Below is a comprehensive overview of the typical steps, legal considerations, and practical guidelines involved in selling an inherited property in the Philippines when one of the siblings (co-heir) is already deceased. Please note that this is general information and does not constitute legal advice. For specific concerns, always consult a qualified attorney.

1. Understand the Nature of Inheritance in the Philippines

A. Governing Laws

Civil Code of the Philippines – Outlines rules on succession, forced heirs, legitime, and the process for intestate and testamentary succession.
Rules of Court – Covers judicial procedures (e.g., settlement of estate, probate) for the distribution of property.
National Internal Revenue Code (NIRC) – Governs taxes relating to inheritance, such as estate tax.

B. Intestate vs. Testamentary Succession

Testamentary Succession (with a Will): The will specifies how the property should be distributed, subject to reserved portions known as “legitime” for forced heirs (spouse, children, parents, depending on the circumstance).
Intestate Succession (no Will): Distribution follows the order laid down by the Civil Code, with priority to surviving spouse, children, parents, and so forth.

2. Identify the Heirs and Their Respective Shares

When a sibling is deceased, the deceased sibling’s share does not vanish; instead, it generally passes to:

The deceased sibling’s direct descendants (children).
If there are no direct descendants, it may pass to the deceased sibling’s surviving spouse, parents, or other relatives depending on the rules of intestacy.

A. Determining Heirs

Forced Heirs: In Philippine law, legitimate children and compulsory heirs cannot be disinherited unless specific legal grounds exist.
Representation: If the deceased sibling had children, those children “represent” the deceased parent in inheriting the parent’s share.

B. Documentation

Death Certificates: You need a copy of the deceased sibling’s death certificate.
Marriage/Family Documents: If the deceased sibling was married, gather marriage certificates, birth certificates of children, etc.
Proof of Relationship: Ensure you can prove the relationship between the deceased sibling and any potential heirs (children, spouse, or parents).

3. Settle the Estate of the Deceased Sibling (If Not Yet Settled)

A. Estate Settlement or Succession Case

When the sibling passed away, that sibling’s own estate had (or still has) to be settled before their portion of the property can be transferred. The process can be:

Extrajudicial Settlement: If the heirs of the deceased sibling agree among themselves, and there is no will that needs probate, they can execute an extrajudicial settlement.
Judicial Settlement: If heirs disagree, there are complications, or a will exists needing probate, then the estate may need to be settled or partitioned in court.

B. Estate Tax Payment

The heirs of the deceased sibling must file the estate tax return and pay any due estate tax for the deceased sibling’s estate before transferring any assets.
Under the TRAIN Law and subsequent issuances, there are specified deadlines and penalties for late filing and payment.

C. Issuance of New Transfer Certificates of Title (TCT)

Once the deceased sibling’s estate is settled (extrajudicially or judicially), the siblings’ share can be transferred and consolidated in the names of the rightful heirs (the surviving siblings plus the deceased sibling’s heirs).

4. Consolidate Ownership Under All Living and Deceased Sibling’s Heirs

A. Execute an Extrajudicial Settlement for the Original Owner (If None Was Done)

If the parent(s) or original owner(s) left the property to multiple siblings without a will, an extrajudicial settlement may be filed by all heirs. If there was a will, a probate might be necessary.

B. Incorporate Deceased Sibling’s Heirs in the Settlement

The deceased sibling’s heirs must be signatories or be properly represented in the extrajudicial settlement or any partition agreement.
The resulting agreement should reflect the share initially due to the deceased sibling, which is then transferred to the deceased sibling’s heirs.

C. Publish in a Newspaper

Extrajudicial settlements require publication once a week for three consecutive weeks in a newspaper of general circulation. This requirement is mandated by Section 1 of Rule 74 of the Rules of Court.

5. Pay the Required Taxes and Fees

A. Estate Tax

Estate Tax on the original owner’s estate (if not yet settled).
Estate Tax on the deceased sibling’s estate (if not yet settled).

B. Documentary Stamp Tax (DST) and Transfer Fees

Pay the documentary stamp tax for the transfer of property.
Settle any registration fees with the Registry of Deeds.

C. Capital Gains Tax (Upon Sale of Property)

Once the property is sold, the seller(s) typically pay 6% Capital Gains Tax on the selling price or the zonal value, whichever is higher, unless the transaction is covered by other specific exemptions under law.

D. Real Property Tax

Ensure that real property taxes (amilyar) are updated. Unpaid real property taxes can complicate the transaction.

6. Transfer of Title to the Heirs’ Names

Registry of Deeds: After you have an Extrajudicial Settlement (or judicial decree) and have paid the necessary taxes, you can apply for the issuance of new titles.
Updated Tax Declaration: Once a new title is issued, have the tax declaration updated in the names of the new owners.

This step is essential to “consolidate” ownership under all heirs (including the estate of the deceased sibling). Having the property titled properly in all heirs’ names ensures you have the legal capacity to sell.

7. Prepare for the Actual Sale of the Property

A. Verify All Owners

All owners (i.e., the surviving siblings plus the deceased sibling’s heirs) must consent to sell the property.
If any heir is a minor, a court-appointed guardian may need to represent the minor’s interest.

B. Execute a Special Power of Attorney (SPA) if Necessary

If some heirs are abroad or unable to personally transact, they may execute an SPA authorizing another person to sign the deed of sale on their behalf.
The SPA must be notarized and, if executed abroad, authenticated (consularized or apostilled).

C. Conduct Due Diligence

Buyers will want to confirm that all estate settlements and taxes have been paid, and that the title is free from encumbrances or liens.

8. Execute the Deed of Absolute Sale

Once you have a buyer:

Negotiate Purchase Price
Draft and Sign Deed of Absolute Sale: Must be signed by all registered owners (including the heirs representing the deceased sibling).
Notarize the Deed of Sale in the presence of a notary public.

9. Pay Applicable Taxes and Process Final Transfer to the Buyer

A. Capital Gains Tax or Withholding Tax

Capital Gains Tax (CGT) (6% of the gross selling price or zonal value, whichever is higher) is usually shouldered by the seller, unless otherwise agreed.
If the seller is habitually engaged in real estate transactions, Creditable Withholding Tax may apply instead.

B. Documentary Stamp Tax (DST)

DST is typically 1.5% of the selling price or zonal value, whichever is higher.

C. Transfer Fees

The buyer typically pays for the transfer tax and registration fees to register the property under their name, but parties may agree otherwise in the deed of sale.

10. Practical Tips and Common Pitfalls

Complete Documentation Early: Inheritance sales can be delayed by missing documents (e.g., death certificates, marriage certificates, birth certificates of heirs, etc.).
Settle Unpaid Taxes Immediately: Estate taxes and real property taxes must be settled to avoid penalties and complications.
Check for Minor Heirs: A court order may be required to sign on behalf of minors.
Avoid Partial Transfers: If you leave out the deceased sibling’s heirs, the buyer cannot get a clean title, leading to legal disputes.
Always Follow the Publication Requirement: Failure to publish the extrajudicial settlement can render it voidable.
Consult Professionals: A licensed lawyer, accountant, or broker can guide you regarding legal, tax, and procedural aspects.

Conclusion

Selling an inherited property in the Philippines when one sibling is deceased involves multiple steps: identifying rightful heirs (including the deceased sibling’s heirs), settling the deceased sibling’s estate, executing or finalizing the extrajudicial or judicial settlement of the original estate, paying all due taxes, and properly documenting the sale. Although the process may seem complex, adhering to legal requirements and ensuring that all heirs are on board will help you finalize the transaction smoothly.

Again, as regulations and circumstances differ from one case to another, always seek the counsel of a qualified lawyer for personalized guidance tailored to your specific situation.