When a person dies, the real and personal properties they leave behind become part of their estate.

The settlement of an estate involves passing on to and partitioning the ownership of the properties among the deceased’s heirs and any other beneficiaries. All the properties in the estate must be declared and the correct taxes associated with each one must be paid with the BIR. No declared property may be transferred to any heir or beneficiary if its corresponding estate taxes have not been paid.

Two Ways to Settle an Estate in the Philippines

Judicial Settlement of Estate

Judicial Settlement involves going through the court system to distribute the assets of the deceased according to the law. This process involves filing a petition with the court, appointing an administrator or executor, inventorying the assets, paying off debts and taxes, and distributing the remaining assets to the heirs.

Additionally, it refers to the legal process of dividing the estate of a deceased property owner among the heirs in court. This usually happens when the heirs of the property did not reach an agreement during the extrajudicial settlement.

In the Philippine legal system, when a person with assets passes away without naming an estate owner, the heirs may file a complaint for partition in court. This action for partition is an ordinary action used to divide the estate among co-owners. The judicial partition involves the assignment of a thing held in common among the heirs. If there are disagreements or conflicts among the heirs regarding the division of the deceased estate owner’s assets, a complaint for partition may be filed in court to settle the matter.

During the ordinary action of partition, the court will determine how to divide the deceased estate owner’s entire estate by means of a judicial partition. This process is necessary to ensure a fair and equitable distribution of the assets. In contrast, an extrajudicial settlement shall be binding only if there is no conflict among the heirs. In cases where there is conflict among the heirs, an ordinary action for partition must be initiated to legally divide the estate among the beneficiaries.

Extrajudicial Settlement of Estate

Extrajudicial Settlement is a simpler and less expensive process that does not involve the court system. This method is only possible if all the heirs agree on how to distribute the assets of the deceased. The heirs sign a notarized agreement to divide the assets according to the law, and the agreement is registered with the Register of Deeds. This process is faster and less costly than judicial settlement, but it is only an option if all the heirs are in agreement.

It occurs when a deceased estate is settled without the need for judicial or legal intervention. This process involves the execution of a deed of extrajudicial settlement among the heirs of the decedent, where the co-owners of the estate agree on the distribution of the estate among themselves.

This type of settlement is more common in the Philippines, where leaving a will is not traditional. In this type of settlement, the heirs and beneficiaries of the deceased reach an understanding on the partitioning of the estate without a will and without going through the courts. A certified affidavit detailing how the estate will be partitioned should be filed by the heirs with the Register of Deeds. A sole heir claiming the entire estate also needs to file a similar affidavit.

This type of settlement is known as extrajudicial settlement of estate. It is a faster and less costly option compared to going through the probate process in court. However, it is important to note that this type of settlement may not be recognized in other countries and could potentially lead to disputes among heirs in the future. It is still advisable to consult with a lawyer to ensure that the settlement is done correctly and legally.

One of the key requirements in an extrajudicial settlement is that the decedent left a valid will or the heirs are in agreement on how the estate should be divided. The deed of extrajudicial settlement must be in public instrument and filed in the office of the register of deeds where the real property involved is located. The rules of court require that the deed be published once a week for three consecutive weeks in a newspaper of general circulation.

If there is only one heir, the extrajudicial partition may be represented by their judicial or legal representatives. However, if there are multiple heirs, all co-owners must sign the project of partition. Once the partition agreement is signed, the estate may be deemed to be a partition among heirs without the need for a judicial or legal partition.In cases where the co-ownership involves real property with a certificate of title, the partition of land may still be subject to the approval of the regional trial court. This approval will result in a judgment of partition, which finalizes the division of the estate among the heirs in accordance with the civil code of the Philippines. 

Inheritance Laws Governing Partitioning of an Estate

Whether or not a person leaves a will, partitioning of their estate must comply with the rules specified in the Inheritance Law of the Philippines.

  • A certain portion of the deceased’s properties, known as legitimes, are earmarked by law to compulsory heirs, classified as follows:
    • Primary – The deceased’s legitimate children and/or their descendants
    • Secondary – The deceased’s legitimate parents and/or their ascendants (grandparents or great-grandparents), as well as illegitimate parents
    • Concurring – The surviving spouse, the deceased’s illegitimate children and/or their descendants

Concurring heirs and primary heirs occupy the same rung in the ladder of inheritance, that is, they are all entitled to inherit the deceased’s property. Secondary heirs are entitled to inheritance only in the absence of primary heirs.

  • If the deceased leaves a will, the distribution of their properties generally follow these rules:
    • Legitimate children are entitled to ½ of the estate, to be divided equally among themselves. The other half is considered the “free portion” of the estate.
    • The surviving spouse is entitled to ¼ of the estate if there’s only one legitimate child. If there is more than one legitimate child, the spouse is entitled to the same portion as each legitimate child. The spouse’s inheritance is taken from the free portion of the estate.
    • Each illegitimate child is entitled to the equivalent of ½ the legitime of a legitimate child, to be taken from the free portion of the estate. If the total for all illegitimate children is more than the remaining free portion of the estate, the free portion is divided equally among them.
    • If there are no legitimate children and descendants, the deceased’s parents or ascendants are entitled to ½ of the estate.

Whatever is left of the free portion of the estate after these legitimes may be disposed of according to the deceased’s will.

  • If the deceased doesn’t leave a will (intestate proceeding), the estate will have no free portion and will be divided equally among the surviving spouse and legitimate children. If there are illegitimate children, they are entitled to the equivalent of ½ the share of the legitimate children. However, the legitimes of the legitimate children and the spouse must be fulfilled first. If the balance of the estate is less than ½ the share of the legitimate children, this must be divided equally among all the illegitimate children.

 

Need further information and assistance regarding Partition of Estate? Talk to our team at Duran & Duran-Schulze Law in Bonifacio Global City, Taguig, Philippines to know more about the requirements and process. Call us today at (+632) 8478 5826 or +63 917 194 0482, or send an email to info@duranschulze.com for more information.

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