Inheritance Process for Deceased Co‑owners under Philippine Law

(A comprehensive doctrinal and practical guide)

1. Introduction

Co‑ownership is common in the Philippines: siblings inherit the family home and keep it undivided, spouses acquire property jointly, or friends buy land together. When one co‑owner dies, his or her undivided ideal share does not automatically transfer to the surviving co‑owners; it becomes part of the decedent’s estate and must first pass through Philippine succession and estate‑settlement rules. This article walks through every key doctrine, statute, regulation, and real‑world step that practitioners, heirs, and surviving co‑owners need to know.

2. Legal Framework

Source	Key provisions relevant to deceased co‑owners
Civil Code of the Philippines (CCP)	Co‑ownership: Arts. 493‑501; Succession: Arts. 777‑1106
Rules of Court	Special Proceedings on settlement of estates (Rules 73‑91); Rule 74 (extrajudicial settlement)
National Internal Revenue Code (NIRC)	Estate‑tax title (Secs. 84‑97); penalties, surcharges, and returns
Family Code / Property Relations	Conjugal and community property rules; Arts. 90‑94, 103‑124
Land Registration Act / P.D. 1529	Transfer and annotation of titles
Special Tax Measures	Estate‑Tax Amnesty Act (R.A. 11213) and extension laws
Bureau of Internal Revenue (BIR)	Revenue Regulations 12‑2018, 17‑2021, etc. (documentary requirements)

3. Basic Concepts

Co‑ownership (Art. 485, CCP): Each co‑owner holds an “ideal” or “undivided” share in the whole, not a specific physical portion, unless and until partition occurs.
Succession opens at the moment of death (Art. 777). The decedent’s share is frozen and becomes part of the estate.
Heirs step into the shoes of the deceased, acquiring the same undivided share pro‑indiviso once succession is settled.
Modes of Succession:
- Testate – by will (Art. 783).
- Intestate – absent or invalid will (Art. 960).
Legitime rules (reserved portions) prevail over the will if compulsory heirs exist (Arts. 886‑909).

4. Determining Who Inherits the Share

Order of intestate succession (if no will)	Share of decedent’s co‑ownership goes to:
1st degree	Legitimate children and descendants (Art. 978); spouse participates (Art. 996).
2nd degree	Legitimate parents and ascendants; spouse (Arts. 979‑998).
Collateral & other cases	Brothers/sisters, nephews/nieces (Arts. 1001‑1014); State as last resort.

Illegitimate children, adopted children, and surviving spouse are all compulsory heirs with fixed legitimes.

5. Estate‑Settlement Pathways

Extrajudicial Settlement (EJS) – Rule 74
- Requisites:
  - No will or the will has been probated and the estate consists only of personalty or realty and there are no outstanding debts, or debts have been paid.
  - All heirs are of age (or minors represented by guardians).
- Steps:
  1. Draft Deed of Extrajudicial Settlement (may include “and Partition” or “and Sale”).
  2. Notarize the deed.
  3. Publish once a week for 3 consecutive weeks in a newspaper of general circulation.
  4. Secure BIR Tax Clearance (file Estate‑Tax Return within 1 year from death, pay estate tax, obtain CAR).
  5. Register deed and CAR with Registry of Deeds; annotate on the TCT/OCT.
Judicial Settlement – Special Proceedings
- Necessary if: there is a will for probate, minors/contested claims, unliquidated debts, or disagreement among heirs.
- Court appoints executor/administrator; inventory, notice to creditors, distribution, partition, and project of partition approved by court (Rule 90).
Small‑Estate (Summary) Settlement
- For estates ≤ ₱10 million (Sec. 2, R.A. 11213 Implementing Rules) or as adjusted; local trial court may summarily authorize settlement and distribution.

6. Effect on the Surviving Co‑owners

Issue	Rule	Citation
Management	Before partition, surviving co‑owners manage the whole vis‑à‑vis the heirs of the deceased. Ordinary acts need majority interest; alteration/disposition needs unanimity.	Art. 497
Expenses/Taxes	Heirs inherit both benefits and burdens. Necessary expenses for preservation are pro‑rated by ideal shares.	Arts. 488‑492
Right to Possess	Heirs may use pro‑indiviso but must respect similar right of others.	Art. 493
Alienation	Any co‑owner (including an heir) may sell or assign his ideal share; buyer enters co‑ownership.	Art. 493
Legal Redemption	If share is sold to outsider, other co‑owners may redeem within 30 days.	Art. 1620

7. Partition versus Continuation of Co‑ownership

The law favors partition (Art. 494):

Extrajudicial Partition (included in EJS).
Judicial Action for Partition – if any heir or co‑owner refuses.
Impossibility of Partition – court may order sale at public auction and division of proceeds (Art. 498).

Exceptions where partition may be refused (Art. 494):

When property is indivisible by nature or law (e.g., condo common areas).
When partition would render the thing unserviceable.
By agreement of the co‑owners (max 10 years, extendable).

8. Transfer‑of‑Title Workflow (Real Property)

Secure certified true copy of the existing TCT/OCT.
Pay estate tax (NIRC rate: 6 % of net estate; due within one year; penalties thereafter).
Get eCAR and Tax Clearance Certificate from BIR.
Pay local transfer taxes:
- DST – 1.5 % of the market value of the share transferred (if by deed of sale or partition with unequal values).
- LGU Transfer Tax – up to 0.75 %.
File with Registry of Deeds: original owner’s duplicate title, EJS/partition deed, eCAR, tax receipts, proof of publication.
Issuance of new TCTs:
- If co‑ownership continues – annotate heirs as new registered owners pro‑indiviso.
- If partitioned – cancel old title, issue separate titles reflecting specific lots or condominium shares.

9. Special Situations

Situation	Special Rule
Conjugal/Community property	Decedent’s one‑half conjugal share is what transmits; surviving spouse retains the other half (Art. 100).
Agrarian reform land	CARP retention/transfer restrictions; heirs must be qualified farmer‑beneficiaries.
Indigenous ancestral land	Must comply with IPRA (R.A. 8371) and customary law; NCIP clearance required.
Foreign heirs	May inherit but ownership of lands subject to constitutional 40 % foreign equity limit; or land converted into corporate shares.
Corporate shares held in co‑ownership	Shares are personal property; transfer via secretary’s book, BIR taxes still apply (capital gains or DST).
Trust or Life Insurance	Proceeds generally outside the estate (Art. 896) unless revocable.

10. Timelines & Prescription

Action	Prescriptive/Statutory period
Estate‑tax return/payment	Within 1 year from death (Sec. 90, NIRC) – extendible by BIR for meritorious reasons (max 5 years).
Legal Redemption	30 days from notice of sale to outsider (Art. 1623, by analogy).
Action to Annul EJS for fraud	4 years from discovery; absolutely 10 years from execution (Rule 74 §4).
Partition action among co‑owners	Imprescriptible while co‑ownership subsists, but laches applies.

11. Practical Checklist for Heirs & Surviving Co‑owners

Secure documents: death certificate, marriage/birth certificates, titles, tax declarations, valid IDs.
Locate or probate the will (within 1 year ideally; Rule 75).
Inventory assets & debts; engage a licensed appraiser for fair‑market values.
Choose EJS or judicial settlement depending on debts and disputes.
File Estate‑Tax Return; pay tax or avail of amnesty if qualified (until June 14 2025 under latest extension).
Publish Rule 74 notice if EJS.
Register deed and secure new titles.
Agree on management or proceed to partition; execute a co‑ownership agreement if continuing.
Update tax declarations and pay real‑property taxes annually.
Record any subsequent sale or renunciation promptly to avoid redemption issues.

12. Common Pitfalls

Assuming property “automatically” transfers to surviving co‑owners without paying estate tax.
Skipping publication of the EJS: title transfer may be annulled for non‑compliance.
Ignoring outstanding debts: heirs become personally liable up to the value they received.
Selling a specific physical portion when the property is still undivided.
Letting estate tax and surcharges balloon; penalties can equal or exceed the tax.

13. Conclusion

In Philippine law, the death of a co‑owner triggers two distinct legal regimes: succession (to determine who inherits) and co‑ownership (to govern how the surviving parties manage, redeem, or partition the property). Mastery of both frameworks—and of the procedural steps before the BIR, the courts, and the Registry of Deeds—is essential to protect the rights of heirs and other co‑owners, avoid tax liabilities, and keep the title chain clean. Because nuances abound (conjugal shares, agrarian limits, pending mortgages, foreign heirs, estate‑tax amnesty windows), professional legal and tax advice is indispensable for any substantial estate.

(Updated as of April 17 2025. This article is for general information only and does not substitute for individualized legal counsel.)