Roadmap of Title Transfer of Inherited Assets in India - Part 1: General Overview & Options for
"Awareness, Assertiveness, Attitude Change, and Action”, as rightly stated by Justice Leila Seth, are key elements of social progression. All legal heirs, male or female, have equal rights in inheritance. Burden of proof is on the individual/entity, who claims otherwise, and intends to take away fundamental right of any legal heir, and, not on the one, whose rights are being impacted. Familiarity, with applicable property laws as well as succession and inheritance laws, process involved, cost to be incurred, and options available for timely action to protect rights, equips legal heirs with tools to make informed choices and protect their rights.
This article is in three parts. Part I shall discuss general overview and options available to legal heirs in their inheritance, Part II shall explain “Extrajudicial Settlement (Settlement by mutual consent) of Estate, title documents, Stamp Duty and Registration fee payable for title transfer, and Part III shall deal with , “Judicial Settlement (settlement by court order) of Estate, Court fee payable, and court process for title transfer.
Title transfer of inherited assets is not an option, but a necessity. Every asset must have an owner, and owner must be alive. Assets cannot remain in the name of deceased owner.
Secondly, although all legal heirs automatically become joint owners of all assets of the estate, but no legal heir, including surviving spouse, acquires any right, whatsoever, in cash and/or non-cash assets of the deceased till the same are transferred in accordance with applicable legal procedure. No legal heir may withdraw any amount from estate funds even for payment of estate's debts and liabilities without due process of law.
And, thirdly, legal heirs, upon inheriting assets, have legal obligations for payment of taxes in the country of their residence as well as where the assets are located. Non-compliance of the same shall subject legal heirs to severe civil and criminal penalties.
NRI’s - U.S. Citizens and residents, if inherit assets, must comply with IRS reporting requirement for receiving foreign gifts, including bequests exceeding $100,000. They must file IRS from 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, besides reporting and paying taxes from all worldwide income.
Each legal heir must be aware of his/her inheritance rights, legal obligations, title transfer process, and cost involved so that they may make informed decisions to protect their rights, and take timely action.
The process for paying debts and liabilities of deceased & transfer of his/her assets to legal heirs is known as "Settlement of Estate". It must be undertaken with assistance of legal professionals specializing in transfer of property law, succession and inheritance laws. The process requires:
a. Assessment of assets and liabilities of the deceased;
b. Evaluation of title documents of cash as well as non cash assets;
c. Valuation of all assets;
d. Determination of legal rights of heirs in the estate;
e. Preparation/review of title transfer documents;
e. Registration of title transfer documents with competent authorities;
f. Payment of stamp duty; and
g. Mutation in Revenue records.
It may also involve timely filing of court action on disputed issues.
The process of transfer begins with:
Step I: Preparation of Inventory of Assets & Liabilities
Legal heirs must prepare an inventory of all assets and liabilities of the deceased. Copies of title documents of all assets, cash and non-cash, must be obtained. All legal heirs must be provided copies of bank statements, passbooks, life insurance policies, retirement accounts, tax returns for last three years, as well as title deeds of all immovable properties (house, land, commercial properties, etc.) to verify inventory entries.
Inventory of Assets must describe valuation of all assets as well.
Step II: Exploring possibility of settling the estate by Agreement of Legal Heirs
All legal heirs must have copy of “Will”, if deceased left behind a Will. Legal heirs must obtain legal opinion about title documents of all assets as well as estate planning documents, i.e., “Will”.
After reviewing documents and obtaining professional legal opinion, legal heirs explore the possibility of settling the estate by mutual agreement, known as "Extrajudicial Settlement".
If mutual agreement is not possible, any legal heir may seek court intervention on disputed issues. This process is known as "Judicial Settlement"
In brief, till estate is settled either by family agreement or court order, no legal heir, including surviving spouse, has any right to use, transfer, acquire or withdraw any estate asset or collect income (rental or interest) from estate assets. Hence, issues must be timely resolved.
To be Continued-
(Part II of the Article shall describe process of Extrajudicial Settlement, i.e. Settlement by Legal Heir Agreement, required transfer documents, stamp duty, registration fee and registration of documents).
Author: Santosh K. Pawar is managing attorney of Law Firm of Santosh K. Pawar. She is licensed to practice in India and U.S. Her expertise includes consulting on property and transfer of inherited assets in India. Part II of the Article shall discuss “Extrajudicial Settlement (Settlement by mutual consent) of Estate, title documents, Stamp Duty and Registration fee payable for title transfer. For more information and assistance, contact by email at email@example.com, call at (585) 264-1649 or WhatsApp at (585) 474-0935.