Sell Inherited Property
Mr. K asks us:
My father died without a will last January 2020 and left my brother and I real properties. Our mother is also deceased. My brother and I wish to sell the real properties that our mother left us. The titles are all in her name. What do we do?
Lawyers Online PH answers:
In your narration, you did not mention whether your father has outstanding debts in favor of any person or entity. Thus, the general process detailed below will be under the assumption that your mother died without any outstanding debts.
In a nutshell, the sale of inherited property is a tedious and time-sensitive process. However, to easily guide you, we will divide the process into three segments.
Segment 1: Settlement of Estate between Heirs
To jumpstart the process of transferring inherited property, an agreement must be reached between heirs detailing the partition of a deceased’s estate (properties left by the deceased). The easiest way to accomplish this is through an execution of a Deed of Extrajudicial Settlement of Estate. This Deed allows the heirs to divide between or among themselves the properties left by the deceased without the need to go to court.
The Deed of Extrajudicial Settlement of Estate must be accomplished with the help of a lawyer. Said Deed shall then be published in a newspaper of general circulation once a week for three consecutive weeks as required by Section 1 of Rule 74 of the Revised Rules of Court.
After publication, you would need to obtain an Affidavit and Certification of Publication from the newspaper that published the aforementioned Deed. These documents are essential for the next segment.
Segment 2: Release of Certificate Authorizing Registration
To formally transfer inherited properties, you will need a BIR clearance called the Certificate Authorizing Registration (CAR). This is accomplished by the payment of estate tax.
First, your father's estate needs to be registered as a taxable entity. This may be done by filing an Application of Registration (BIR Form 1904) with the BIR. This form shall be submitted together with your father's death certificate. After which, the BIR will issue the estate’s Tax Identification Number (TIN).
Second, accomplish an estate tax return. Note that estate taxes must be paid within one (1) year from death to avoid interests and penalties. You need to fill out BIR Form 1801 and submit it together with: (a) M’s death certificate, (b) Estate’s TIN, (c) Deed of Extrajudicial Settlement of Estate, (c) certified true copy/ies of the Transfer/Original/Condominium Certificate of Title/s of M’s properties, (d) certified true copy/ies of the latest tax declaration of M’s properties, and (e) any other document/s that the BIR may require.
Third, pay the computed estate tax. You may pay the estate tax through ay of the following: (a) an Authorized Agent Bank (AAB), (b) Revenue Collection Officer; or (c) duly authorized city or municipal Treasurer in the RDO (Revenue District Office).
Fourth, submit all the required documents together with proof of payment to the BIR. Once processing is completed, the BIR will then issue a CAR.
Segment 3: Sale of Inherited Property
Once the CAR has been released, the sale of inherited property may now proceed.
First, with the help of a lawyer, execute a Deed of Sale in favor of the buyer of the properties.
Finally, proceed to the Register of Deeds to register the sale. The following documents must be presented to the Register of Deeds: (a) Deed of Extrajudicial Settlement of Estate; (b) Deed of Sale; (c) Owner’s duplicate of the Transfer/Original/Condominium Certificate of Title/s; (c) Affidavit and Certification of Publication from the newspaper that published the Deed of Extrajudicial Settlement of Estate; (d) CAR; (e) Estate tax clearance; (f) Real estate tax clearance; (g) certified copy of tax declaration; and (h) any other document/s that the Register of Deeds may require.
Note that the process above details only the general procedure and does not cover all the intricacies involved in selling inherited property
In sum, the sale of inherited property involves three general steps: (a) out of court settlement of the estate between the heirs; (b) release by the BIR of a Certificate Authorizing Registration; and (c) sale of property. More importantly, the first two steps must be done within one (1) year from death to avoid interests and penalties.