CONDITIONS FOR THE TRANSFER OF PROPERTY TO THE HEIRS

A persons property, rights and obligations are transmitted to his heirs by way of succession
upon his death. [Article 774, Civil Code] However, before the ownership of, or title to, said
property may be transferred in the names of the decedents heirs, the heirs must first settle
the decedents estate, pay the estate tax to, and obtain a certificate authorizing registration
from, the Bureau of Internal Revenue (BIR), and register the transfer with the Registry of
Deeds.
Settlement of Estate
A. Judicial Settlement
The estate of a decedent may be settled by filing a petition before the Regional Trial Court in
the place where he resided at the time of his death, if he was a resident of the Philippines at
the time of his death, or before the RTC in the place where he had estate, if he was a
resident of a foreign country at the time of his death. [Section 1, Rule 73, Rules of Court]
If the decedent left a will, such must be probated (i.e. allowed or disallowed). Under Article
383 of the Civil Code, no will shall pass either real or personal property unless it is proved
and allowed in accordance with the Rules of Court.
B. Extrajudicial Settlement
However, 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 heir/s need not go to court to settle the decedents estate. The heirs may divide the
estate among themselves, or the one and only heir may adjudicate the entire estate to
himself, by means of a public instrument (i.e. affidavit) which must be filed in the Register
of Deeds.
The fact of such extrajudicial settlement must be published in a newspaper of general
circulation once a week for three (3) consecutive weeks.
The parties to the extrajudicial settlement shall file a bond with the Register of Deeds in an
amount equivalent to the value of the personal property involved, to answer for the
payment of any just claim at any time within two (2) years after the settlement and
distribution of an estate. This bond should be filed simultaneously with the extrajudicial
settlement instrument (document).
Estate Tax
Estate tax is imposed on the transfer of the decedents estate to his lawful heirs and
beneficiaries based on the fair market value of the net estate at the time of the decedents
death. [Section 84, NIRC]
The rate of estate tax depends on the entire value of the net estate. If the net estate is:
Over

But not over

The tax shall be

Plus

P200,000.00
P500,000.00

P200,000.00
P500,000.00
P2,000,000.00

Exempt
0
P15,000.00

5%
8%

Of the excess
over
P200,000.00
P500,000.00

P2,000,000.00
P5,000,000.00
P10,000,000.00

P5,000,000.00
P10,000,000.00
and over

P135,000.00
P465,000.00
P1,215,000.00

11%
15%
20%

P2,000.000.00
P5,000,000.00
P10,000,000.00

Filing Requirements
(1) A written Notice of Death must be given to the Commissioner of the BIR within two (2)
months after the decedents death or after qualifying as executor or administrator, as the
case may be. Said notice is required in all cases of transfers subject to estate tax, or where,
though exempt from tax, the gross value of the estate exceeds Twenty Thousand Pesos
(Php20,000.00). [Section 89, NIRC]
(2) The executor, administrator, or the heirs shall register the estate of the decedent and
secure a new Tax Identification Number (TIN) therefor from the Revenue District Office
(RDO) where the decedent was domiciled at the time of his death. [Section 9(c),
Revenue Regulation (RR) No. 2-2003]
(3) An Estate Tax Return must be filed within six (6) months from the decedents death,
which may be extended in meritorious cases by the Commissioner of the BIR for a period
not exceeding thirty (30) days. Said return shall be filed with the Accredited Agent Bank
(AAB), RDO, Collection Officer or duly authorized Treasurer of the city or municipality where
the decedent was domiciled at the time of his death. Said filing is required in all cases of
transfers subject to estate tax, or where, though exempt from tax, the gross value of the
estate exceeds Two Hundred Thousand Pesos (Php200,000), or regardless of the gross value
of the estate, where the said estate consists of registered or registrable property such as
real property, motor vehicle, shares of stock or other similar property for which a clearance
from the BIR is required as a condition precedent for the transfer of ownership thereof in
the name of the transferee. [Section 90, NIRC]
Payment
The estate tax shall be paid at the time the return is filed by the executor, administrator or
the heirs, but may be extended by the Commissioner of the BIR for five (5) years in case
the estate is settled through the courts, or two (2) years in case the estate is settled
extrajudicially. [Section 91, NIRC]
Certificate Authorizing Registration
After the estate tax is paid, the Commissioner of the BIR or his duly authorized
representative shall issue a Certificate Authorizing Registration (CAR) attesting that the
transfer and conveyance of the property was reported and the taxes due have been fully
paid.
Notably, Section 95 of the NIRC enjoins Registers of Deeds from registering in the Registry
of Property any document transferring real property or real rights therein or any chattel
mortgage, by way of gifts inter vivos or mortis causa, legacy or inheritance, unless a CAR is
shown.
A CAR has a validity of one (1) year. In case of failure to present the same to the Registry of
Deeds (RD) within the one (1) year period, the same shall be presented for revalidation to
the RDO where the CAR was issued. [Revenue Memorandum Order No. 15-2003]
Registry of Deeds

For issuance of title transactions in connection with registered land or estate of the
decedent, the CAR and the settlement documents (i.e. Extrajudicial Settlement/Adjudication
or Court Order approving the partition and Certificate of Finality of the said court order, as
the case may be) must be submitted, and the owners duplicate certificate of title
surrendered, to the Registry of Deeds. [Section 92, P.D. No. 1529]
Moreover, transfer taxes and transfer fees must be paid respectively to the local government
unit and to the Registry of Deeds where the property is located, before a new certificate is
issued in the name of the heirs.