1) The core idea: why “extrajudicial settlement + donation + sale” becomes complicated

When someone dies owning real property, three different legal systems immediately overlap:

Succession (inheritance) rules – who became owners, in what shares, and whether they can settle without court.
Property registration rules – what appears on the title is not automatically updated; RD requires registrable instruments before issuing a new title.
Tax rules – transfers by death, by donation, and by sale are distinct taxable events, often requiring separate returns, payments, and BIR clearances before RD will transfer the title.

A common “real world” sequence looks like this:

The decedent dies owning a titled property.
Heirs execute an Extrajudicial Settlement (EJS) to settle/partition the estate without court.
One or more heirs executes a Donation / Waiver / Assignment so that only one person (or fewer people) ends up owning the property.
That resulting owner (or the group) sells the property to a buyer.

Each step has validity requirements and potential tax consequences. A mistake in any link can delay titling, trigger penalties, or expose the buyer to claims.

2) Legal foundations you need to know

A. Ownership transfers at death (even before paperwork)

Under the Civil Code principle on succession, rights to the succession are transmitted from the moment of death. Practically:

The heirs become co-owners of the estate property upon death (subject to the estate’s obligations, legitimes, etc.).
However, the title remains in the decedent’s name until the transfer is properly documented and registered.

B. Extrajudicial Settlement (EJS) – when it’s allowed

EJS is the non-court method recognized under Rule 74 of the Rules of Court. In general, an EJS is proper when:

The decedent left no will (intestate), and
The decedent left no outstanding debts, and
The heirs are all of age, or minors are duly represented by legal guardians, and
The heirs execute a public instrument (notarized deed) or, in a limited case, a self-adjudication affidavit when there is only one heir.

Publication requirement: EJS must be published in a newspaper of general circulation once a week for three consecutive weeks.

Important practical reality: Many estates proceed via EJS even when there are potential debts or uncertainties. That doesn’t automatically “void” everything, but it increases risk—especially for buyers—because omitted heirs/creditors may challenge the settlement.

C. The “2-year” exposure under Rule 74

A key feature of extrajudicial settlements is the two-year period during which the settlement/distribution remains vulnerable to claims of:

omitted heirs, and
creditors.

This is why RDs often annotate the EJS and the statutory effects on the title. For buyers, it’s a major due diligence issue (more on this later).

D. Donation / waiver / assignment: they are not the same, and labels don’t control

After EJS, heirs often want to consolidate ownership (e.g., all siblings agree that one sibling will own the property, then that sibling will sell). This consolidation is done by instruments such as:

Deed of Donation (gift)
Deed of Waiver of Rights (often a gift in substance)
Deed of Assignment / Transfer of Hereditary Rights (may be with or without consideration)
Partition deed giving unequal shares (may contain an embedded gift element)

Substance over form matters in taxation and validity. A deed titled “Waiver” may be treated as a donation if it effectively gives one heir’s share to a specific person without consideration.

E. Formal requirements for donation of real property

A donation of immovable property must generally be:

in a public instrument specifying the property and burdens/conditions, and
accepted by the donee (acceptance must be in the same instrument or in a separate public instrument, with proper notice requirements observed).

If acceptance/formalities are defective, registries may refuse registration and the donation may be legally vulnerable.

F. Partition vs. donation vs. sale among heirs

Partition divides co-ownership into determinate shares.
A donation gratuitously transfers ownership/share.
A sale transfers for consideration.

The distinction is crucial for tax and for later buyer risk.

3) Common transaction structures (what people actually do)

Structure 1: EJS → transfer title to heirs → Donation (consolidate) → Sale to buyer

Most “clean” on paper, but can be slower and can result in multiple rounds of taxes/fees and multiple title issuances.

Structure 2: EJS with Waiver/Donation in the same deed → title directly to the final heir(s) → Sale

Often done to reduce steps. The EJS contains both:

settlement/partition, and
waiver/donation language so the property ends up in fewer names.

Still may require donor’s tax treatment if the waiver is in favor of a specific person.

Structure 3: EJS with Sale (direct to buyer)

A single instrument where heirs settle the estate and sell the property to the buyer. This is widely used in practice. Key point: Even if done in one deed, it often represents two legal transfers:

decedent → heirs (by succession, documented by EJS), and
heirs → buyer (by sale)

Tax authorities frequently treat it as two taxable events, even if processed together.

Structure 4: Sale/Assignment of hereditary rights (before partition)

An heir may transfer hereditary rights or an undivided share even before partition. This can be useful if one heir refuses to sign a sale of the whole property: other heirs may still sell/assign their shares, making the buyer a co-owner.

4) Step-by-step roadmap (titled land/condo) — from death to buyer’s title

Below is the “typical” compliant roadmap, noting where donation fits.

Step 1: Confirm the estate and the heirs (succession mapping)

Gather and verify:

Death certificate
Proof of family relations (birth certificates, marriage certificate, etc.)
Whether there is a surviving spouse and what property regime applies (Absolute Community of Property / Conjugal Partnership / separation)
Whether there are compulsory heirs (legitimate children, illegitimate children, surviving spouse, etc.)
Whether there are possible omitted heirs (children from previous relationships, adopted children, etc.)

Why it matters: Omitted heirs are a top reason EJS and downstream sales get challenged.

Step 2: Identify the property and its status

Collect:

Owner’s duplicate title (TCT/CCT) or, if lost, start reissuance process
Latest tax declaration, tax clearance, RPT receipts
Zonal value / fair market value references used by BIR
Encumbrances (mortgage, liens, adverse claims, lis pendens, etc.)
For condos: condominium corporation clearances and dues status

Step 3: Check if EJS is appropriate (and risks if it isn’t)

Red flags that often require judicial settlement or special handling:

minors among heirs with no proper representation
known unpaid debts of the decedent
disputes among heirs
a will exists (even if questioned)
missing/unlocatable heirs

Proceeding extrajudicially despite these issues increases challenge risk and may make buyers skittish.

Step 4: Estate tax compliance and BIR clearance (practically unavoidable for title transfer)

For transfers of real property from a decedent, RD typically requires BIR clearances (commonly an eCAR) before it will transfer title.

Estate tax compliance commonly involves:

Filing the estate tax return and attachments
Paying estate tax (plus penalties if late)
Securing the BIR clearance/eCAR for the transfer

Practical point: Even if heirs intend to “sell immediately,” estate tax compliance is usually still a gating item for RD registration and issuance of the buyer’s title.

Step 5: Execute the EJS (and publish)

The EJS deed usually contains:

description of the estate and the property
complete list of heirs and their civil status
statement that there is no will and (typically) no debts
how the property is adjudicated/partitioned
notarization and proper documentary attachments

Then comply with:

Publication once a week for 3 consecutive weeks Keep newspaper affidavits and clippings/certifications, as RD may require proof.

Step 6: Register the EJS with the Registry of Deeds

Registration effects:

RD annotates/records the EJS and, if partition is done, may issue new title(s) in heirs’ names (depending on structure).
If the plan is to consolidate ownership via donation/waiver, that instrument also needs registration.

Step 7: Execute the donation/waiver/assignment (the “consolidation” step)

Common patterns:

Several heirs donate their shares to one heir.
Several heirs “waive” their rights in favor of one heir.
One heir assigns rights to another for consideration (sale-like).

Validity essentials for donation of real property:

public instrument
donee acceptance in proper form
spousal consent where required (if the donating heir’s share is affected by marital property rules)
for married parties, include spouse details and ensure any required marital consent is reflected

Tax essentials:

A donation is commonly subject to donor’s tax and may also trigger documentary stamp tax treatment as a conveyance.
A “waiver” may be treated as donation depending on whether it is general or specifically in favor of a named person and whether there is consideration.

Step 8: Register the donation/waiver and issue the consolidated title

Once taxes/clearances are satisfied and the deed is registrable:

RD annotates and issues a new TCT/CCT in the donee/consolidated owner’s name (or in the names of the remaining owners).

Only after this is the owner’s title “cleanly” aligned with the intended seller.

Step 9: Sell to the buyer (Deed of Absolute Sale) and transfer title

For most privately owned real property held as a capital asset (typical family property not used in business), the sale commonly requires:

Capital gains tax compliance
Documentary stamp tax compliance
LGU transfer tax payment
Updated RPT payment/clearances
RD registration → issuance of title to buyer

If the property is an ordinary asset (e.g., used in a real estate business, or held by certain taxpayers in business contexts), income tax/VAT/withholding rules may apply differently.

5) Tax map: estate tax vs donor’s tax vs capital gains tax (and why “double taxation feeling” happens)

Think of the chain as potentially three taxable transfers:

A. Transfer by death (Estate tax)

Triggered by death; documents the passage of ownership from decedent to heirs. RD/BIR processing for real property usually requires this to be settled before any new title is issued.

B. Transfer by donation/waiver (Donor’s tax)

Triggered when an heir gratuitously transfers their share to someone else (often another heir). Key practical point: Even if “the family agrees,” tax authorities may still treat it as a taxable donation if it’s a specific transfer without consideration.

C. Transfer by sale to the buyer (Capital gains tax / income tax)

Triggered when property is sold for consideration.

D. Documentary Stamp Tax (DST) and local transfer tax can apply at multiple stages

DST is generally imposed on documents evidencing transfers, and LGU transfer taxes are usually imposed on transfers registered in the locality. Depending on how deeds are structured, there may be DST/local tax events on:

the EJS/partition,
the donation/waiver,
the sale.

Practical reality: Some one-deed structures are processed “in one go,” but still reflect multiple taxable transfers in computation/requirements.

6) Donation vs “waiver” vs “renunciation” (inheritance law + tax reality)

A. Inheritance law concept: repudiation/renunciation

Heirs may repudiate inheritance. In pure succession terms, a repudiation can cause the share to pass according to intestacy rules (accretion/substitution rules depending on circumstances).

B. Real-world instruments: “Waiver of Rights”

Many deeds are drafted as “waiver” because families prefer the word. But two questions matter:

Is the waiver “general” (in favor of the estate/co-heirs generally), or “specific” (in favor of a named person)?
Is there consideration (payment), or is it gratuitous?

These distinctions are frequently determinative for donor’s tax exposure. A “specific, gratuitous waiver in favor of X” is commonly treated like a donation.

C. Partition giving unequal shares can embed a gift

If the EJS partitions property in a way that one heir receives more than their hereditary share without consideration, the “excess” can be treated as a donation in substance.

7) Validity pitfalls that can break the chain (and hurt a later sale)

A. Missing or incorrect heirs

A sale downstream can be attacked if:

a compulsory heir was omitted,
the surviving spouse was ignored,
illegitimate/adopted children were not accounted for,
heirs were misidentified (wrong names, civil status, or identities).

B. Minors or incapacitated heirs

EJS requires all heirs to be of age or properly represented. If not, the settlement may be vulnerable.

C. Debts of the decedent

If there are unpaid debts, EJS is not the ideal route. Creditors may pursue remedies against the estate and question distributions.

D. Donation formalities not followed

Especially:

lack of proper acceptance in the required form
failure to properly describe the property
issues with spousal consent and marital property regime implications

E. Prohibited donations and family law restrictions

In Philippine family law:

Donations between spouses during marriage are generally prohibited/void subject to limited exceptions (moderate gifts on occasion). While the common EJS scenario is sibling-to-sibling or parent-to-child, this becomes relevant if:
- an heir “donates” to their spouse as part of consolidation, or
- the donee structure places ownership in a spouse’s name.

F. Legitimes and “inofficious” donations

Donations that impair compulsory heirs’ legitimes can be subject to reduction. While this is more often an issue with donations made by the decedent during life, intra-heir donations can still produce disputes when they effectively alter expected hereditary allocations.

8) Buyer-side risk: the Rule 74 “two-year” problem and how buyers protect themselves

Even if everything is notarized and registered, Rule 74 creates exposure for two years. A buyer’s practical concerns:

An omitted heir may surface and claim the settlement was defective.
A creditor may assert claims against the estate.
Fraud/forgery allegations can arise later.

Common risk-mitigation strategies in Philippine practice include:

Waiting out the two-year period before buying (or before paying the full price)
Escrow/holdback arrangements for part of the price until the risk period lapses
Strong warranties and indemnities in the deed
Requiring proof of publication and complete family documentation
Requiring all heirs’ appearances or properly authenticated SPAs

Even then, litigation risk cannot be reduced to zero; it can only be managed.

9) Document and drafting checklist (practical, Philippines-specific)

Core civil documents

Death certificate
Marriage certificate of decedent (and of heirs if relevant)
Birth certificates of heirs
If applicable: acknowledgment documents for illegitimate children; adoption decrees; judicial declarations affecting status
IDs, TINs, and marital details of all signatories

Property documents

Owner’s duplicate TCT/CCT
Certified true copy of title (for due diligence)
Tax declaration, tax map/lot plan references if needed
RPT official receipts and tax clearance
If mortgaged: loan documents, release of mortgage, bank clearances
For condos: CCT, condominium corp clearance, dues statement

Instruments

Deed of Extrajudicial Settlement (with partition/adjudication terms)
Proof of newspaper publication (affidavit of publication + clippings/certification)
Deed of Donation / Waiver / Assignment (with correct acceptance provisions if donation)
Deed of Absolute Sale (or Deed of Sale of Undivided Share if only some heirs sell)

Authority documents

Special Power of Attorney (SPA) for heirs abroad or unavailable
- Properly notarized and, if executed abroad, properly authenticated/apostilled per prevailing rules
For estates involving deceased heirs (predeceased or died after the decedent): additional succession documents may be needed.

Tax and registry clearances (typical)

Estate tax returns/receipts and BIR clearances/eCAR(s)
Donor’s tax returns/receipts and BIR clearances/eCAR(s) if donation involved
CGT (or applicable income tax) returns/receipts and clearances/eCAR(s) for sale
DST returns/receipts as applicable
LGU transfer tax payment
RD registration fees

(Exact forms and sequencing are often “RDO practice-dependent,” but the concept of separate compliance per taxable transfer is the stable point.)

10) Strategic choices: when to consolidate by donation before selling (and when not to)

Reasons families consolidate first (donation/waiver to one heir)

Only one person negotiates and signs the sale.
One point of contact for the buyer.
Cleaner chain for banks (if buyer financing requires clear ownership).

Downsides

May trigger donor’s tax/DST/fees before the sale even happens.
Adds another registrable transfer, often another eCAR and RD processing cycle.
If the sale later falls through, the family has already incurred the donation costs.

Alternative: sell as heirs (EJS with sale)

Can avoid a separate donation step.
But requires all heirs’ participation (or SPAs), which can be hard.
Buyer must be comfortable with the heirs’ collective signature and the EJS risk period.

11) Special scenarios you should recognize early

A. One heir refuses to sign

Options:

Others can sell only their undivided shares (buyer becomes co-owner).
Seek partition (judicial if necessary).
Negotiate buyout or settlement.

B. Property is still under “mother title” or not titled (tax declaration land)

Transfers depend on whether the property is registrable under Torrens. For untitled land, the process is more document-heavy and may involve separate titling/regularization steps; buyers face higher risk.

C. Agricultural land / agrarian restrictions

Sales can be restricted by agrarian reform laws and land classification issues. This can invalidate or complicate transfers regardless of EJS/donation compliance.

D. The decedent’s spouse and property regime

A common mistake is treating the entire property as estate property when part belongs to the surviving spouse under the marital property regime. Proper segregation of:

the spouse’s share, and
the decedent’s share (the estate), is essential in the settlement and tax computation.

12) A practical “clean chain” summary (best-case, low-risk approach)

Identify all heirs and property regime correctly.
Complete estate tax compliance and obtain BIR clearance(s).
Execute a properly drafted EJS; publish; register with RD.
If consolidating: execute a properly formalized donation/waiver/assignment; pay donor-related taxes as required; register; issue consolidated title.
Execute deed of sale; pay sale-related taxes; pay LGU transfer tax; register; issue buyer’s title.
Manage the Rule 74 two-year exposure through contractual protections and documentation.

13) Key takeaways (the “all-important” principles)

Death transfer, donation transfer, and sale transfer are legally distinct; each can have its own compliance and tax footprint.
EJS is not just a family agreement; it is a regulated procedure with publication and a two-year vulnerability period.
Donation of real property has strict form and acceptance requirements; shortcuts often backfire at RD/BIR.
Labels don’t control: “waiver” can still be treated as a donation depending on substance.
For selling, the safest chain is a registrable chain: BIR clearances + RD-registered deeds + correct heirship mapping + buyer risk controls.