How to avoid classic problems legal heirs face while inheriting assets

This article aims to share with the readers some of the classic problems faced by legal heirs while inheriting the assets and properties of their predecessors, and simultaneously ways to avoid them.

Legal rights of heirs
Inheritance is a vested interest that the legal heirs acquire and that passes to them after the death of the deceased under the Indian Succession Act 1956

By Rahul Hingmire

In India, the Inheritance law finds its place in multiple statutes and when compared with other laws, it is generally regarded as confusing due to its complex nature. Thus, it is observed that legal heirs are often entangled in unnecessary and highly time-consuming legal proceedings, to stake their claim on the assets and properties. This article aims to share with the readers some of the classic problems faced by legal heirs while inheriting the assets and properties of their predecessors, and simultaneously ways to avoid them.

What is Inheritance?

Inheritance is a vested interest that the legal heirs acquire and that passes to them after the death of the deceased. Under the Indian Succession Act 1956, which applies to the Hindus, Jains, Buddhists, and Sikhs on the death of the deceased.

Absence of a Will

In the absence of a Will or any other testament, all the properties belonging to the deceased, such properties are distributed to all the legal heirs equally. The properties shall include all the properties as on the date of the death of the deceased belonged to him. Many times, equal distribution is not in the lines of a family arrangement previously entered into amongst the members of the family unless the same has been done in a way that has been recorded.

Therefore, it is recommended to have a Will in place to plan succession, especially in the event of any previous family arrangements that have been given effect or not.

Contest to a Will

In the existence of a Will, the Testator (author of the Will) outlines his desire to distribute the assets belonging to him at the time of the execution of such Will. It is pertinent for the Testator to include all his shareholding, ownership, receivables, and entitlements from any individuals or any businesses that he may be a part of.

Such bequests shall also, as much as possible, align with the charter documents of businesses like partnership deed, memorandum, and articles of association of a company where he holds a position as a director or shareholder.

The reason that the bequests under the Will should be in consonance and the lines of such documents is so that the bequests enable the legal heirs to act as assigned to them under the said Will / Testamentary document.

A Will that has been duly executed can be challenged by the legal heirs in the following ways:

(a) By providing a subsequent Will, which may or may not have been registered; such challenge can be defended by stating based on the point of registration or non-registration of the subsequent Will.

(b) Will can also be challenged on the lines of the authenticity of the same, which authenticity can be proved by the attesting witnesses;

(c) An execution of a Will can also be challenged based on the Testator not being of legal sound mind, which can be authenticated by providing a medical certificate.

Inheriting ownerships/shares of businesses

Private Partnership/ Limited Liability Partnership: If the Testator is a partner in a partnership firm or a partner in a limited liability partnership, and any bequest is made based on the holding of the partnership shares, the Will of the Testator must be aligned with the Partnership deed. Such Partnership Deed should contain a clause that states what shall follow in the event of the death of a partner: whether the legal heirs get inducted as new partners or whether the partnership dissolves on the demise of a partner. And any such event shall be by the rules and regulations of the respective partnership acts.

Companies (As per the Companies Act, 2013): When a bequest is made wherein the Testator holds shares or is a director or holds any other position in a private limited company, the Will needs to be drafted in a way that allows the legal heir, to whom such bequest is made, is allowed to give effect to the said bequest. Such a bequest should be made keeping in mind the nomination forms as submitted with the company and its officers, as may be required under the applicable laws. In the event of a different bequest, the nomination forms can also be corrected to align with the terms of the Will.

However, it must be noted that nomination does not amount to the transfer of shares to the nominee in the event of the death of the shareholder/owner. It only amounts to a temporary transfer until the Will is probated and has been finally given effect by the executor of the Will.

Private Trusts

When it comes to trust, whether under the Indian Trusts Act or in Maharashtra, the Bombay Public Trusts Act, the trust deed shall be the charter document of deciding the consequences of the death of a testator or the trustee. A testator cannot transfer his rights and interests that vest in him under his Will unless the same has been specifically provided under the trust deed.

Such consequences may mention the dissolution of the trust and further steps to be taken by any such person as has been mentioned in the trust deed. In the event the trust deed is silent, the Indian Trusts Act and Bombay Public Trust Acts help decide the steps thereafter, as the case may be.

Hindu Undivided Family (HUF)

In the existence of a HUF, it is generally advised that a HUF deed should be entered into by the Karta that mentions his legal heirs/coparceners.

It is of great importance that the Testator should not confuse the properties owned in his capacity and the properties under HUF. And that such distinction should also, as far as possible, be mentioned in the bequest under the Will.

Tenancy Rights

In the case of a tenancy, tenancy passes on to a member of the tenant’s family who has been residing with the deceased tenant or operating the premises for commercial purposes at the time of his death subject to the consent and confirmation of the landlord. It is important to note that the tenancy rights cannot be inherited by legal heirs. In the event Testator is a landlord and after the death of the landlord, the tenancy does not terminate until the legal heirs of the landlord issue notice to the tenants terminating such tenancy.

The laws of inheritance are a highly complex subject, therefore it is strongly recommended to consult with a trusted legal advisor, in this regard.

(The author is Founding Partner at Vis Legis Law Practice, Advocates. Views expressed are personal.)

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