
Local Transfer Taxes	Paid to the City or Provincial Treasurer's Office (usually 0.5% to 0.75% of the property value).

Crucial Caveats: The Two-Year Rule

Heirs and prospective buyers of inherited properties must be highly aware of Section 4, Rule 74 of the Rules of Court.

When a property is transferred via an EJS, a legal lien is annotated on the back of the new Title. This annotation states that the property is subject to the rights of any excluded heir or creditor who might appear within two (2) years from the date of the settlement's registration.

What this means: If an unknown child or a hidden creditor surfaces within that 2-year window, they can legally contest the settlement and claim their rightful share of the property—even if the property has already been sold to an innocent third party. After two years, this lien expires and can be cancelled.