Extrajudicial settlement of estate: how heirs do it

Heirs can divide an estate among themselves without going to court when the Rules of Court allow it. Rule 74, Section 1, sets the conditions: the person who died left no will and no debts, and the heirs are all of age, or any minor heir is represented by a guardian or legal representative authorised for the purpose. The heirs sign a public instrument (a notarised deed) dividing the estate and file it with the Register of Deeds. If there is only one heir, that heir signs an affidavit of self-adjudication instead.

If any condition is not met, or the heirs cannot agree, the estate goes to court.

The deed of extrajudicial settlement

The deed is a notarised agreement among all the heirs. It usually sets out:

• who died, when, and their last residence;
• that they left no will and no debts;
• every heir and their relationship to the person who died;
• every property in the estate, with title or account details;
• how the heirs divide it;
• each heir’s signature, in front of a notary (or at a consulate, or before a foreign notary with an apostille, for heirs abroad).

Who counts as an heir, and the share each gets when there is no will, comes from the Civil Code’s rules on intestate succession (Arts. 960 onward). For example, Art. 996 says a surviving spouse with legitimate children gets the same share as each child. Until the heirs divide it, the Civil Code treats the estate as owned in common by all of them (Art. 1078).

We do not provide a template. A deed that leaves out an heir or a property can be challenged later.

Publication, the bond and the two-year period

Rule 74 adds three protections for anyone the deed might leave out:

• Publication: the settlement must be published in a newspaper of general circulation “once a week for three (3) consecutive weeks” (Rule 74, Secs. 1 and 2). A settlement does not bind anyone who did not take part in it or had no notice of it.
• Bond: if the estate includes personal property (cash, deposits, vehicles, shares), the heirs file a bond with the Register of Deeds “in an amount equivalent to the value of the personal property involved”, at the same time as the deed (Sec. 1).
• Two years: for two years after the settlement, an heir who was left out, or a creditor, can still go to court to claim their share, and the property stays answerable for it during that time (Sec. 4). Someone who was a minor, incapacitated or outside the Philippines when the two years ran out gets one more year after that situation ends (Sec. 5).

Heirs who live abroad

Every heir must sign the deed, or give someone the power to sign for them. From abroad there are two ways to make a signature count in the Philippines:

• sign in front of a consular officer at a Philippine embassy or consulate, which adds its acknowledgement; or
• sign in front of a local notary where you live, then get an apostille from that country’s authority. The Philippines has accepted apostilles since 14 May 2019. The DFA says documents from Finland, Germany and Greece (and, in an earlier advisory, Austria) still need legalisation by the embassy or consulate.

Heirs abroad can also sign a special power of attorney naming one heir at home to sign the deed and handle the BIR and the Register of Deeds. The BIR accepts an SPA signed abroad with a consulate’s certification or an apostille.

Taxes and transfers, in order

1. Sign and notarise the deed, then publish it for three weeks.
2. Estate tax: file BIR Form 1801 within one year of the death and pay the tax. The deed of extrajudicial settlement is one of the documents the BIR asks for. See estate tax in the Philippines.
3. eCAR: the BIR issues the electronic Certificate Authorizing Registration once the tax is paid and the documents are complete.
4. Local transfer tax: paid to the provincial or city treasurer. The Local Government Code lets a province charge up to 0.5% of the property’s value, and a city up to 0.75% (RA 7160 Secs. 135 and 151). The law says it is due within 60 days of the death, so ask the treasurer about any late charge.
5. New titles: the Register of Deeds registers the transfer once it has the deed, the eCAR, proof of the transfer tax and the bond where needed. New tax declarations follow at the city or municipal assessor.
6. Bank deposits: banks release a deceased depositor’s account to the heirs on the eCAR and the settlement documents, or allow withdrawals with 6% tax withheld (see the estate tax guide).

When it cannot be done out of court

The estate needs a court process when:

• there is a will: a will has to be proved in court (probate) before it can take effect. See a last will and testament in the Philippines.
• the heirs disagree: Rule 74 says they “may do so in an ordinary action of partition”, which is a court case;
• there are unpaid debts and the creditors want them settled first;
• a minor heir has no authorised representative;
• an heir is missing or cannot be found to sign.

In court, a judge appoints an administrator or confirms the executor, settles the debts and orders how the estate is divided. This takes longer and costs more, and a lawyer is needed.