What Happens to a Property When the Owner Dies?

a property after the owners death

Among the most often asked questions about property ownership is, what happens to a property if the owner dies? A popular presumption is that ownership is passed down in line with the provisions of a decedent’s will. Nevertheless, this notion has a number of flaws. For instance, what if the decedent died without a will? Or, what if the decedent’s property was kept in trust? What happens to a house when the owner dies is determined by many elements of the decedent’s estate plan. Philippine law explains what happens to a property if the owner dies, the personal and real properties they leave behind form part of their estate. Estate planning may be a hard process with several aspects to take into account and choices to be undertaken. The settlement of an estate entails transferring and dividing property ownership among the decedent’s successors and any other claimants. All of the estate’s properties must be disclosed, and the appropriate taxes must be paid to the Bureau of Internal Revenue (BIR). No declared property may be passed to any successor or claimant if its related estate taxes have not been settled.

Read also: Why is Estate Planning Important for Your Assets?

In the Philippines, there are two ways to settle what happens to the property if the owner dies:

  • Judicial Settlement of Estate

In a judicial settlement, the court will designate an administrator to govern the estate, as the title implies. The administrator will ensure to pay the obligations of the estate. Debts, recurrent maintenance, administrative fees, and even taxes are examples of these obligations. The administrator may also be responsible for providing a plan to the court regarding how to partition the estate left by the decedent. This plan is known as the Project of Partition. If the court orders this plan, the administrator will carry it out and divide the inheritance among the descendants. It should be noted that the applicable taxes and fees must be completed within the time frame specified by law. Thereafter, the descendants should get the relevant certificates. Such certificates are necessary for the properties to be transferred to the names of the descendants.

  • Extrajudicial Settlement of Estate

Unfortunately, more frequently than not, in the Philippines, Filipinos settle estates extrajudicially or without resorting to courts. But even so, not all estates may be handled in this manner. The regulations need certain circumstances to occur before the descendants can appeal to extrajudicial settlement. The following conditions must be met before proceeding to extrajudicial settlement:

  • The decedent did not leave a will
    • The decedent left no obligations or had previously paid them
    • There are multiple descendants who are all of legal age. If there are children or minors, they are represented by officially authorized legal or judicial representatives

If you can achieve the foregoing standards, you can end up settling the estate without going to court. In this instance, the descendants may now all decide among each other how the inheritance will be partitioned by collectively completing a public instrument which is notarized and generally termed an “Extrajudicial Settlement”. When there is only one descendant, the only successor should complete an “affidavit or self-adjudication” as opposed to an extrajudicial settlement. The fact of these public instruments is reported and published in a widely circulated newspaper. Take into consideration that the extrajudicial settlement is not binding upon any individual who has not participated therein or had no notice thereof. The term “taxation” refers to the process of determining how much money should be paid in taxes. Following that, the descendants must get the requisite certificates in order for the properties to be passed to their names. A bond is then submitted to the Register of Deeds.

The Rule of Court defines this process.

Rule 74, Section 1.

Extrajudicial settlement by agreement between heirs. — 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 parties may without securing letters of administration, divide the estate among themselves as they see fit by means of a public instrument filed in the office of the register of deeds, and should they disagree, they may do so in an ordinary action of partition. If there is only one heir, he may adjudicate to himself the entire estate by means of an affidavit filled in the office of the register of deeds.

Whether or not a decedent leaves a will, what happens to a property if the owner dies must conform to the standards provided in the Inheritance Law of the Philippines:

  1. A specific percentage of the decedent’s possessions, known as legitimes, are assigned by law to obligatory descendants, categorized as follows:
    1. Primary 

The decedent’s legitimate children and/or their successors

  1. Secondary

The decedent’s legal parents and/or their ascendants (grandparents or great-grandparents), as well as their illegitimate parents

  1. Concurring

The decedent’s illegitimate children and/or their successors, as well as the existing spouse.

Primary and concurring descendants are on the same tier of the inheritance ladder, which means they are all eligible to receive the decedent’s property. Secondary heirs are eligible for succession only when there is an absence of primary descendants.

  1. If the decedent left a will, the division of their possessions normally follows these rules:
    1. Legitimate children are legally entitled to a  portion of the inheritance, which must be shared equally among them. The remaining half is known as the “free share” of the estate.
    2. If there is just one legitimate child, the remaining spouse is entitled to one-fourth of the inheritance. When there is more than one legitimate child, the spouse is entitled to the same percentage as each legitimate child. The spouse’s inheritance is deducted from the estate’s free half.
    3. For every illegitimate child, he or she is subject to half the equivalent of the legitime of legitimate child, which is deducted from the estate’s free share. Whereas if the sum of all illegitimate offspring exceeds the estate’s remaining free share, the free share is distributed evenly between all of them.
    4. In the absence of legitimate children and successors, the decedent’s parents or ascendants (grandparents or great-grandparents) are entitled to half a percent of the estate.
  2. In instances when a spouse dies without a will, issues commonly emerge. If you do not have any idea about what happens to a property if the owner dies and of the inheritance law, you may be perplexed. If the decedent has not left a will (intestate proceeding), the estate will have no free portion and will be split evenly among the remaining legitimate spouse and legitimate children. If there are illegitimate offspring, they are eligible to correspond to half the portion of the legitimate children. Even so, the legitimacy of the legitimate children and the spouse must be accomplished first. Whereas if the balance of the estate is lower than half the share of the legitimate children, this should be shared evenly between each of the illegitimate children. This is under Article 996 of the New Civil Code of the Philippines. The facts you need to know about the succession of inheritance may be presented in Chapter 3 of Republic Act No. 386.

Because it has not been customary, many Filipinos fail to prepare an Estate Plan. Creating a Will after purchasing a house or any other property is a good strategy for safeguarding your assets and providing for your family member, especially if an unexpected event were to take place. This will help you manage what happens to the property if the owner dies. Consult with legal experts to know more about estate planning.

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Read also: 6 Steps in Legit Checking Your Soon-to-be Property

Written by: MC Sanchez