"Legal Heir/Family Settlement Agreement” – A Powerful Tool to Distribute Inheritance in India

April 14, 2021

Santosh K. Pawar, Esq.



"Legal Heir Agreement" also known as "Family Settlement Agreement" is a time and cost effective option for distributing inheritance in India. This option is available to legal heirs ONLY when all agree. No reason or justification is required for not opting for Distribution by Agreement and requiring Court Order for the same.


WHY IS DISTRIBUTION/TRANSFER OF INHERITANCE MANDATORY


Distribution/Transfer of assets of the deceased is mandatory to transfer ownership rights from deceased/Estate of the Deceased to successors.


No one has any right to use and/or transfer (to himself/herself or to any third party) any asset left behind by the deceased till authorized.


All assets of the deceased are automatically owned by his/her estate, a separate legal entity which comes into existence immediately upon his/her death.


The Estate continues to own all assets left behind by the deceased till assets are lawfully transferred.


HOW DOES THIS PROCESS OF ESTATE DISTRIBUTION BEGIN?


The process begins with appointment of legal representative of the Estate of the Deceased.

Legal Representative must be appointed by unanimous agreement of all legal heirs OR by the Court Order.


Legal representative is known as "Administrator of the Estate". If anyone claims existence of "Will" of the deceased, such legal representative is known as "Executor of Will" of the Deceased.


Administrator/Executor, after due appointment, is responsible to collect assets, prepare inventory of assets and liabilities of the deceased, provide copy of the same to all legal heirs for approval, pay outstanding debts of the deceased, manage assets till transfer, file income tax returns of the deceased and the Estate of the deceased and transfer assets in compliance with law.


HOW ARE RIGHTS/CLAIMS IN THE ESTATE DETERMINED?


All legal heirs, male or female, have equal rights/claim in the Estate of the deceased.


Anyone, intending and/or attempting to deprive any one or more legal heirs of his/her equal right in the Estate of the Deceased, on any ground whatsoever, must do so either by Agreement OR by establishing his/her claim in court of competent jurisdiction and obtaining court order for the same.


Option to distribute assets of the Estate of the deceased by AGREEMENT, in place of distribution by COURT ORDER is available ONLY when all legal heirs unanimously agree.


No legal heir is required to provide any reason or justification to refuse to opt to settle by agreement.


Refusal by any one or more legal heirs requires court action and court order.


Let us explore contents and process of execution "Legal Heir/Family Settlement Agreement” for distribution of inherited assets.


“Family Settlement/Legal Heir Agreement” is not a transfer document. It is an outline of intentions of all legal heirs for further actions for transferring ownership and possession. It must contain -:

  1. Disclosure of all assets and liabilities of the deceased along with supporting documents establishing ownership and outstanding liabilities;

  2. Disclosure of Estate Planning Documents of the Deceased, if any, i.e., "Will", "Trust", etc.

  3. Unanimous agreement of all legal heirs to distribute inheritance provided freely, voluntarily, without any coercion, undue influence, fraud and/or misrepresentation;

  4. Approval of terms and conditions of the Agreement with knowledge and understanding of the same;

  5. Legal capacity of all parties, i.e., each party is at least 18 years old and not suffering from any mental incapacity; and

  6. Execution/signing of the document in compliance with law in the presence of at least two independent witnesses, who also sign in the presence of signatories.

“Family Settlement Agreement” is a legal document which determines not only inheritance rights of all legal heirs but also lawful and equitable distribution of Estate assets.


Hence, it must be prepared by and executed under supervision of experienced legal professionals.


Each legal heir must obtain legal advice from his/her own independent legal professional prior to entering into such agreement.


The contents of settlement agreement depend on various factors and mutual agreement parties.



Sample Legal Heir/Settlement Agreement

for Appointment of Administrator and Distribution of Inheritance


This Legal Heir/Family Settlement Agreement is made at _________ on the ______ day of ________, 20___, to distribute assets of The Estate of ____________________, by and between


(Enter full name, date of birth and address of each party to the Agreement)

1.

2.

……




PREMISES


WHEREAS, ____________ (name of the deceased) passed away on _______ (date of death) at _____________________ (place of death); and


WHEREAS, permanent residence of _________________ (name of the deceased) at the time of his/her death was _______________ (full address of the deceased); and


WHEREAS, __________________ (name of the deceased) left behind ____ class-I legal heirs, who are parties to the present agreement; and


WHEREAS, there are no other class-I legal heirs (other than the parties hereto), left behind by ______________, (name of the deceased) the deceased; and


WHEREAS, each party declares under penalty of perjury that he/she has fully and accurately disclosed all financial facts and information in his/her possession and personally known to him/her to all other parties to this agreement regarding the existence, characterization, and valuation of all assets and liabilities of the Estate of the Deceased.


WHEREAS, the Estate of __________(name of the deceased), deceased consists of moveable and immovable assets, which are subject to partition among lawful owners; and


WHEREAS, the parties desire to enter into a comprehensive settlement agreement among themselves which will fairly and equitably settle their present and future rights and claim in the Estate of __________ in all respects;


WHEREAS, the parties understand that instead of entering into this agreement they have a right to proceed with court action and seek a judicial determination of the issues covered by this agreement but, notwithstanding such right, the parties desire to avoid the delay, expense, and risk of litigation and that they believe that their interests would be better served by the terms and conditions of this agreement; and


WHEREAS, each party has been fully advised with respect to the legal, financial, and practical effect of this agreement by their respective counsel; and


WHEREAS, the parties mutually intend this agreement to be a final disposition regarding the estate settlement issues addressed herein.


NOW, THEREFORE, based upon the above-stated premises, and the terms and provisions specified below, that parties agree as follows:


ARTICLE I.

COMPLETE AND ACCURATE FINANCIAL DISCLOSURE


Each party, hereby, represents and declares under penalty of perjury that he/she has made complete and accurate disclosure of all financial information known to him/her to other parties to this agreement regarding the existence, characterization, and valuation of all assets and liabilities of the Estate of the Deceased.


Each party represents and acknowledges that he/she may face civil as well as criminal legal consequences for knowingly suppressing any financial information regarding any asset of the Estate from other parties to the agreement.


ARTICLE II.

ASSETS OF THE ESTATE OF ________ (name of the deceased)


Based on information and enclosed documentary evidence, the Estate of ____________, deceased consists of the following assets which are subject to distribution in compliance with law:


(Enter description, name on title document, and value of each asset owned by the deceased on the date of death):

  • Real Estate:

(Enter details, title ownership and approximate value of each property, if applicable, e.g., Residential House, located at ________________ in the name of ________, valued at __________);

  • Cash Assets:

(Enter amount and location of all cash assets, if applicable, e.g., Sum of ______________ at home/locker);

  • Bank Accounts

(Enter balance amount, account number, name and location of bank for each account, if applicable, e.g., Sum of ____________ in Account # ____________ in the name of __________ in ________ bank)

  • Shares and Stocks:

(Enter share/stock number, name of company, and present value of each share and/or stock, if applicable, e.g., Share # _______ of _______ (name of company) in the name of _________, valued at _______);

  • Business Interest:

(Enter name of business and value, if applicable, e.g., Business interest in ________________ (name of business) valued at ______________);

  • Loans to Others and Accounts Receivable:

(Enter amount, name and address of each debtor, if applicable, e.g., Sum of _______________ owed by _____________ (enter name and address of debtors);

  • Vehicles (car, motorcycles, etc.):

(Enter description, name of title holder, and present value, if applicable, e.g., ___________ (description), owned by ________, valued at ______);

  • Jewelry, art, household furnishings, precious objects, etc.:

(Enter description and value of each item, e.g., _____________ (description of item), valued at _________);

  • Other assets:



Parties, herein, declare that they do not have information about any other asset of the Estate of ______, deceased.


ARTICLE III:

DEBTS & LIABILITIES OF THE ESTATE OF ________ (name of deceased)


Based on the available information and enclosed documentary evidence, the Estate of _________, deceased has the following outstanding debts and liabilities to be discharged prior to any distribution of assets:

  • Funeral Expenses:

  • Medical Expenses:

  • Amount payable to third parties (e.g., Sum of _________ owed to _______________ (name and address of creditor);

  • Credit Card debts (e.g., Sum of ________ owed to _______________ (name of credit card company);

  • Utility bills (e.g., Sum of _______ payable for ___________ to _____________(name of company);

  • Taxes payable (e.g., sum of _____________ payable to ________ for property tax/Income tax); Etc.

The parties, herein, hereby, represents and declare that they do not have information about any other outstanding debt and liability of the Estate of __________________, deceased.


ARTICLE IV.

APPOINTMENT OF LEGAL REPRESENTATIVE OF THE ESTATE


The parties, hereby, agree to appoint _________ as legal representative of the Estate of ____________ (name of the deceased) and authorize him/her to collect assets, manage and distribute assets of the Estate in compliance with law.


The parties, hereby, authorize and direct Mr./Ms./Mrs. _______________________ to obtain Permanent Account Number (PAN) for the Estate, open separate bank account in the name of the Estate to conduct all transactions on behalf of the Estate, file timely income tax return, pay all outstanding debts and liabilities of the deceased and his/her estate, submit written report and supporting documents of all transactions for approval by all legal heirs.


The parties agree that Mr./Mrs. ___________________, legal representative of the Estate of ________ , shall not distribute and/or transfer any asset of the Estate till all parties approve in writing, all financial transactions undertaken on behalf of the estate.


ARTICLE V.

DISTRIBUTION OF ASSETS OF THE ESTATE


The parties agree that the Estate of ______________ shall be distributed as follows:


  1. ____________________ above-mentioned first party shall be the absolute owner of ___________ ;

  2. ____________________, the above-mentioned first party shall be the absolute owner of _______ ;

  3. That cash assets of the Estate shall be divided as follows:

……

……


ARTICLE VI.

LEGAL CAPACITY OF LEGAL HEIRS


Each party, hereby, represents and declares that he/she is at least 18 years of age.


All parties declare that none of the party is suffering from any mental incapacity to enter into this agreement or any other agreement.


ARTICLE VII.

FREE CONSENT


Each party to this agreement represents, acknowledges and declares that he/she has entered into this agreement freely and voluntarily, without any fraud, coercion, undue influence, or misrepresentation by any party or anyone else, and the parties do hereby ratify, confirm and adopt each and every recital covenants and conditions of this agreement set forth below.



ARTICLE VIII.

KNOWLEDGE, UNDERSTANDING, AND APPROVAL OF AGREEMENT


Each party to this agreement represents, acknowledges, and declares that he/she can read and understand English, has read contents of this agreement, and fully understands every item on this document and its legal, financial and practical effect.


OR

_________ (name of party) represents, acknowledges and declares that the interpreter, ___________ , whose Certification is attached herewith, read to him/her every clause on this agreement in ______ language, a language in which __________ is fluent. The said party understood every clause of this agreement as interpreted.


Based upon such understanding, each party believes that this agreement is fair, reasonable and equitable in all respects and each party approves and executes this agreement freely and voluntarily.


ARTICLE IX.

HEIRS AND ASSIGNS


This agreement shall inure to the benefit of and shall be binding upon, the parties hereto, their heirs, executors, administrators, and assigns.


ARTICLE X:

ENTIRE AGREEMENT


This agreement contains the entire understanding of the parties, who hereby acknowledge that there have been and are no representations, warranties, covenants or understandings by either party to the other, except as expressly set forth in this agreement.


ARTICLE XI.

REVOCABILITY


That this Agreement is irrevocable after transfer of ownership and receipt of possession of asset(s).


ARTICLE XII.

LEGAL REPRESENTATION


Each party has been fully advised of the legal and practical effect of this agreement by his or respective legal counsel.


First party has been represented by: ______________


……


Furthermore, all parties hereby acknowledge and understand that _______ has represented only _______ in connection with the negotiation, preparation and execution of this Agreement.



IN WITNESS WHEREOF, the parties hereto have signed this agreement on the date and year indicated below.


EACH OF THE PARTIES REPRESENTS AND WARRANTS THAT HE OR SHE HAS CAREFULLY READ, UNDERSTOOD AND APPROVED EACH AND EVERY PAGE OF THIS AGREEMENT, INCLUDING EXHIBITS AND ATTACHMENTS, IF ANY, PRIOR TO SIGNING HIS OR HER NAME BELOW AND INITIALING EVERY OTHER PAGE HERETO ATTACHED.


Executed at _________ On ________________.

_____________________________

....……………………., First Party



____________________________

……………………, Second Party




WITNESSES:-


1. __________________

Name

Address

Telephone #

Email#

ID#


2. __________________

Name

Address

Telephone #

Email#

ID #:





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