Tax Exemption Threshold for Estate Settlement Without Court (Philippines)

Philippine legal context • Practical guide • Current framework under the TRAIN Law (R.A. 10963) and the Rules of Court (General information only—not legal advice. Tax and procedure rules change; confirm with the BIR/your LGU or counsel before filing.)

1) “Without court” = Extrajudicial Settlement of Estate (EJS)

Under Rule 74 of the Rules of Court, heirs may settle an estate without a court case if all of the following are true:

No will (or the will is not to be probated);
No outstanding debts of the decedent or the debts have been fully paid/settled;
All heirs are of age (or minors are duly represented), and all consent;
The settlement is put in a public (notarized) instrument and published once a week for three consecutive weeks in a newspaper of general circulation;
If there is real property, the deed is registered with the Register of Deeds.

There is no peso-value limit in Rule 74 for using EJS. It’s the conditions above, not the size of the estate, that allow a no-court settlement.

(Separate from EJS, Rule 74 also mentions a very old “summary settlement of small estate” via court when the estate is tiny; that is a court process and rarely used today. This article focuses on EJS.)

2) The tax side: what “exemption threshold” really means today

There is no blanket “tax-free if below X pesos” rule for the whole estate. Instead, the estate tax is a flat 6% on the net estate (gross assets minus allowable deductions). If allowable deductions wipe out the net estate, no estate tax is due—but you still need to file and secure BIR clearances to transfer title.

Key numbers that create a de facto tax-free range

Under the TRAIN Law framework:

Standard deduction: ₱5,000,000 (automatic; no substantiation beyond basic estate docs).
Family home deduction: Up to ₱10,000,000 of the family home’s fair market value (zonal/assessed; whichever is applicable).
Share of the surviving spouse: Only the decedent’s half of conjugal/community property enters the gross estate; the surviving spouse’s net share is excluded.

Implication: If an estate is, for example, composed only of a family home worth ₱10M or less, and there are no other assets, the net estate after the ₱10M family home deduction (plus the ₱5M standard deduction) will typically be ₱0 → no estate tax due. Likewise, if total assets are modest and deductions (₱5M standard + spouse’s share + family home up to ₱10M) cover them, tax due can be zero.

What still happens when tax due is zero

You must file the Estate Tax Return (BIR Form 1801) within one (1) year from death (extensions may be sought for meritorious reasons).
You must submit documentary requirements so the BIR can issue the eCAR (Electronic Certificate Authorizing Registration), which you will need to transfer title of real properties/vehicles/shares, etc.
Local transfer taxes/fees (LGU) and registration fees still apply even if national estate tax due = 0.

3) Filing & timing highlights (estate settled extrajudicially)

When to file: Within 1 year from death (request extension early if needed).
Where to file/pay: RDO of the decedent’s last residence (or per BIR rules if non-resident).
Installments: The BIR may allow installment payments (typically up to 2 years) in cases of illiquid estates; interest may be addressed per BIR rules.
Bank withdrawals: Banks require BIR clearance before releasing the decedent’s deposits. Under TRAIN-era rules, withdrawals can be allowed subject to withholding that is creditable against the final estate tax, following BIR procedures.
eCAR: Secure one eCAR per property (or per batch per BIR practice). No registry (Registry of Deeds/LTO/stock transfer agent) will transfer without the relevant eCAR.

4) Allowable deductions (most common)

₱5,000,000 Standard deduction (automatic).
Family home—up to ₱10,000,000 (FMV up to the cap).
Surviving spouse’s share (for conjugal/community).
Claims against the estate that are valid, subsisting, and enforceable (must be properly documented and, if required, notarized before death or supported by credible evidence).
Losses (from casualty/theft) meeting strict timing and documentation rules.
Prior transfers (vanishing deduction) and other limited items recognized by the NIRC and BIR regulations.

(TRAIN simplified deductions—older itemized funeral/medical deductions were removed.)

5) What isn’t avoided by being “below a threshold”

Even if the estate tax due = ₱0 after deductions:

Estate Tax Return filing and eCAR issuance are still required for asset transfers.
LGU transfer tax on real property by succession is still due (rates typically up to 0.5% in provinces and up to 0.75% in cities/Metro Manila, charged on the higher of zonal/assessed value).
Documentary Stamp Taxes (DST) and registration fees may apply to certain instruments/registrations.
Publication cost for EJS (3 weeks) and notarization costs apply.
Back real property taxes (if any) must be settled before title transfer.

6) Step-by-step: EJS with tax compliance (practical flow)

Heir mapping & asset list: Identify all heirs; list assets and liabilities; get valuations (zonal/assessed/appraised as applicable).
Draft the EJS deed (or Deed of Self-Adjudication if there’s only one heir).
Notarize the deed; publish the EJS notice once a week for 3 consecutive weeks.
Secure death certificate and civil registry proofs (marriage certificate, birth certificates of heirs, etc.).
Compute the net estate using TRAIN deductions (₱5M standard; family home up to ₱10M; spouse’s share; other allowable deductions).
File BIR Form 1801 with supporting documents (IDs/TINs of heirs, EJS deed, valuations, tax declarations, CAR requirements checklist, proofs of debts if claiming, etc.).
Pay estate tax (if any) or process eCAR issuance if zero tax.
Pay LGU transfer tax/DST (where applicable).
Register transfers:
- Real property: Register of Deeds (title issuance per heir’s shares); annotate EJS and publication; submit eCAR, tax clearance, real property tax receipts, etc.
- Vehicles: LTO (present eCAR and documents).
- Shares of stock: Corporate secretary/stock transfer agent (eCAR required).
- Bank accounts: Present BIR authorization and comply with bank/BIR withdrawal rules.

7) Worked examples

A. Family home only, worth ₱8,500,000

Deductions: ₱5,000,000 (standard) + ₱8,500,000 (family home, capped at ₱10M) = ₱13,500,000
Gross estate: ₱8,500,000 → Net estate = ₱0 → Estate tax due: ₱0
Still required: File 1801 + secure eCAR + pay LGU transfer tax/fees + register title via EJS.

B. Mixed estate, ₱12,000,000 total (incl. family home ₱9,000,000), conjugal; surviving spouse

Determine decedent’s half of conjugal assets (say the whole ₱12M is conjugal → decedent’s share ₱6,000,000 enters gross estate).
Deductions: ₱5,000,000 standard + ₱9,000,000 family home (within ₱10M cap).
If family home is included in the conjugal pool, allocate properly; often this results in net estate near or at ₱0 depending on the mix. If net estate ≤ 0 → no estate tax, but filing and clearances still required.

C. Estate with non-family-home realty ₱20,000,000, single heir

Gross estate (assume exclusive property): ₱20,000,000
Deductions: ₱5,000,000 standard (no family home) → Net ₱15,000,000
Estate tax: 6% of ₱15,000,000 = ₱900,000 (plus any surcharges/interest if late).
Heir can still use EJS if the Rule 74 conditions are satisfied (no debts, single consenting heir). Tax and transfer procedures apply.

8) Edge cases & cautions

Unknown or later-discovered debts/Heir disputes: EJS is risky if a creditor emerges or an heir was omitted. Rule 74 allows aggrieved parties to sue within statutory periods. Consider court settlement if disputes/creditors are expected.
Minors or incapacitated heirs: Must be represented (guardian/legal representative); some families still opt for court approval/guardianship for protection.
Foreign assets/foreign heirs: Additional tax and conflict-of-laws issues can arise; professional advice is prudent.
Late filing: Surcharge/interest/compromise penalties may apply; some estates may consider tax amnesty reliefs if available during the period (check current effectivity/coverage).
Valuation: Use the higher of zonal value (BIR), fair market value per tax declaration, or appraised value, per BIR rules. Proper valuation keeps you compliant and avoids under-declaration issues.

9) Quick answers to common questions

Is there a single peso “threshold” that makes the whole estate tax-exempt? No. Estate tax is 6% of the net estate. However, the ₱5M standard deduction and family home up to ₱10M often reduce the net to ₀ for many modest estates.
If the estate is effectively tax-free, can we skip BIR entirely? No. You still file and obtain eCAR(s); registries won’t transfer title without them.
Does EJS depend on the estate’s size? No. EJS depends on no will, no (unpaid) debts, and unanimous heirs’ consent, not estate value.
Are local taxes still due even if estate tax is ₱0? Yes. Expect LGU transfer tax and registration fees.

10) Minimal checklist (EJS with tax compliance)

Death certificate; IDs/TINs of heirs
Proof of relationship (PSA marriage/birth certificates)
Asset list + valuations (tax declarations, BIR zonal proofs, appraisals if needed)
EJS deed (or self-adjudication), notarized
Publication (3 consecutive weeks) & affidavit of publication
BIR Form 1801 + supporting docs; pay tax (if any); secure eCAR
LGU transfer tax/DST (as applicable)
Registration with Registry of Deeds/LTO/stock transfer agent/banks

Bottom line

No court is possible via EJS if Rule 74 conditions are satisfied—no value ceiling applies.
For taxes, think deductions, not a hard “exemption cap.” With ₱5M standard + up to ₱10M family home (plus spouse’s share exclusion), many ordinary estates pay no estate tax, but must still file and process clearances to transfer title.

If you want, tell me your rough asset mix (family home value, other realty, cash/banks, vehicles, stocks, liabilities, marital property regime). I can estimate the net estate and outline the exact filing packet you’ll likely need.