When heirs settle an estate extrajudicially and also wish to sell the inherited property (for example, to a buyer, or to one of the heirs), they often combine the settlement and the sale into a single document, commonly called a Deed of Extrajudicial Settlement with Sale (or Deed of Extrajudicial Settlement with Absolute Sale). This is legally permissible when the requirements for an extrajudicial settlement are met: the decedent left no will, there are no outstanding debts (or they are paid), all the heirs are of legal age (or minors are duly represented), and the heirs all agree. In this single deed, the heirs first adjudicate the property among themselves (the settlement portion), and then convey it to the buyer (the sale portion). Several requirements and consequences apply. First, the deed must be a public instrument (notarized), filed with the Register of Deeds, and published in a newspaper of general circulation once a week for three consecutive weeks. Second, the estate tax on the inheritance must be paid to the BIR (and the corresponding taxes on the sale, such as capital gains tax and documentary stamp tax, must also be settled) before the title can be transferred to the buyer. Third, and importantly, the property distributed by extrajudicial settlement remains subject, for two years from the settlement, to a lien in favor of any heir or other person who was unduly deprived of their lawful participation, or of creditors; so a buyer takes the property subject to this two-year liability, and a person unduly deprived may compel the settlement to answer for their share within that period. The buyer should therefore verify that all the heirs signed and that the publication was done, to avoid later claims. So heirs may settle and sell inherited property in one deed, subject to the extrajudicial-settlement requirements, the estate and sale taxes, and the two-year liability period that protects omitted heirs and creditors.
Settlement and Sale in One Deed
Heirs may combine the settlement and sale into a single Deed of Extrajudicial Settlement with Sale — adjudicating the property among themselves, then conveying it to a buyer — when the extrajudicial-settlement requirements are met.
Requirements
- A public (notarized) instrument, filed with the Register of Deeds;
- Published once a week for three consecutive weeks; and
- Estate tax and the sale taxes (CGT, DST) paid to the BIR before transfer.
The Two-Year Liability
The property remains subject, for two years from the settlement, to a lien in favor of any heir or creditor unduly deprived of their share. A buyer takes it subject to this period, so verify all heirs signed and the publication was done.
Practical Takeaways
- Heirs can settle and sell in one deed;
- Requires notarization, registration, 3-week publication, and estate + sale taxes;
- A two-year lien protects omitted heirs/creditors — buyers beware.
Frequently Asked Questions
Can heirs sell inherited property while settling the estate? Yes. Heirs may combine the settlement and the sale in a single Deed of Extrajudicial Settlement with Sale, adjudicating the property among themselves and then conveying it to a buyer, if the extrajudicial-settlement requirements are met.
What are the requirements for an extrajudicial settlement with sale? A public instrument filed with the Register of Deeds, publication once a week for three consecutive weeks, and payment of the estate tax and the applicable sale taxes such as capital gains tax and documentary stamp tax before transfer.
What is the two-year liability in an extrajudicial settlement? The distributed property remains subject, for two years from the settlement, to a lien in favor of any heir or creditor unduly deprived of their lawful share. A buyer takes the property subject to this period.
What should a buyer of extrajudicially settled property check? That all the heirs signed the deed, that the required publication was done, and that the estate and sale taxes were paid, to avoid later claims by omitted heirs or creditors within the two-year period.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.