Settlement of Estate: What Families Need to Know

When a loved one passes away, one of the big questions families face is: “What happens to their properties and assets?”

The law says these need to be settled before ownership can legally pass on to the heirs. This process is called settlement of estate.

Now, there are three (3) ways to do this:

1. Judicial Settlement – through the courts.
2. Extra-Judicial Settlement – outside the courts, through a notarized agreement executed by 2 or more heirs.
3. Affidavit of Self-Adjudication – outside the courts, through a notarized agreement. executed by a sole heir.

What’s the Difference?

Think of judicial settlement as the “courtroom route.” If the heirs are fighting over inheritance, or if there’s a will that needs to be recognized (probated), you’ll need to go through a judge. That usually means longer time and higher cost.

An Extra-Judicial Settlement of Estate and Affidavit of Self-Adjudication, on the other hand, are the shortcut ways to transfer a deceased person’s property to the heir/s without going to court.

To avail the EJS and Self Adjudication, the following must be present:

1. The deceased left no will;
2. There should be no debt left by the deceased;
3. All heirs or sole heir is/are of legal age (if minor, must be properly represented);
4. Everyone agrees on how to divide the estate

Example Story

Take the case of the XXX family. Their father passed away leaving a house, a small rice field, and a bank account.

The siblings all agreed that:

• the mother would keep the house,
• the eldest son would manage the rice field, and
• the bank account would be divided equally.

Because everyone agreed and there was no will, and that the deceased lef tno debt, they didn’t need to go to court. Instead, with the help of a lawyer, they signed an Extra-Judicial Settlement of Estate, published it in the newspaper, paid the estate taxes with the BIR, and had the house title and farmland transferred.

This process took a few months—not years—and cost much less than a court case.

Why Do We Need an Extra-Judicial Settlement or Affidavit of Self=Adjudicaiton?

Some families think, “We’re already living in the property, and we all agree anyway, why bother?”

Here’s why:

• Possession alone does not make you the legal owner.
• To transfer the title of land, withdraw bank accounts, or even sell a car of the deceased, government offices (Registry of Deeds, BIR, banks, LTO, etc.) will ask for proof that the estate has been formally settled.
• Without it, titles stay under the deceased’s name, and this can cause big problems later—especially if one heir sells their “share” without others’ knowledge.

So the settlement is there to formalize ownership, pay taxes, and avoid future disputes.

Who Needs to Do This?

Basically, all heirs. Whether you’re the spouse, child, or parent of the deceased (depending on who survives), you need to take part.

Creditors also benefit because publication of the deed in a newspaper gives them a chance to come forward if the deceased owed them money.

When Should Families Do It?

It’s best to do this within a year from death, because the BIR requires that the estate tax be filed and paid within that period. Filing late may mean penalties and surcharges.

But even if more than a year has passed, heirs can still process the settlement. It just means possible extra charges with the BIR.

Where Do You File This?

Here’s the step-by-step:

1. Prepare and sign a notarized Deed of Extra-Judicial Settlement or Affidavit of Self-Adjudication
2. Publish it in a newspaper of general circulation for three consecutive weeks (this serves as notice to the public).
3. File and pay estate taxes with the BIR to get a Certificate Authorizing Registration (CAR).
4. Register the deed and CAR with the Registry of Deeds for real properties, so new titles can be issued in the heirs’ names.
5. Submit the documents to banks, LTO, or other agencies if other properties are involved.

Do You Really Need a Lawyer for This?

Some heirs believe they can handle the process on their own. In reality, mistakes often happen such as using the wrong wording in the deed, failing to publish in a newspaper as required, or filing estate taxes incorrectly. These errors can cause delays, increase expenses, and even lead to disputes among heirs later on.

A lawyer helps by:

• Drafting a deed that clearly protects each heir’s rights.
• Guiding the family through the BIR process and Registry of Deeds requirements.
• Preventing future lawsuits among heirs or against buyers/creditors.

Simply put, a lawyer makes sure the process is smooth, legal, and final.

Frequently Asked Questions (FAQs)

1. What if one heir refuses to sign?
   If not all heirs agree, you cannot use extra-judicial settlement. The case must go through judicial settlement in court.
2. Can minors be included in extra-judicial settlement?
   Yes, but they must be represented by a legal guardian (usually the surviving parent). Court approval may also be needed to protect the minor’s share.
3. How much does it cost?
   Costs vary depending on estate size and assets. Expect to pay for:

• • Estate taxes to the BIR
  • Publication fees
  • Notarial and legal fees
  • Registration fees at the Registry of Deeds

4. What happens if we don’t settle the estate?
   The titles will remain in the deceased’s name. This means you cannot legally sell, mortgage, or transfer the property. Penalties for unpaid estate taxes will also keep increasing.
5. Can we settle the estate years after death?
   Yes, but you’ll have to pay the estate tax (plus surcharges and interest, if applicable). The longer you wait, the costlier it may get.

Author’s Note:
An extra-judicial settlement and self-adjudication are practical and affordable ways to transfer a loved one’s property, but it only works if the legal requirements are followed. It is more than just signing an agreement; the deed must be notarized, published in a newspaper, and estate taxes must be settled before the property can be registered. With proper legal guidance, families can avoid mistakes, prevent disputes, and ensure a smooth transfer so they can focus on moving forward together.

If your family is planning to go through this process, contact us today for a consultation. We will be glad to guide you every step of the way.

Disclaimer: This article is provided for general guidance and does not substitute for legal advice. Consult a Philippine lawyer for proper assistance.