Lost Title and Inheritance Tax
Recently, an old client referred me to her friend who needed help for her inherited property in the Philippines. Her mother died last year leaving with her a house and lot in the Philippines. She and her mother were based abroad so she needed someone to assist her in selling the inherited property. The title belonged to her mother married to a foreigner who died long before her mother did. I asked for copies of documents but the most important document which is the TCT is missing! So we have two problems here, to replace the lost title, pay the inheritance tax then transfer the title to the heir.
As they say, you can’t be a full-pledged real estate broker if you haven’t handled cases like this. Armed with just the property address and a copy of old tax declaration, I went to the city treasurer’s office where the property is located and requested for latest copy of tax declaration and computation of realty taxes due on the property. From there, we can find the TCT number so after getting the copy of tax declaration, I proceed to the Registry of Deed to request for a certified true copy of the title and trace back at least three titles. It was good that there were only two previous titles; one was the mother title and the second was the developer’s and latest was this owner.
With lost owner’s duplicate copy of title, how do I proceed? Before this case, I always refer to it as “extra-judicial” but since there is only one heir, I got corrected by the RD officer as self-adjudication. Extra-judicial settlement if there are two or more heirs. I will then need two affidavits from the heir or maybe it can be consolidated into one, (I will let the lawyer do that) : the affidavit of loss and the self-adjudication.
Next stop is the Bureau of Internal Revenue (BIR) to check what requirements we will need to submit to settle inheritance tax as BIR won’t process unless complete documents were submitted. There is a checklist of these requirements at the BIR for Estate Tax.
I enumerated here the checklist I got from the BIR office for reference. I just highlighted what documents we were required.
Mandatory requirements are:
1. Tin of Estate (Form 1904)
2. Photocopy of Death Certificate, subject to presentation of the original
3. Any of the following :
- Affidavit of self-adjudication
- Deed of Extra-judicial settlement of the estate if the estate had been settled extra-judicially,
- Court order if settled judicially
- Sworn declaration of all properties of the Estate
4. Official Receipt/Deposit Slip for this purpose and duly validated return as proof of payment
For Real properties, if any
- Certified True Copy of latest Tax Declaration issued by Local Assessor’s Office for land and
improvement relevant date of taxable transaction (date of death)
- Owner’s copy for presentation purposes only together with the photocopy thereof for authentication
of Certified true copy of TCT, CCT , OCT
- Sworn declaration of No Improvement by at least one (1) of the transferees or Certificate of No
Improvement from the Assessor’s Office if applicable
- Certificate of Property Holdings (of Spouse) and photocopy of previous CAR (from Register of Deeds)
- Barangay Certification –Proof of Residence
- I.D, of Administrator/Heir and/or ID & Authorization of person transacting other than the
Then one last requirement that if the property’s Zonal Value is more than P2M, a Statement duly certified by a CPA containing the itemized assets, deductions, and the amount or still due if applicable.
I also posted here the Estate Tax table for reader’s reference:
Another challenge posted to me is how I can find an interested buyer willing to advance the payment of the inheritance tax while we are still filing for replacement of the lost title in court. The heir do not have the money to pay for the inheritance tax as the property ‘s zonal value is about P3.3M. The property can sell for not less than P6M just for the lot price alone and then the improvement while its been more than 20 years, it is well- built and renovate to new to sell it about twice as much. Not to mention you have a famous celebrity for a neighbor. Hmmm.. I think I should look for a buyer who is a big fan of this celebrity who can afford to buy this house and be close to his/her idol.
Well, if lucky we can finish this in six to eight months or maybe a year depends on the judge…. but at least I know now that I can handle case like this for as long as the client is willing to go through the process and willing to wait. After all, it is her inheritance and she can only make use of the proceeds if we go through this.
For reader who might be in the same situation or you have elderly parents who has properties and have not done anything about the property they will leave to their heirs, to suggest that maybe they already partition the property to avoid inheritance tax especially if the property/ies is/are worth over P10M. Capital gains tax of 6% is better than 20% even if it was based on zonal value. Then aside from that, if there are siblings who are hard to please and want more than what they should get, or just the inheritance tax alone wil be a big problem to deal with as it is hard to dispose a property with deceased parties on the title. Then if in case the title has been cleaned of the deceased party/ies and had been transferred to heirs, there is prescription period in accordance with Section 4 Rule 74 of Civil Code that prohibits negotiating the property for the period of two years or pay corresponding bond so you can sell.
For lost title, you need to file the case in court to replace the lost title and it can take a year or more before the judge can give his/her decision and that is not even a guarantee. You need to have a very valid reason for the loss.
Well, it’s not that hard after all. I should say our job is really very rewarding not just financially. To be of assistance to families in this kind of situation brings many reward and experience that we can also share with others especially to colleagues in the industry.
If you have questions related to this situation or in similar situation and needing assistance, please feel free to email the author at firstname.lastname@example.org .