Is your legacy really yours?

In modern law, the terms inheritance and heir refer exclusively to succession of a property by descent from a person who did not have a Will. When a person with significant assets dies intestate, the estate comes into disrepute with each family member claiming to be the legal heir. To prevent such a situation, the society has evolved codes of conduct, known as succession acts, for identifying the claimants. In the Indian context, the Hindu Succession Act, 1956, and the Indian Succession Act govern the generational transfers of Hindus, Parsis and Christians, among others. The Muslims are governed by their own law. Assets or property owned by a person are of two types: Self-earned or acquired, and inherited ones.

For self-earned wealth, the earner has all the powers to use the wealth, spend, gift, donate or bequeath as he pleases. Disposal by the earner, even if it is in total exclusion of the family, cannot be subjected to successful legal challenge or review. In the Indian context, the disposal of self-earned assets has not been subjected to scrutiny under “sufficiency of family provision” claims.

The second is inherited or ancestral assets. Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. In law, an heir is a person who is entitled to receive a share of the deceased’s property, subject to the rules of inheritance in the jurisdiction where the deceased (decedent) died or owned property at the time of death. A person does not become an heir before the death of the deceased since the exact identity of the persons entitled to inherit is determined only then. Both men and women can inherit properties.

After the amendments in 2005, all descendents of the deceased, including his or her illegitimate children, are entitled to a share of the property inherited.

The Acts referred to the above prohibit the joint inheritors or heirs (also referred to as coparceners) to dispose of the inherited property except as provided by the Act. In simple terms, inherited property cannot be willed away or bequeathed as per sole wishes of any one heir. But distribution shall be made between the family members entitled to receive a share and in the same share as prescribed in the Act. Any inappropriate decision would lead to litigation.

Coparceners need to take special care to keep ancestral properties and accruals separated from their self-earned properties on account of the Hindu Succession (Amendment) Act, 2005. Commingling of such properties is not desired since it could lead to litigation.

A succession plan for inherited properties needs to focus on the following: (i) ensure smooth partitioning between the coparceners through a partition deed. Partitioning should be done by mutual consent of all coparceners. The partition deed should encompass all the assets that are subject to partition. On such transparent partitioning, through a written partition deed duly stamped and registered with the authorities, each recipient becomes single legal owner and can deal with their share as they find fit. Once delineation takes place, the assets can be mingled for better management and control of the enlarged base of properties. (ii) Focus on erasing the “inheritance” label from those assets. If the heir has children the assets inherited from the elders will bear the inheritance label and will remain subjected to the restrictions imposed on their distribution, even if the initial heir creates a Will for its distribution. Non-observance of this leads to legal disputes on Wills while they are being probated. One can, however, erase the label of inheritance by converting the asset into cash and then managing the cash for the benefit of the family. Converting an inherited asset into cash would require consent from all descendents empowering the first heir to sell or otherwise dispose of the inherited asset. (iii) The succession plan is as provided under the statutes.

Proper documentation of the assets inherited and identifying the shares of each eligible claimant as distinctly as possible will help the succession planner to prevent commingling. Bequests are usually of real and tangible personal properties and can be made to relatives, friends and even pets, and causes that are dear to the giver. Bequests can be made both in one’s lifetime through instrument of trusts, or through a Will which reaches the beneficiary after probate of the estate is completed.

Why a bequest? There are many reasons to make a bequest. It allows the giver to honour a loved one or a loved cause. It gives satisfaction to know that the future gift will live on, perpetuating one’s legacy.

Are bequesting and transfer through Wills different? The two terms are interconnected, yet different. Both achieve the same purpose of transferring real assets and other tangible personal property to successors, family members, pets and even unrelated third parties. Wills carry a tone of family succession and transfer of property. Non-inclusion of certain members of the family has the potential of Wills being challenged in a court of law. There are also other issues on which Wills can be subjected to judicial review or decision. Bequeathing is entirely voluntary and the beneficiary may come to know of the windfall only when the Will is taken up by the executor or administrator for implementing, or when the probate process is initiated.

Summary; Any inherited property retains the label of inheritance and cannot be either willed or bequeathed. Dealing and disposing of inherited property in ways other than provided for will be a breach of law. In other words, inherited properties cannot be dealt through Wills or through bequests. 

OLMdesk@outlookindia.com