By: Philis Theresa Cruz
Throughout our lives, we accumulate various properties – both personal and real – with the intention of passing them on to our heirs. However, we also aspire to prevent inheritance disputes from straining relationships and to alleviate the burden of additional fees. So, how can we ensure that our heirs receive their rightful inheritance?
First and foremost, it’s crucial to grasp the concept of an estate. An estate encompasses the total value of both real assets (land, permanent structures) and personal possessions (vehicles, jewelry, art collections, stocks, bank deposits, etc.), minus any existing liabilities or obligations of the deceased individual.
While the rights to a decedent’s properties are immediately transferred to the heirs upon their passing, the legal process of ownership transfer is neither automatic nor straightforward. Heirs must navigate a rigorous procedure before claiming ownership, a reason why many Filipinos often avoid settling the estate of their loved ones.
Regrettably, numerous real estate properties still bear the names of deceased individuals, resulting in substantial unpaid estate taxes. The Philippine Government has extended the deadline for estate tax amnesty applications to June 14, 2025, in a bid to address this issue.
How do you ensure that your properties are inherited by your heirs? Here are the steps to transfer real estate properties through succession:
Step 1 – Check if the Decedent Left a Will
Filipinos typically do not prioritize preparing wills, despite their potential to minimize conflicts among heirs later. There are two types of wills: notarial and holographic.
A notarial will must adhere to a specific format for validity. It should be signed on all pages by the testator (the person executing the will) and the witnesses. Additionally, it must be acknowledged before a notary public by both the testator and the witnesses.
In contrast, a holographic will should be entirely handwritten, signed, and dated by the testator. Witnesses are only required in court to validate the will’s authenticity by confirming the testator’s handwriting and signature.
If there is a will, the heirs will go through a judicial settlement of the estate. A probate court will assess the will’s validity. Subsequently, the executor appointed by the decedent (or the court-appointed administrator, if none was specified) will oversee the execution of the will’s provisions and the general administration of the estate.
A judicial settlement is also applicable if there is no will and there is a dispute among heirs regarding the division of the estate.
If no will exists, the heirs will undergo an extrajudicial settlement of the estate. This involves executing a deed of extrajudicial settlement, provided that the surviving heirs (those with an absolute right to inherit) agree on the division and distribution of the estate.
The deed of extrajudicial settlement should detail several key points, including that the decedent left no will or debt, each heir’s relationship to the decedent, a list and description of the estate, and how the properties will be distributed among the heirs. In cases with only one heir, they need only execute a deed of self-adjudication, bypassing the need for an extrajudicial settlement.
Step 2 – Assessment and Payment of Estate and Transfer Taxes
Visit the Bureau of Internal Revenue (BIR) Revenue District Office (RDO) and the Assessor’s Office overseeing the property. Obtain a certificate of zonal value (from BIR) and fair market value (from the Assessor’s Office) at the time of the decedent’s passing. Submit the required documents and settle the estate tax and transfer tax.
Under the TRAIN law, the estate tax now stands at a uniform rate of 6 percent of the net estate, while the documentary stamps tax remains at 1.5 percent of the net estate.
This should be resolved within one year from the date of the decedent’s passing at an authorized agent bank of the BIR RDO with jurisdiction over the decedent’s last place of residence. Once cleared by the BIR, an electronic certificate authorizing registration (e-CAR) will be issued to the heir(s).
The transfer tax, which ranges from 0.5 percent to 0.75 percent depending on the property’s location, should be settled at the Treasurer’s Office of the local government unit where the property is situated.
Step 3 – Transfer of Title and Tax Declaration in the Name of the Heirs
Pay the corresponding registration fees at the Registry of Deeds (RD) with jurisdiction over the property. Then, submit all required documents for the RD to process the title transfer to the heirs.
Once the new title is released under the heir(s)’ name by the RD, the final step is to process the transfer of the tax declaration in the same name. This is done at the Assessor’s Office.
To minimize disputes and avoid additional fees and penalties, conduct thorough research and seek professional assistance to ensure your designated heirs inherit your properties. For heirs facing the need to sell the property to cover estate tax and other expenses, or encountering any other issues, there are established methods to navigate these situations.
For personalized guidance and expert insights into your property-related needs, contact us.