6 Steps in Settling the Estate of a Dead

Person in the Philippines

With property values rising in the last 6 months, more and more
sellers are motivated to sell real properties to get the maximum
amount of money for their benefit. The rise in property values is
not limited only to the National Capital Region, but to all urban
and suburban areas in various provinces in Luzon, Visayas and
Mindanao.
It is a fact that there are numerous real properties for sale that
are still registered in the names of the deceased parent,
grandparent or next of kin. As licensed real estate service
practitioners (RESPs), we know that when the registered owner of
a real property is dead the same cannot be transferred to the
name of the buyer until the estate of the deceased person has
been settled.
To elucidate, settling the estate of the deceased means the
declaration of all the properties of the deceased real and
personal and payment of the correct estate taxes on all the
declared properties with the Bureau of Internal Revenue (BIR). No
property in the name of the deceased can be transferred to the
name of another person without the settlement of the estate
whether testate or intestate.
RESPs should dissuade their seller-clients from resurrecting the
dead to make it appear that the deceased executed the deed of
sale of the property just to pay capital gains and evade the
payment of estate taxes.
The savings made on paying capital gains tax only is not worth
the trouble of a BIR investigation. It is not good for your sellerclient as well as to the RESPs who advised such a mode of
transfer.

Do what is right. Prepare the documents for the extrajudicial

settlement of the estate when there has been or prior to a
meeting of the minds between the buyer and seller.
Here are 6 simple steps to follow when settling the estate of a
deceased person in preparation to sell the property to an
interested buyer:
STEP 1: Fill out BIR Form 1904 (Application for
Registration). All parties that transact with the BIR should have
a valid Tax Identification Number (TIN). Normally, Form 1904 is
used to verify the TIN of the seller as well as the buyer. But in
payment of estate taxes, the estate of the deceased will have to
have a separate TIN from the seller-heirs.
In filling out Form 1904, here is what to do: (a) on the Taxpayer
Type, mark with an X the box indicating One-Time Taxpayer;
(b) on Classification, mark with an X the box indicating Nonindividual; and (c) on Sex, mark with an X the appropriate box
indicating gender of the deceased.
Next, write ESTATE OF [THE DECEASED PERSONS NAME] in the
space provided for the Taxpayers Name. On the Civil Status, mark
with an X the appropriate box indicating civil status of the
deceased. On the Date of Birth, write the date of death of the
decedent as it appears in the Certificate of Death.
Write the Local Address of the decedent in the space provided
for. Take note that the Local Address of the decedent should be
the one indicated in the death certificate.
If the person dies abroad and has no residence in the Philippines
fill out the Foreign Address by writing the address indicated in the
death certificate. In such a case, the filing of the Estate Tax Return
should be made at the BIR Revenue District Office (RDO) No. 39
(South Quezon City).

Finally, put an X on the box indicating Transfer of Properties by

Succession (Death); and on Tax Types mark an X the box
indicating Estate Tax. Remember to indicate the name of the
Taxpayer/Authorized Agent and sign the same. It is important to
attach a photocopy of the certified copy of the Certificate of
Death to Form 1904.
STEP
2: Prepare
the
mandatory
documentary
requirements to be submitted to the BIR for the
settlement of estate of a deceased individual. You can get a
copy of the Checklist of Documentary Requirements by clicking on
the link. Go to page 3 and 4 of the document to find the list.
STEP 3: Prepare BIR Form 1801 (Estate Tax Return). Fill up
the name and the TIN of the Estate on the spaces provided in
Form 1801. The ONETT Officer of the Day will assist you in filling
out the rest of the form based on the computation he/she has
made based on the review of the documents presented. However,
if the estate of the deceased is more than P3 million then it would
be wise to consult a certified public account to determine the
initial computation of the taxable estate.
STEP 4: Pay the estate tax as computed. You can pay the
estate tax with an Authorized Agent Bank (AAB) of the RDO
having jurisdiction over the place of residence of the decedent at
the time of his/her death.
Cash is best to settle the estate tax. But if the tax due is a large
amount and security would be a problem for the one paying it
then the same can be paid by means of a Managers or Cashiers
Check.
If payment is made through a Managers or Cashiers Check, the
following should be written as payee: [BANK, BRANCH] FAO
BUREAU OF INTERNAL REVENUE IFO [TAXPAYERS NAME] [TIN OF
TAXPAYER]. However, if you will pay the estate tax using a AAB

that is a government financial institution like Landbank of the

Philippines, then the payee may simply be BUREAU OF INTERNAL
REVENUE.
STEP 5: Submit all documentary requirements and proof of
payment to the RDO having jurisdiction over the place of
residence of the decedent. Upon submission of the
requirements and proof of payment, the ONETT One-Time
Transaction will issue a Claim Stub with a reference number.
When you follow up if aCertificate Authorizing Registration
(CAR) has already been issued then you only need to give the
reference number.
Please note that the processing of estate taxes requires a
minimum of 60 days by the BIR. Depending on the review of the
documents, the BIR has the right to require the heirs for
additional requirements especially in connection to any
deductions claimed by the estate.
There is a P1 million standard deduction for all estates. If one of
the properties being settled is the family home then a barangay
certificate should be presented to certify that the decedent is a
bona fide resident of the barangay where the family home is
located, if the deduction of P1 million for the family home will be
claimed. The family home should be in the name of the decedent
in order for the deduction to be claimed.
STEP 6. Wait for the release of the Certificate Authorizing
Registration. Upon the release of the CAR, the property can now
be sold to a buyer. The CAR, along with the transferring document
Extra-judicial Settlement of Estate, Affidavit of Self-Adjudication,
etc. and the Tax Clearance Certificate should be part of the
documents to be presented when paying the capital gains and
documentary stamp taxes covering the sale of the property.
Some buyers, however, would want to have the title and tax
declarations of the real property in the name of the heir or heirs

before they finalize the purchase of the property. In such a case,

the RESP should process the payment of transfer tax to the LGU
concerned and the registration fees with the Registry of Deeds
having jurisdiction over the location of the real property.
The same process mentioned above will govern if the transferring
document is an Extra-judicial Settlement of Estate with Sale.
A final note should be made to alert RESPs and the concerned
readers. If the Extra-judicial Settlement of Estate contains a
waiver of some sort for and in favor of a particular heir or heirs,
the BIR shall assess the Heirs additional taxes in the form of
a donors tax. The BIR considers such waiver as a donation on
the part of the waiving heir/s to the recipient heir/s.