Settlement of an estate 

need not undergo judicial proceedings all the time. Rule 74, Section 1 of the
Rules of Court allows the extrajudicial settlement of estate by agreement among the heirs. Said Rule
states:

Sec. 1. Extrajudicial settlement by agreement between heirs. – If the decedent left no will and no
debts and the heirs are all of age, or the minors are represented by their judicial or
legal representatives duly authorized for the purpose, the parties may, without securing letters of
administration, divide the estate among themselves as they see fit by means of a public instrument
filed in the office of the register of deeds, and should they disagree, they may do so in an ordinary
action of partition. If there is only one heir, he may adjudicate to himself the entire estate by means
of an affidavit filed in the office of the register of deeds. The parties to an extrajudicial settlement,
whether by public instrument or by stipulation in a pending action for partition, or the sole heir who
adjudicates the entire estate to himself by means of an affidavit shall file, simultaneously with and as a
condition precedent to the filing of the public instrument, or stipulation in the action for partition, or of the
affidavit in the office of the register of deeds, a bond with the said register of deeds, in an amount
equivalent to the value of the personal property involved as certified to under oath by the parties
concerned and conditioned upon the payment of any just claim that may be filed under Section 4 of this
rule. It shall be presumed that the decedent left no debts if no creditor files a petition for letters of
administration within two (2) years after the death of the decedent.

The fact of the extrajudicial settlement or administration shall be published in a newspaper of general
circulation in the manner provided in the next succeeding section; but no extrajudicial settlement shall be
binding upon any person who has not participated therein or had no notice thereof.

However, extrajudicial settlement of estate cannot be resorted to every time. There are conditions
which must be satisfied such as:

1. The decedent left no will.

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.

Extrajudicial settlement of estate is often recommended to expedite the transfer of properties of

the decedent to his heirs. This is in view of the fact that judicial settlement of estate takes years before
the case is concluded. Furthermore, this is more adversarial and is resorted to when the heirs disagree on
the properties to be partitioned and the corresponding shares of the respective heirs.

An extrajudicial settlement of estate is done by executing an “Extrajudicial Settlement Among

Heirs”. This is a legal document specifying:

1. Compliance with the legal conditions for an extrajudicial settlement

2. Description of the properties to be extrajudicially settled (title number, value, location, lot size, technical
description, etc.)
3. Nature of the property (if conjugal property)
4. Name of the heirs
5. How the properties shall be divided amongst the heirs.
6. Posting of a bond if there is personal property involved.
7. Undertaking that the Deed will be published in a newspaper of general circulation once a week for 3
consecutive weeks.

It must be noted that the Deed of Extrajudicial Settlement must be published in a newspaper of

general circulation once a week for 3 consecutive weeks. Kindly consult with the Register of Deeds
where the property is located for the listing of these newspapers.
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

2. The Philippine Embassy or Consulate in the country where decedent is residing at the time of his death.

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 exceedingly double the amount of tax, as it deems
necessary.

The estate tax is based on the value of the net estate as follows:

1. If not over P200,000, it is exempt

2. If over P200,000 but not over P500,000, then tax is 5% of the excess over P200,000
3. If over P500,000 but not over P2,000,000, then tax is P15,000 PLUS 8% of the excess over P500,000
4. If over P2,000,000 but not over P5,000,000, then tax is P135,000 PLUS 11% of the excess over
P2,000,000
5. If over P5,000,000 but not over P10,000,000, then tax is P465,000 PLUS 15% of the excess over
P5,000,000
6. If over P10,000,000, then tax is P1,215,000 PLUS 20% of the excess over P10,000,000

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.

For extrajudicial settlement of estate, the following documents must be submitted with the BIR:

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
a. For listed stocks – newspaper clippings or certification from the Stock Exchange
b. For unlisted stocks – latest audited Financial Statement of issuing corporation with computation of book
value per share
9. Proof of valuation of other types of personal property
10. CPA Statement on the itemized assets of the decedent, itemized deductions from gross estate and the
amount due if the gross value of the estate exceeds two million pesos
11. Certification of Barangay Captain for claimed Family Home

Other documents may also be requested by the BIR.

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.
The Process of Extrajudicial Settlement of Estate in the Philippines
Not everyone undergoes estate planning or executes a will to manage the properties to be inherited by
the heirs in case of a person’s death. Lack of estate planning or a valid will leaves the decedent’s heirs at
a loss as to what to do next. Thinking that going through a formal process of estate settlement is difficult,
lengthy and costly, heirs tend to resort to estate settlement discussions without any documentations as to
who gets what. Others sometimes skip the discussion part and just proceed with claiming ownership over
properties that they prefer, without the other heirs’ consent. Oftentimes, this leads to family quarrels, and
the family members ultimately find themselves in court.

On the other hand, while it is possible that there is no conflict among the heirs, problems typically arise if
the heirs decide to sell the properties belonging to an estate that is not legally settled yet.

A. When does extrajudicial settlement of estate apply and what are the requirements?
Extrajudicial settlement of estate may be done provided the following are present:
1. Decedent dies without a last will and testament;
2. No outstanding debts at the time of extrajudicial settlement;
3. Heirs are all of legal age or minors represented by judicial guardians or legal representatives;
4. Settlement made in public instrument (i.e., deed of extrajudicial settlement of estate) duly filed with
the Register of Deeds;
5. Publication of the fact of extrajudicial settlement in a newspaper of general circulation in the province
once a week for three (3) consecutive weeks (note that publication does not constitute constructive
notice to the heirs who had no knowledge or did not participate in the settlement, hence, extrajudicial
settlement is not binding on them); and
6. Bond to be posted with the Register of Deeds if the estate includes personal property.
It is essential that all the heirs must agree and cooperate in executing the extrajudicial settlement of
estate. A disagreement among the heirs will certainly impede the process and might even require a
judicial settlement of estate.
Generally, the heirs execute a public instrument in a form of deed of extrajudicial settlement of estate
where the foregoing legal requirements are stated, together with the following:
1. Description of the estate (i.e., itemized list of the properties, title or account number, value, location, lot
size, technical description, nature);
2. How the properties are divided amongst the heirs; and
3. An undertaking that the deed of extrajudicial settlement will be published in a newspaper of general
circulation.
Depending on the intention of the heirs, the deed of extrajudicial settlement may be executed
simultaneously with other contracts involving donation, waiver of rights, and/or sale. Likewise, it may be
executed simultaneously with a special power of attorney authorizing representative/s such as lawyers,
to settle the estate for ease of transactions with the relevant government agencies and private entities
(i.e., banks, corporations).

For instance, the heirs may execute a deed of extrajudicial settlement of estate with sale if the heirs
are selling a real property to a third-party buyer. Other documents which may be executed are deed of
extrajudicial settlement of estate with donation, and/or deed of extrajudicial settlement of estate
with waiver of rights.

If there is one surviving heir, the heir may execute an affidavit of self-adjudication, which adjudicates
the entire estate to him/herself.

B. What are the requirements to transfer the properties in the name of the heirs?

Generally, estate settlement proceedings are done with the end-goal that the properties of the deceased
are transferred in the names of the heirs. Complying with the requirements described above is just the first
step to transfer the property titles to the heirs. Transfer of property titles or registrations further requires
the following:
1. Payment of estate taxes with the Bureau of Internal Revenue (BIR)
An estate tax of 6% (based on the value of net estate) under the TRAIN Law is due on the transfer of the
net estate of a decedent. However, if the person died prior to January 1, 2018, the applicable rate of
estate tax shall be based on the schedular rates provided under Section 84 of the National Internal
Revenue Code of 1997. Note that the tax is imposed on the value of the net estate (gross estate less
deductions allowed by law).

As a general rule, the BIR requires the following:

i. For death prior to January 1, 2018, filing of the Notice of Death with the BIR office which has jurisdiction
over the place of the decedent’s residence at the time of death;
ii. Preparation of the documents to be submitted together with the estate tax return:
a. Certified true copy (CTC) of the decedent’s Death Certificate;
b. Notice of Death, duly received by the BIR (for death prior to January 1, 2018);
c. Deed of Extrajudicial Settlement or Affidavit of Self-Adjudication (or any other documents executed by
the heirs pursuant to estate settlement);
d. If estate includes real properties:
 CTC of the Original/Transfer/Condominium Certificate of Title of the real
property;
 CTC of the Tax Declaration of the real property; and
 Certificate of No Improvement issued by the Assessor’s Office if the real property
has no improvement;
e. If estate includes personal properties (i.e., vehicles, cash and cash equivalents, investments, shares of
stock):
 Photocopy of Certificates of Deposit/Investment of the decedent;
 Photocopy of Certificate of Registration of vehicles and other proof showing their
correct values;
 Proof of valuation of shares of stock at the time of death (i.e., latest audited
financial statements of the corporation or Price index from the Philippine Stock
Exchange (PSE)/latest fair market value (FMV);
 Photocopy of stocks certificates; and
 Photocopy of registration and proof of value of other properties.
f. Certified Public Accountant (CPA) Statement on the itemized assets of the decedent, itemized
deductions from gross estate, and the amount due if the gross value of the estate exceeds:
 PhP5,000,000.00, if decedent dies on or after January 1, 2018 or
PhP2,000,000.00, if decedent dies prior to January 1, 2018;
g. Special power of attorney if the person transacting with the BIR is a representative of the heir/s; and

iii. Filing of the estate tax return with supporting documents and payment of estate tax.

If estate settlement includes taxable donations or sale, applicable donor’s tax or capital gains tax shall
also be paid.

2. BIR’s Issuance of Certificate Authorizing Registration (CAR)

If the property involved is a real property or share of stock, a CAR is required to transfer the property in
the name of the heirs. The BIR issues the CAR after filing of the estate tax return (and other required
documents) and payment of estate taxes. Issuance of CAR may take months depending on the relevant
BIR office. The CAR will be submitted to the relevant government agencies or corporations upon
application for transfer of property titles or registration.
3. Request for transfer of the property’s certificate of title with the Register of Deeds

After the CAR is issued by the BIR, request for transfer of the property’s certificate of title in the name
of the heirs is filed with the Register of Deeds where the property is located. As a general rule, the
submission of the following documents are required to process the transfer of property title:
i. Deed of extrajudicial settlement or affidavit of self-adjudication duly-stamped by the BIR;
ii. Original owner’s duplicate copy of the title;
iii. CTC of the CAR;
iv. Transfer tax receipt from the treasurer’s office with security seal and certification;
v. Real Property Tax Clearance from the treasurer’s office;
vi. CTC of the Tax Declaration;
vii. Affidavit of publication with newspaper clippings; and
viii. Proof of payment of transfer tax (i.e., official receipt).
The requirements above may differ depending on the relevant Register of Deeds which has jurisdiction
over the property.

4. Request for transfer of the property’s Tax Declaration with the Assessor’s Office
i. Original and photocopy of the newly issued certificate of title;
ii. Photocopy of the previous certificate of title;
iii. Photocopy of the deed of extrajudicial settlement or affidavit of self-adjudication;
iv. CTC of the old Tax Declaration;
v. Photocopy of the CAR;
vi. Original and photocopy of the payment of the transfer tax paid at the City Treasurer;

vii. Tax Clearance; and

viii. A 3x5 picture of the property’s location printed on photo paper.

Likewise, the foregoing documentary requirements may differ depending on the relevant Assessor’s Office
that has jurisdiction over the property.

The process and requirements of the transfer of proper registrations of personal properties differ
depending on the nature of the properties. Typically, government and private entities require submission
of the deed of extrajudicial settlement or affidavit of self-adjudication, proof of payment of estate tax, proof
of property registration, and CAR if the personal properties consist of shares of stock.

Since the documents are to be submitted to numerous parties (government and private) when processing
title or registration transfers, it is crucial to know the documentary requirements of each relevant party to
plan ahead and prepare the number of copies of the documents to be executed by the heirs and/or
requested from relevant government agencies and private entities.
If the above-mentioned requirements and procedures appear to be overwhelming and complicated, you
should consider asking the advice of an expert, especially a tax lawyer or an estate attorney.