Transfer of Inherited Assets in India Part II- “Extrajudicial Settlement” or Settlement by Agreemen
Transfer of inherited assets would not be controversial, time consuming or complicated, if all heirs work together and accept the fact that assets of the deceased are family assets, and all heirs acquired equal joint ownership rights in the same due to their specific relationship with the deceased. It is a right given by nature. It is a right provided by laws of every nation. Why should any heir, male or female, deprive other heir of his/her inheritance or force to him/her to relinquish his/her share in inheritance on any pretext without due process of law?
The following synopsis is based on author's extensive research on “Hindu Succession Act”, “Indian Succession Act”, “Transfer of Property Act”, “The Registration Act, 1908”, as well as “Indian Stamp Act, 1899” and is intended to equip all heirs with essential tools to act fairly and equitably in settling estate of the deceased.
Inheritance is a natural, legal, and constitutional right of all heirs. Compelling anyone to relinquish the same without any valid reason or justification is not only illegal but inherently wrong and immoral as well.
The process of paying debts and liabilities and transfer of all assets of the deceased is known as "Settlement of Estate". The basic premise is:
All heirs acquired equal rights as joint owners in the entire estate of the deceased;
Transfer of title of each asset is a mandatory step for any heir to be legally use, possess, transfer and/or receive proceeds from any asset;
All heirs are in fiduciary relationship with each other till transfer is complete;
Will is not the primary document of title transfer; and
Seeking Partition is a right of every heir which he/she may exercise at any time immediately after passing away of the deceased owner.
Settlement of Estate "by Agreement" in 7 easy Steps
Step 1 - Execution of Legal Heir Settlement Agreement
"Family Settlement Agreement" or "Legal Heirs Agreement" is an arrangement whereby members of a family decide to amicably settle the disputes between them in regard to the properties and assets owned by the family. The said agreement consists of -
All assets and liabilities of the deceased owner;
Individual share of all heirs in the estate;
Appointing one individual/heir to act as administrator or facilitator for settling the estate;
Authorizing administrator to pay debts and liabilities of the deceased; and
Transferring ownership of assets of deceased to his/her heirs.
The said agreement may be verbal or in writing, but no transfer of immovable asset is valid till title transfer is registered with office of public records, i.e. office of sub-registrar.
No agreement or transfer deed is valid until terms and conditions of the same are fair and equitable, and consent is obtained without undue influence, duress, fraud, suppression or misrepresentation of material facts.
“Will” is not the primary document for transfer of assets. It must be accompanied by either court order or consent of all heirs that each one of them relinquishes his/her right to contest the "Will".
In states, like Delhi, where probate is not mandatory, when any heir challenges validity and proper execution of alleged Will, no transfer of title may occur without obtaining court order.
Step 2: Opening of Estate Trust Account in any financial institution
The legal heirs are required to open a trust account in the name of the estate in any financial institution for depositing all of his/her cash assets, and paying his/her debts and liabilities.
Step 3: Obtaining Succession Certificate
Any legal heir may apply for grant of “Succession Certificate” from court.
Succession Certification is a court order determining all legal heirs of the deceased. It is required to collect cash assets of deceased from his/her financial institution(s) as well as paying his/her debts and liabilities.
Step 4: Collecting Cash assets and paying debts and liabilities of the estate
The authority of administrator to begin settlement of estate arises out of Legal Heir Settlement Agreement. He/she collects all assets, deposits the same in trust account of the estate, and pays debts and liabilities of the deceased out of trust account.
The administrator has fiduciary liability towards estate of the deceased as well as heirs. He/she is accountable for all his/her actions. He/she must collect all assets whether in any financial institution, in custody of any individual, or payable by debtors. All cash assets must be deposited in the estate account. If any nominee or surviving joint account holder withdraws money from account/joint account of the deceased, the administrator collects the assets belonging to estate and deposits in trust account.
After paying all debts and liabilities of the deceased, the administrator prepares accounting statement of net assets and provides copy of the same to all heirs for their review.
Step 5: Transfer of Assets
Ownership title of all assets of the deceased owner are required to be transferred to his/her heirs in order for them to acquire right to sell, transfer, rent, or receive proceeds of such assets.
Unless asset is properly and legally transferred, heirs subject themselves to becoming part of ‘benami’ ownership in India. The central government has a right to confiscate the asset (cash as well as noncash) and begin criminal prosecution as well for being benamidar.
Transfer of immovable assets, i.e., house, land, commercial real estate, requires registration with office of public records, i.e. office of sub-registrar, where property is located.
Title transfer of real estate may occur by executing and registering "Family Settlement Agreement", "Mutual Release Agreement", “Transfer Deed”, "Administrator Deed”, “Partition Deed” or “Relinquishment Deed”.
“Partition Deed” may be executed partitioning share of heir(s) if it is feasible to partition any particular asset (known as “Partition in kind”). For example, deceased left three-storey house, and three heirs. Heirs agree to transfer title of one floor each to each heir. OR deceased left behind 10 acres of land and five heirs. Heirs agree to divide the said land in five equal parts. By Partition deed, title of land may be transferred to each heir.
If physical Partition is not possible, legal heirs may agree for “Partition by Sale”, whereby asset is sold and sale proceeds are distributed among heirs.
Step 6: Registration of Transfer Documents
The documents that create or extinguish a right of some nature with respect to immovable property (house, land, or commercial real estate) must be compulsorily registered under “The Registration Act, 1908” (under Section 17 of the Act) with an officer who maintains public record (like a sub-registrar) for registration.
The transfer documents must be registered within four months of execution.
No stamp duty is payable under “Indian Stamp Act, 1899” for title transfer of property acquired by inheritance, as stamp duty is payable only when a property is acquired by way of Sale Deed/Conveyance Deed/Gift Deed.
The registration fee payable for transfer of asset by “Transfer Deed” or “Partition Deed” (in Delhi) is 1% of value as per circle rate plus Rs. 100/- for pasting fee, and for “Relinquishment Deed” is Rs. 1,000 per instrument plus Rs. 100/- for pasting fee.
Step 7: Mutation in Revenue Records
Last step in transfer of title of immovable asset is “Mutation”. It is recordation in public revenue records. The record is updated to show who shall be responsible to pay property tax on the asset. Mutation is not an evidence of title ownership of property. It must be done after title transfer is recorded in office of sub-registrar.
It is time for a change. Think before executing "Relinquishment Deed". Stop supporting wrong and illegal actions. Demand Inheritance. Require claimant(s) to establish his/her claim. Get professional assistance. You owe this to yourself. You owe this to coming generation, your wives, sisters, daughters and many more. Don't let them down, and they won't let you down.
To be continued …
(For information regarding Settlement of Estate by Court Order and process for transfer, read Part III of the Article)
Author: Santosh K. Pawar is an attorney licensed to practice in India and U.S. Part III of the Article shall discuss “Judicial Settlement (Settlement by court order) of Estate, Court fee, and Court action to be taken. Please contact for free analysis and opinion by email to email@example.com, tel. at (585) 264-1649 or WhatsApp at (585) 474-0935.