A brief overview of extrajudicial settlement

When a person passes on, those left behind are often faced not only with emotional loss but also with the task of settling the person’s affairs. The process of estate settlement affects families from all walks of life, regardless of the size or value of the estate involved. It is therefore not surprising that estate settlement continues to receive public attention, including through proposals in Congress relating to estate tax, such as bills seeking to extend estate tax amnesty programs or to revisit the existing estate tax system itself. While these proposals remain under discussion, they reflect a shared recognition that estate settlement is a common and often challenging experience for many Filipinos and foreigners who have properties in the Philippines.

Estate settlement is the process by which a decedent’s properties, rights, and obligations are identified, settled, and transferred to his or her heirs. There are different ways to complete this in the Philippines, depending on the circumstances. One of the most commonly used methods is extrajudicial settlement (EJS) which allows heirs to settle the estate among themselves without going to court. This is allowed if the decedent did not leave any will, there are no unpaid debts (or the heirs agree to take responsibility for them), and all heirs sign and publish the agreement to divide the estate.

For many families, EJS offers a way to move forward without the added cost, time, and formality associated with judicial processes. However, while EJS simplifies the procedure, it does not remove the legal and tax requirements that accompany the transfer of property from one party to another.

The EJS process actually starts with the determination of who are the heirs and what are the properties left by the deceased. The heirs will then have to decide how the properties will be divided among themselves. This agreement must be formalized in a notarized deed of extrajudicial settlement, which must be published once a week for three consecutive weeks in a newspaper of general circulation. These procedural steps, while straightforward in principle, also form the basis for subsequent steps involving taxes and property transfers.

Tax law imposes a 6% estate tax on the transfer of a decedent’s net estate upon death to the heirs, regardless of whether the estate is settled through court proceedings or through EJS. The law allows certain deductions to arrive at the net estate subject to tax, such as the value of the family home or certain properties received prior to death, subject to limitations.

Beyond estate tax, the way the heirs apportion the estate can also have separate tax consequences. A 6% donor’s tax may apply if an heir gives up part of his or her rightful share so that another heir receives more than his or her legal share. Donor’s tax can likewise be imposed when there is a specific renunciation in favor of a particular co‑heir, as opposed to a general renunciation. In a recent Court of Tax Appeals (CTA) case, the court held that although certain paragraphs of the EJS appeared to indicate a general renunciation (i.e., without designating a specific recipient), these were effectively negated by later provisions that clearly directed the repudiated shares in favor of a specific heir. Consequently, the CTA considered renunciation in the EJS as a gratuitous transfer or donation. Careful drafting and aligning allocations with legal shares help avoid unintended donor’s tax exposure.

Where land or other real property forms part of the estate, local taxes likewise come into play. Under the Local Government Code, local government units are authorized to impose a tax on the transfer of ownership of real property, including transfers by donation and inheritance. The specific rates and procedures may vary depending on the city or municipality, adding another step to the settlement process.

Notably, settling an estate also involves the submission of required documents (e.g., death certificate of the decedent, the deed of extrajudicial settlement, proof of publication of EJS, tax declarations, certificates of title), filing the estate tax return, and paying the tax due to the Bureau of Internal Revenue (BIR). Heirs or their representative must also secure a Certificate Authorizing Registration (CAR) from the BIR for each property before any transfer can be recorded by other institutions such as the Register of Deeds (RD) and the Land Transportation Office (LTO).

Ultimately, beyond these required documents and processes, it’s important to recognize the human context in which estate settlement takes place. Families often begin the settlement process while still grieving the loss of a loved one. During this period, attention is understandably focused on personal and family matters, and the completion of legal and tax requirements may not be an immediate priority. In reality, this may contribute to delays in filing estate tax returns or settling tax obligations within the periods prescribed by law, resulting in the imposition of penalties and interest. This experience is not uncommon and reflects the practical challenges faced by families navigating estate settlement during a difficult time.

From the perspective of families, these layered requirements combined with emotional and personal circumstances can make EJS feel more tedious than initially expected. While the absence of court proceedings remains a clear advantage, the overall timeline of the settlement may still be affected by the need to gather the required documents, complete tax filings, and secure clearances. The delays at any stage may affect the next steps, making timing and coordination an important part of the process.

The government passed several estate tax amnesty measures, with the most recent ending on June 14, 2025. These helped to ease the burden of long-standing unpaid estate taxes for families of decedents, especially those from earlier years. Today, legislators are once again discussing potential amnesty and other reforms, reflecting their continued recognition of the practical realities faced by families in settling estates. While these are still under deliberation, families must manage estate settlement based on existing rules and procedures.

In sum, extrajudicial settlement remains a valuable and legally recognized option for settling estates in the Philippines. At the same time, its effectiveness in practice largely depends on how well heirs or their representatives understand and manage the surrounding tax and legal requirements while coping with personal loss. A clearer appreciation of these realities may help set more realistic expectations and encourage informed decision-making during what is frequently a sensitive and challenging period. 

Source: Business World

Why the Philippines Needs 282,000 New Homes a Year

If you have ever wondered why homes still feel “kulang” even with so many new projects rising, the answer is simple: the Philippines is not building enough houses every year to keep up with demand. Recent estimates show that the country needs to produce around 282,000 new housing units annually from 2025 to 2030 just to start closing the gap, with an even bigger jump needed after 2030.

The real size of the housing gap

Studies by housing experts estimate that average annual demand for new homes is in the hundreds of thousands, while actual private-sector production is barely a fraction of that, resulting in a large yearly shortfall. This shortfall piles up on top of an already big backlog, which government and international agencies have previously placed in the millions of units.

One analysis breaks it down like this: demand for new homes is roughly 478,000 units per year, while only about 128,000 units are being supplied by the private sector, leaving a shortfall of around 350,000 homes annually. To narrow this gap, experts say the country must ramp up production to at least 282,000 units a year from 2025 to 2030, and then massively scale to about 1.6 million units yearly from 2031 to 2040.

Why 282,000 homes a year?

The figure of 282,000 units is not random; it is a calculated target that factors in existing backlog plus future household formation over the next years. In simple terms, it is the “minimum aggressive level” that slows down the growth of the backlog instead of letting it balloon further.

Government projections in earlier years already showed that if the country stayed at about 200,000 units per year, the backlog could still hit around 6.5 million households by 2030. The new, higher targets—combined with the administration’s “Pambansang Pabahay Para sa Pilipino” program aiming for around 1 million homes per year—are attempts to break out of that low-production trap.

What this means for today’s buyers

For ordinary homebuyers, all these big numbers translate into daily realities you can feel:

• Competition for well-located, reasonably priced homes remains intense, especially in cities and growing provincial hubs.

• Lower- and middle-income families are pushed toward far-flung areas, informal settlements, or cramped rentals due to limited affordable supply.

• Prices for decent housing in safe, accessible locations tend to rise faster than incomes, which keeps “affordable” homes out of reach for many.philstar+1

If the country fails to consistently hit or exceed that 282,000-unit target, the backlog will continue to grow, which can keep pressure on prices and on rental markets. Conversely, if public and private sectors succeed in scaling up, buyers could see more choices in different price brackets and locations over the next decade.

Government programs and private sector role

The national government has put housing front and center, highlighting that hundreds of thousands of housing units have been financed and constructed since mid‑2022 under flagship programs. The “Pambansang Pabahay Para sa Pilipino” initiative aims to deliver millions of units within the current administration to address both the backlog and future needs.

However, experts emphasize that government cannot do it alone; the private sector currently accounts for a large share of formal housing production and must scale up as well. This means developers, banks, and housing finance institutions need to work together to cut red tape, speed up permitting, and make financing more accessible, especially for socialized and economic housing.

How buyers and investors can respond

For home seekers and small investors, the housing gap is both a challenge and an opportunity:

• For end-users, it underscores the importance of planning early, improving creditworthiness, and exploring government-backed financing options like Pag-IBIG to secure a decent home before prices move further up.

• For investors, the persistent shortage suggests continued long-term demand, particularly in affordable housing and in-city or near-city projects close to employment.

If the country succeeds in consistently building 282,000 or more homes a year through 2030, the market could gradually shift from “chronic shortage” to a more balanced environment where more Filipino families can realistically achieve homeownership. Until then, understanding the numbers behind the housing gap can help you make smarter decisions—whether you are buying your first home, upgrading, or investing for the long term.

Source: Ziggurat Real Estate

When Is a Regime of Complete Separation of Property Mandatory in Marriages?

In Philippine real estate practice, understanding the property regime between spouses is crucial. Whether you are buying, selling, donating, or inheriting property, the applicable marital property regime determines who owns what, who must sign, and how property is transferred.

While many couples assume that property is always shared, there are situations where the law requires a regime of complete separation of property—even if the spouses did not choose it.

This post explains when complete separation of property becomes mandatory, particularly under Philippine law, and why it matters in real estate transactions.

What Is Complete Separation of Property?

Under a complete separation of property regime, each spouse:

• Owns, administers, and disposes of their own property independently

• Is solely responsible for their own debts (with limited exceptions)

• Does not need the other spouse’s consent to sell or mortgage property they exclusively own

This is the opposite of the default regime in the Philippines, where most marriages fall under absolute community of property unless a prenuptial agreement provides otherwise.

When Is Complete Separation of Property Mandatory?

There are specific situations under the Family Code where the law itself requires a regime of complete separation of property.

1. When a Marriage Is Judicially Separated

A court may order judicial separation of property when:

• One spouse abandons the other

• One spouse fails to comply with marital obligations

• There is abuse of property administration

• A spouse becomes incapacitated to manage property

Once granted, the court dissolves the existing property regime and replaces it with complete separation of property.

For real estate:

• Each spouse becomes the sole owner of their allocated share

• Future acquisitions belong only to the acquiring spouse

2. When a Marriage Settlement Is Declared Void

If a prenuptial agreement or marriage settlement is declared void, and the law cannot apply the default community regime, the court may impose complete separation of property to protect both spouses and creditors.

This sometimes arises when:

• A marriage settlement violates legal requirements

• There is fraud or coercion

• Property rights become impossible to administer jointly

3. When Spouses Are Legally Separated

In cases of legal separation, the marriage bond remains, but the law dissolves the property regime.

The result:➡️ A mandatory complete separation of property

From that point forward:

• Each spouse manages their own assets

• New real estate purchases are not co-owned

4. When a Foreign Spouse Is Involved and the Law Requires Separation

In certain mixed-nationality marriages, conflict-of-law rules or foreign property restrictions can result in practical or legal separation of property.

For example:

• A foreign spouse generally cannot own land in the Philippines

• Property may be registered solely in the Filipino spouse’s name

• Courts may treat ownership as separate to comply with constitutional limits

This is especially relevant in real estate transactions involving foreign nationals.

5. When the Court Orders Separation to Protect Creditors

Courts may also impose complete separation of property to protect:

• Creditors

• Heirs

• A spouse from financial abuse

If one spouse incurs excessive debt or mismanages community assets, the court can order separation to prevent further damage.

Why This Matters in Real Estate Transactions

If complete separation of property is mandatory or has been ordered:

You do NOT always need both spouses to sign

• Only the owner-spouse signs for their property

Titles and tax declarations must be checked carefully

• Ownership may already be partitioned

Buyers must verify the property regime

• Ask for court orders or marriage settlements

• Confirm whether separation has been declared

Failure to verify can lead to:

• Invalid sales

• Title disputes

• Claims from the other spouse

Key Documents to Look For

Real estate practitioners should request:

• Marriage certificate

• Prenuptial agreement (if any)

• Court order of judicial separation of property

• Decision on legal separation

• Property partition documents

A regime of complete separation of property is not always optional. In several situations under Philippine law, it becomes mandatory by court order or by operation of law.

For real estate professionals, buyers, and sellers, confirming the marital property regime is not just a legal formality—it is essential for ensuring that a property transfer is valid and enforceable.

When in doubt, always consult a property lawyer or review the applicable provisions of the Family Code and relevant jurisprudence from the Supreme Court of the Philippines before proceeding with a transaction.

Source: Ziggurat Real Estate