What All Inheritors Must Know About Inheritance Transfer in India
All NRI’s confront the situation of inheritance transfer in India. Lack of required information compels legal heirs to relinquish/abandon their rightful claim. The following blog is an attempt to provide information to all about their rights and legal process involved in transfer of inherited assets from estate of the deceased to estate beneficiaries.
The process of ownership transfer of inherited assets in any country is clearly defined in laws of succession, evidence, and registration. Debts and Liabilities of the deceased are paid, and title of net assets is transferred from the deceased to his/her legal heirs or estate beneficiaries.
Natural succession grants equal rights to all legal heirs in inherited assets. Anyone claiming otherwise, on any ground whatsoever, must establish his/her right in compliance with prescribed laws. Burden of proof is on the claimant before depriving other legal heirs of their rightful share.
Inheritance transfer requires legal analysis of various existing documents, creation of new ownership documents, registration with appropriate civil authorities, court action, and payment of stamp duty & court fee. Hence, it is advisable that all legal heirs conduct or participate in asset transfer with assistance of his/her own attorney specializing in inheritance transfer and property laws.
Step-by-Step Process of Asset Transfer from Estate to Estate Beneficiaries
The transfer process is known as settlement of the estate and may be divided into six easy steps. Ownership rights emanate only after completion of all steps.
Step One: Inventory of Assets and Liabilities
Legal heirs must determine net assets of the deceased to be transferred. Net assets are assets minus liabilities. All documents evidencing ownership of assets and liabilities must be collected.
Ownership documents may consist of deeds of properties, title of vehicles, passbooks of bank accounts, Certificate of fixed deposits, stocks, bonds, documents of bank lockers, third-party amount receivables, policy of life insurance, pension documents, etc.
Liabilities documents are medical and funeral bills, outstanding mortgage, third-party loans, income tax, utility bills, credit card statements, etc.
Step Two: Determining rights of legal heirs (by Legal Heir Agreement or Court
Action) and opening the estate
After legal analysis of all existing document and estate planning documents, i.e., Will or Trust, if any, legal heirs must make a determination whether they would transfer assets by Legal Heir Agreement or Court Action and Supervision.
Settlement of estate by “Legal Heir Agreement” is possible only when all legal heirs consent - willingly, knowingly, voluntarily, without duress and/or undue influence.
There is no automatic transfer, even where existence of “Will” is claimed. “Will” is a legal document which must meet certain basic requirements of “Indian Succession Act” and “Indian Evidence Act” to be valid. Hence, validity and proper execution of the same must be established by the claimant.
Transfer through “Will” by “Legal Heir Agreement” may be done if all legal heirs execute Affidavit of “No Objection”. Refusal by even one legal heir compels court action.
The estate is opened in the Court by filing either Petition for Probate or Letter of Administration, or Suit for Declaration (of rights of legal heirs), Partition, and rendition of accounts.
Step Three: Obtaining Valuation of all assets
After determination of rights of all legal heirs and appointment of administrator/ legal representative of the estate, by agreement or court action, administrator obtains valuation of all assets left behind by the deceased.
Step Four: Paying liabilities - Debts, Loans, Bills, and Taxes
Before transferring any asset to any legal heir, administrator/legal representative of the deceased owner is required to pay all debts, liabilities, bills, and taxes of the deceased out of estate assets.
Step Five: Transferring Ownership of Estate Assets from Estate to Estate
After discharging all liabilities of the deceased owner, the Executor/Administrator begins title transfer of all net assets from estate to estate beneficiaries in compliance with law. He/she hands over possession, title deeds and transfer documents to the beneficiary entitled for the same. Cash assets may be transferred by check.
Transfer documents of Real Estate must be registered with office of sub-registrar where property is located after payment of stamp duty and registration.
The amount of stamp duty depends upon what transfer document is being registered. The stamp duty payable for registration is nominal if ownership is transferred by duly executed “Relinquishment Deed” and “Affidavit of No Objection for transfer”, in place of “Executor Deed”, “Administrator Deed”, "Partition Deed" or "Family Settlement Agreement", which require set percentage of value of the property being transferred..
After registration, legal heirs may execute document confirming possession, transfer, and recordation to avoid any future claims.
After recording transfer in the records of the Sub-Registrar, new owner must file Application for Mutation with municipal corporation to enter his/her name in revenue records evidencing person responsible for payment of property tax. New owner also must get utility bills transferred in his/her name.
If any property was rented, new owner must send notice to tenants, execute new rent agreement, and begin collecting rent as new owner.
Step Six: Closing the Estate
After payment of liabilities of the estate, transfer of all assets from estate to estate beneficiaries, handing over of legal possession and all title documents, executor/ administrator prepares record of all actions taken. If transfer occurs through court action, report is submitted before the court. In case of transfer through settlement, memorandum is prepared and copy provided to all beneficiaries.
After completion of above six steps, the estate is closed.
Author: Santosh Kalra Pawar is a practicing attorney in the State of New York. She specializes in U.S. Immigration, Family Law, Adoption, Real Estate Closing, as well as NRI legal consulting on Estate Closing (Inheritance transfer and property matters). She is a law graduate from University of Delhi, India and has attended Syracuse Law School in New York. She practiced as an attorney in India from 1984 to 1989 and has been a practicing attorney in the State of New York since 1993. For more information, case evaluation, and legal assistance, please feel free to contact at Santosh@attorneypawar.com