What Every Legal Heir Must Know About Process of Transferring Asset of the Deceased in India
January 26, 2022
Author: Santosh K. Pawar
Inheritance is a right of every legal heir. No one has any authority to deprive any legal heir of his/her right without due process of law.
Law prescribes process to transfer property, whether it is cash or Real Estate, whether transfer occurs by Sale, Gift or Inheritance.
Compliance with prescribed laws is mandatory for all legal heirs, whether it is surviving spouse, sons or daughters.
Assets of the Deceased must transfer. Owner of any asset must be a living person. Hence, transfer process must begin immediately after death of asset owner.
Where to begin? Let us get familiar with basic concepts and processes.
Who owns assets of the Deceased upon his/her death? Who may initiate transfer process? Who is authorized to transfer assets of the Deceased? What options, if any, do Legal Heirs have in initiating the process?
For Sample format of initiating document, “Legal Notice”, click the link below.
I. Key Concepts
a. “The Estate of the Deceased”
"The Estate of the Deceased is a legal entity which comes into existence immediately upon death of any asset owner, by operation of law. "The Estate" becomes exclusive owner of all assets, cash and property, left behind by the deceased. Income, rental, interest, business, etc., generated by any asset of "the Estate" is income of "the Estate" till assets are lawfully transferred from "the Estate" to lawful successors.
The Estate” is an independent taxable entity, who obtains its own tax ID/PAN (Permanent Account Number), opens its own bank account and must file its separate income tax return till its assets are transferred.
b. "Administrator"/"Legal Representative”
“The Estate" operates through its duly appointed officer, known as “Administrator” or "Legal Representative".
"Administrator/“Legal Representative” is appointed either by court order OR unanimous agreement (where applicable) of Legal Heirs. He/she has limited role and performs ONLY the following administrative functions:
Gathering information and collecting assets of the Estate;
Marshaling Assets OR Preparing inventory of assets and liabilities of the Estate;
Notifying legal heirs & providing factual information of assets, liabilities and all financial transactions conducted by him/her on behalf of "the Estate"
Obtaining tax ID for "the Estate";
Opening bank account in the name of "the Estate";
Paying outstanding debts and liabilities of the deceased;
Filing Income Tax Returns of the Estate;
Seeking determination of rights of all legal heirs; and
Distributing and transferring assets of the Estate to lawful successors in compliance with law.
c. Lawful Successors/Legal Heirs
Who are lawful successors of assets of “the Estate of the Deceased”?
All Legal heirs (surviving spouse, son(s) and daughter(s)) are lawful successors of assets of "the Estate" and have equal share in each asset of “the Estate” till established otherwise.
Who must establish that any one or more legal heir(s) is/are not entitled to equal share in any asset of "the Estate"?
Whoever claims, that he/she is entitled to share of any other legal heir in any asset of "the Estate", on any ground, whatsoever, must prove that he/she is entitled to do so.
d. Who is Authorized to Initiate the Transfer Process?
Any legal heir, i.e., surviving spouse, son(s) or daughter(s), may initiate the transfer process.
II. Options for Legal Heirs -
i. Unanimous Agreement OR Court Proceedings
Transfer of assets from "the Estate" to lawful successors occurs either by unanimous consent of all legal heirs, where permitted, or by Court Order.
Court Order for Transfer of any asset of the Estate of the Deceased is mandatory, when:
Legal Heirs do not have unanimous agreement on appointment of legal representative OR transfer of any asset of the Estate;
The Deceased, at the time of his/her death, resided within local limits of the jurisdiction of the High Court of Mumbai, Chennai, or Kolkata,
The Deceased left any asset in the local limits of the jurisdiction of High Court of Mumbai, Chennai or Kolkata.
If Legal Heirs unanimously consent, they execute "Legal Heir Agreement" and other transfer documents to transfer each asset of "the Estate".
If “Legal Heir Unanimous Agreement"” is not available for any reason, whatsoever, legal heirs have no option but to file legal proceedings in court of law to proceed further.
ii. Notifying Legal Heirs
The process begins by notifying all legal heirs about intent to initiate the process to transfer assets from “the Estate” to "lawful successors".
Anyone who has claim against "the Estate" s may initiate the process by service of "Legal Notice" upon other claimants/legal heirs.
"Legal Notice " states intent, claim of the person serving Notice, and proposal to settle/transfer assets of "the Estate".
Anyone claiming existence of “Will” of the Deceased, and transfer of any asset of “the Estate” based on claimed “Will”, must provide copy of claimed “Will” to all legal heirs.
Other legal heirs have an option to accept or refuse the proposal or make a counter offer.
Every legal heir has right to require claimant of "Will" to obtain court order certifying that the claimed "Will" is valid and properly executed by the Deceased, as alleged.
No legal heir is required to provide any reason or justification for exercising his/her right.
No claimant of "Will" has any right or authority to compel other legal heirs to relinquish his/her rights in any asset of the Estate.
No means no. If unanimous agreement of legal heirs does not exist, the claimant has no option but to obtain court order.
iii. Executing “Legal Heir Agreement”
Initiating Court Proceedings
If legal heirs UNANIMOUSLY agree on all issues, they execute “Legal heirs Agreement” (where permitted) to proceed further. The agreement outlines all factual details and appointment of legal representative of “the Estate”.
The legal representative of the Estate proceeds with opening the Estate, preparing inventory of assets and liabilities, provides copies of the same to all legal heirs for their review, and once approved by all legal heirs, pays outstanding debts, filed income tax returns of the Estate, and transfers assets of the Estate.
Whenever, legal heirs do not have unanimous agreement, for any reason, whatsoever, there is no option but to initiate court proceedings.
Any legal heir may initiate court proceedings for administration of "the Estate" or partition of share from "the Estate".
Upon filing of court proceedings, court notifies other legal heirs by service of summons and copy of petition filed.
Other legal heirs file responses and present their respective claims before the Court.
The Court frames issues, conducts trial on disputed issues, and renders judgment.
The court appoints legal representative of “the Estate” and supervises the entire process from opening, administration, and closing of “the Estate”.
To conclude, no asset of “the Estate of the Deceased” is permitted to be transferred till legal heirs undergo prescribed legal process.
P.S.: Please click the link for sample “Legal Notice”.