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Xtrajudicial Settlement of Estate in The Philippines
Xtrajudicial Settlement of Estate in The Philippines
2. The decedent has no debts or his debts have been fully paid.
3. The heirs are all of legal age or the minors are duly represented by their judicial
or legal representatives.
4. A public instrument is duly executed by the heirs and filed with the Register of
Deeds.
Before filing the Deed of Extrajudicial Settlement with the Register of Deeds where
the land is located, it is necessary that the estate taxes be paid first. Under Philippine laws,
estate tax is defined as a tax on the right of the deceased person to transmit his estate to his
lawful heirs and beneficiaries at the time of death and on certain transfers, which are made
by law as equivalent to testamentary disposition. According to the Bureau of Internal
Revenue, estate tax is not a tax on property but rather imposed on the privilege of
transmitting property upon the death of the owner.
IMPORTANT: The discussion below on the estate taxes, deduction and procedure
before the BIR is relevant only to those who died before 01 January 2018 since Republic
Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion Law
(TRAIN Law), amended the Tax Code, including the procedure, tax rates and deductions
for estate taxes. The TRAIN Law became effective on 01 January 2018.
It bears great emphasis that the Estate Tax Return must be filed within six (6)
months from the decedent’s death. The deadline may be extended by the Commissioner of
the BIR, in meritorious cases, not exceeding thirty (30) days. It must be noted that the estate
itself is assigned its own Tax Identification Number (TIN). The Estate Tax Return is filed
with Revenue District Office (RDO) having jurisdiction over the place of residence of the
decedent at the time of his death. If the decedent has no legal residence in the Philippines,
then the return can be filed with:
1. The Office of the Revenue District Officer, Revenue District Office No. 39, South
Quezon City; or
Furthermore, the estate tax shall be paid at the time the return is filed. However,
upon request and if the Commissioner of the BIR finds that payment on the due date of the
Estate Tax or of any part thereof would impose undue hardship upon the estate or any of
the heirs, he may extend the time for payment of such tax or any part thereof not to exceed
five (5) years, in case the estate is settled through the courts or two (2) years in case the
estate is settled extra-judicially. If an extension is granted, the BIR Commissioner may
require a bond in such amount, not exceeding double the amount of tax, as it deems
necessary.
The estate tax is based on the value of the net estate as follows:
The basis shall be the net estate. That means that there are allowable deductions on
the estate. These deductions include funeral expenses, share of the surviving spouse,
medical expenses incurred by the decedent within 1 year prior to his death, family home
deduction of not more than P1,000,000.00, standard deduction of P1,000,000.00, among
others. It is best to consult with an accountant on this matter to determine the accurate
estate tax.
1. Notice of Death
2. Certified true copy of the Death Certificate
3. Deed of Extra-Judicial Settlement of the Estate
4. Certified true copy of the land titles involved
5. Certified true copy of the latest Tax Declaration of real properties at the time of
death
6. Photo copy of Certificate of Registration of vehicles and other proofs showing
their correct value
7. Photo copy of certificate of stocks
8. Proof of valuation of shares of stocks at the time of death
After the estate taxes have been paid, the heirs may proceed to the Register of Deeds
where the land is situated. If the Register of Deeds would allow it, the filing with the BIR
and Register of Deeds may be simultaneous. The proof of payment of the estate tax,
Affidavit of Publication of the Deed, the Deed of Extrajudicial Settlement of Estate are the
basic requirements to be submitted to the Register of Deeds. When all pertinent documents
are submitted, the Register of Deeds will correspondingly issue the Transfer of Certificates
of Title to the proper heirs.
On a final note, it must be borne in mind that the extrajudicial settlement can be
nullified if it was done in fraud of creditors or other rightful heirs. Furthermore, this can
open the erring heirs to criminal liabilities.