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Wills, Partitions & Successions - Jairam Chandnani - LEXIM ASSOCIATES 05 th January, 2008.

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Presentation on theme: "Wills, Partitions & Successions - Jairam Chandnani - LEXIM ASSOCIATES 05 th January, 2008."— Presentation transcript:

1 Wills, Partitions & Successions - Jairam Chandnani - LEXIM ASSOCIATES 05 th January, 2008

2 Hindu Succession Act

3 LEXIM ASSOCIATES 3 Succession Law Person Dies No Will – Intestate Hindu, Jain, Sikh Hindu Succession Act Christian, Parsi, Jew Indian Succession Act Muslim Muslim Law Makes a Will -Testate Hindu, Christian Parsi, Jew Sikh, Jain Indian Succession Act Muslim Muslim Law

4 LEXIM ASSOCIATES. 4 HSA Application Hindus, Jains, Sikhs, Buddhists Not to Muslims, Christians, Parsis, Jews Overrides all Customs, Traditions, etc. Applies when a Hindu dies intestate Without making a valid will Succession to property then fixed by HSA and not by his wish / will Therefore, advisable to make a Will

5 LEXIM ASSOCIATES 5 Intestate Male Firstly – Class I Heirs Secondly – if no Class I, then upon Class II Heirs Thirdly – if no Class II, then Agnates Lastly – upon Cognates

6 LEXIM ASSOCIATES 6 Female Intestate Foll. property absolute property Inheritance Partition In lieu of maintenance By gift Own skill By purchase She can deal with this property as she likes Can will it away to whomever she likes Exception

7 LEXIM ASSOCIATES 7 Female Intestate Firstly Children, Children of pre-deceased Children, Husband Secondly Husbands Heirs Thirdly Her Parents Fourthly Her Fathers Heirs Lastly Her Mothers Heirs

8 LEXIM ASSOCIATES 8 Female Intestate Exception – s.15(2) If property inherited from her parents & She dies w/o any children Property Fathers Heirs & not to her Husband /his Heirs If she leaves behind a child

9 LEXIM ASSOCIATES 9 HSA Share in HUF Can be willed away Else devolves on surviving members Not as per HAS Rules but by survivorship E.g. HUF has 4 members. Karta dies. Share of other 3 members increases by survivorship.

10 LEXIM ASSOCIATES 10 HSA Amendment in 2005 Amdt. Introduced in Central Act Daughter of a co-parcener shall: by birth become a co-parcener in her own right as a son; have same rights in HUF as a son; be subject to same liabilities in respect of HUF property have a share equal to a Son Daughters can now become a Karta? What happens after her marriage? Date of Amendment: 9 Sept 2005

11 LEXIM ASSOCIATES 11 HSA Amendment in 2005 Does amended section apply to: Daughters born after this date? Daughters married after this date? All daughters, married or unmarried, but living as on this date? Mah State Amdt provided similar benefits But only to daughters married before 22 June 1994 Same position applicable after Central Act?

12 Wills

13 LEXIM ASSOCIATES 13 Wills-Definition A wish, desire, choice, etc of a person as regards disposition of his property after his death ISA, 1925: Legal declaration of testators intention with respect to his property which he desires to be carried into effect after his death General Clauses Act: A codicil and every writing making a voluntary posthumous disposition of property

14 LEXIM ASSOCIATES 14 Characteristics Legal declaration of Testators Intention As regards his property Manifests only after the testators death Will not valid till testator is alive Speaks from the Grave Can be revoked at any time and end number of times by the testator in his lifetime

15 LEXIM ASSOCIATES 15 Why make a Will? Have complete discretion on distribution of property after death to persons of your choice Reduces succession disputes Good way to reward someone by willing a part of your wealth to him post your death Better to make a will at an early age due to uncertainty of life- No limit on number of revisions to a will

16 LEXIM ASSOCIATES 16 Wills - Terms Testator Beneficiary/Legatee Estate Executor/Executrix Bequest Bequeath Witnesses Life-interest beneficiary Codicil

17 LEXIM ASSOCIATES 17 Who can Make? Major person- of sound mind Male as well as Female An intoxicated person / one who does not understand what he is doing? Deaf / Dumb / Blind? Ordinarily Insane?

18 LEXIM ASSOCIATES 18 How to Make? Write / type Signature / thumb mark of Testator 2 Witnesses to signature of Testator Appoint Executors Date the will Designate legatees / beneficiaries

19 LEXIM ASSOCIATES 19 What can be Bequeathed? Any Property- land, bldg., flats, shares, bonds, money, personal effects, cars, prized possessions etc. Must be legally transferable Tenanted Premises? Property must be owned by Testator Share in HUF property?

20 LEXIM ASSOCIATES 20 Who can be a Beneficiary / Legatee? Any one –relative/friend/employee/servant? Minor/lunatic? Co. can be made a Beneficiary under a Will? Animals can be made a Legatee under a Will? If legatee dies before testator? If 2 legatees ~ 1 dies? Joint death of testator & legatee?

21 LEXIM ASSOCIATES 21 Types of Bequests Conditional Precedent Subsequent Specific v General Legacy Distinguishable from other assets Specific gets priority if estate inadequate for all

22 LEXIM ASSOCIATES 22 Executors Selection Criteria: Someone close to testator Should be willing to be an executor Better to check with him beforehand Duties Provide for all funeral expenses of the testator Pay off all debts Cannot refuse to act once accepted

23 LEXIM ASSOCIATES 23 Witness Should be attested by 2 or more witnesses Witness should have seen the testator sign/affix mark Must receive a personal acknowledgement of the testators signature WHO?- Need not know contents of will

24 LEXIM ASSOCIATES 24 Wills Wills & Other Laws: Is Stamp Duty payable? Is Registration a must? Are Takeover Regulations applicable?

25 LEXIM ASSOCIATES 25 Nomination Wills v Nomination ~ What Prevails? Always Wills Nominee Only a stop-gap arrangement till Estate executed & bequests made Plugs gap between Death of a Person and Bequest to a person Once Will executed, nomination automatically ends Exception?

26 LEXIM ASSOCIATES 26 Revocation Irrevocable only after death Revokes by marriage? By making a new will / codicil By destroying existing will

27 LEXIM ASSOCIATES 27 Wills - FAQs Is a person legally required to make a Will? What happens if a person dies without a Will? Is a Will final forever? What is the Legal Format for a Will? Can one distribute everything in his lifetime? Can an illiterate make a Will? Should every page of a Will be signed?

28 LEXIM ASSOCIATES 28 Wills - FAQs Can one Will away everything to Charity? Can a Muslim make a Will? Can one exclude close family and select distant relatives / friends? What happens if more than Will is produced? Should every property be mentioned?

29 LEXIM ASSOCIATES 29 Wills & Tax CGT on Transfer of asset under a will COA of Legatee Period of holding of Legatee Indexation Taxation of Income of deceased Executor entitled to recover the tax paid from the estate of the deceased

30 LEXIM ASSOCIATES 30 Wills - Probate What is it? Copy of the will certified by Court seal Establishes authenticity/finality and validates all acts of executors Probate - Process Application to Court Will copy Court fees Why required?

31 LEXIM ASSOCIATES 31 Wills - Probate Onus of proving genuineness of Will is on one who claims it to be genuine He must also dispel all suspicious circumstances Court expects all legitimate suspicion to be removed before accepting the Will as genuine. K Laxmann (SC) Shashikumar Banerjee (SC) Court to consider genuineness & expln. of all suspicious circumstances Lalitaben J Popat, (SC)

32 HUF Partition

33 LEXIM ASSOCIATES 33 HUF Partition HUF consists of lineal male descendants from a common ancestor + their wives Now even Daughters are included Partition: Defining of the shares of coparceners in Joint Property Division of Joint Family by a definite + unequivocal indication to separate

34 LEXIM ASSOCIATES 34 HUF Partition Hindu Law recognises Total & Partial Partition IT / WT recognises only Total Partition Partition defn. (IT) : Physical division, if so capable or else such division as property admits – mere severance of status is not a partition Partial Partition defn. (IT) : Partial as regards HUF property or Members of the HUF or both If Tax not an issue, can have Partial Partition

35 LEXIM ASSOCIATES 35 HUF Partition Manner of Partition: Oral Partition By a Suit By an Agreement or Deed of partition By an Arbitration Award

36 LEXIM ASSOCIATES 36 Stamp Duty Duty under various Articles Instrument of Partition : 2% on the Market value of the Separated Share of the Property Value on which Stamp duty is leviable: Total FMV of Property less the Largest Share partitioned If all Shares are equal, then deduct any one Share

37 LEXIM ASSOCIATES 37 Registration of Agr. Sardar Singh / Kashinath Sa (SC) If it creates right, title & interest in Imm. Prop. then compulsorily Registration If a mere declaration of a pre-existing right or reference to past partition & not creating right in praesenti – then No Registration Unregistered Agr. inadmissible as evidence It is a Valid Agr. not a Waste Paper Creates rights & obligations between parties

38 Family Arrangement

39 LEXIM ASSOCIATES 39 Family Arrangement Meaning & Relevance Maximum disputes take place within Family Members rather than among Strangers FA is one of the oldest ADR mechanisms Scope of FA is extremely wide – even recognised in English Law Instances : Ambanis, Bajajs, Modis, Ranbaxy, Mafatlals, etc.

40 LEXIM ASSOCIATES 40 Family Arrangement Actual Example Father & 3 Sons Several Properties, Firms, Cos., all owned by 1 / 2 / 3 / 4 members Disputes - One brother wants to separate Is FA possible? Yes Process Valuation of Properties + Business Comml Understanding of division

41 LEXIM ASSOCIATES 41 Family Arrangement Who gets what Manner of Division Disputes under FA Disputes over Valuation Disputes over Allocation of Assets Disputes over Payment Schedule, Instalment Facility, Interest on Deferred Payments

42 LEXIM ASSOCIATES 42 Family Arrangement What is a Family Arrangement? – Kale v. Dy. Director (SC) is an arrangement between members of the same family for the benefit of the family by compromising doubtful or disputed rights or by preserving family property or peace & security by avoiding litigation or by saving its honour

43 LEXIM ASSOCIATES 43 Family Arrangement Courts generally lean in favour of FA Essential that it is a valid FA Entire law is based on Case law Important Concepts & Principles of FA: Courts would make every attempt to sustain a FA rather than avoid it Criteria applied for FA - different from those for strangers – broadest view possible – Halsburys

44 LEXIM ASSOCIATES 44 Family Arrangement Important Principles FA is not a Transfer No Gift-tax on FA (in the past) No Capital Gains Tax on FA No Stamp Duty on FA Award as on a Conveyance If there is an antecedent title of some sort in the parties and Agr acknowledges and defines this title – no Conveyance – assumed that title claimed always resided in him

45 LEXIM ASSOCIATES 45 Family Arrangement MOU merely records what had been agreed + prepared after FA arrived at – No Registration Only when FA is brought about by MOU – If it creates rights in immovable property - it would require Registration & SD Distinction between Document containing Terms and Recitals of a FA and a mere recording of what has already taken place MOU must be signed by all intended to be covered

46 LEXIM ASSOCIATES 46 Family Arrangement Recording of past oral FA is not a Conveyance MOU itself creates new interest in land & contemplates execution of other documents - not exempt from SD as on a Conveyance Compromise creating fresh rights in land- not a declaration of pre-existing rights, is a Conveyance Plea of practical inconvenience cant be raised at implementation stage Proper Drafting of MOU is Paramount

47 LEXIM ASSOCIATES 47 Family Arrangement Even married daughters can be made a party to FA If she surrenders shares held by her pursuant to a FA, then it would not be a taxable transfer Cos. cannot transfer assets under a FA and say that CG is exempt since it is part of a FA

48 LEXIM ASSOCIATES 48 Family Arrangement Maintenance Would Maintenance paid under FA Award be allowed as a Deduction to Payer? Yes : If Award creates a Charge on Properties received – Diversification at Source No : If not a Charge - mere Application of Income

49 Release Deed

50 LEXIM ASSOCIATES 50 Release In restructuring of family owned and run businesses execution of a Release Deed was a popular mode One co-owner renounces his share in favour of another co-owner Share of other co-owners in the property enlarged Stamp duty friendly Earlier SD of Rs. 200 only Lesser SD compared to a Gift Deed

51 LEXIM ASSOCIATES 51 Release Bom HC Decisions Asha K Bajaj (Bom) – 2001 Shailesh Harilal Poonatar (Bom) – 2004 To plug this loophole – Amendments in 2005 & 2006 to Art.52: 5% on MV of property released If release of ancestral property to siblings / parents / spouse / children / grand-children / their legal heirs – SD of Rs. 200 only

52 Gifts

53 LEXIM ASSOCIATES 53 Transfer of Property Gift - definition: Transfer of existing movable or immovable property Made voluntarily & without consideration From Donor (Transferor) to Donee (Transferee) Accepted by or on behalf of Donee Gift must be accepted in Donors lifetime

54 LEXIM ASSOCIATES 54 Gift must be voluntary Total absence of consideration No man can gift to himself Donor & Donee Transfer of Property

55 LEXIM ASSOCIATES 55 Gift of Immovable Property must be: By a written Gift Deed Registered Attested Invalid - If 3 conditions not met Under Mohammedan Law? Immovable Property

56 LEXIM ASSOCIATES 56 Transfer of Property Acceptance by Donee is a Must If Donee dies without accepting Gift? Gift made to 2 or more Donees jointly 1 Donee refuses to accept Does the entire Gift fail?

57 LEXIM ASSOCIATES 57 Gift could be conditional If conditions not met? Condition not dependent on mere wish of Donor If condition is illegal or immoral or opposed to public policy? Transfer of Property

58 LEXIM ASSOCIATES 58 Contract Act Ex nudo pacti non oritur action Contracts made without consideration are void ab initio Exceptions: Made out of natural love & affection Agreement in writing Registered Gift given out of natural love – valid contract

59 LEXIM ASSOCIATES 59 Contract Act Matter of fact Does nearness of relationship prove natural love? Agreement to Gift to spouse after filing for separation? Is it on account of natural love & affection?

60 LEXIM ASSOCIATES 60 Contract Act Inadequacy of consideration in a contract Deemed Gift? Can consideration flow from 3 rd party? If not, would it be a Deemed Gift? Can consideration flow to a 3 rd party?

61 LEXIM ASSOCIATES 61 Stamp Duty Stamp Duty : Same as Conveyance 3% on FMV of movables 5% on FMV of immovable Concessional Rate for Flat in CHS Misconception: SD can be paid on the basis of Gift-tax Valuation of Property Payable on FMV of Property – Ready Reckoner Value for Immovable Property

62 LEXIM ASSOCIATES 62 Stamp Duty Gifts to Family : 2% of FMV of the property gifted Family definition: Spouse Sibling Lineal Ascendant / Descendant of the Donor Definitions?

63 LEXIM ASSOCIATES 63 Stamp Duty Instrument of Gift includes a Declaration recording making or acceptance of Oral Gift If No Gift Deed – No SD Receipt issued by Donee for gift of movables received – Is it an Instrument?

64 LEXIM ASSOCIATES 64 Stamp Duty Doc. Recording Gift of movables Gift of movables does not require instruments Document recording past gift Whether to be stamped? Document does not make the gift – it only records what has happened No stamp duty payable

65 LEXIM ASSOCIATES 65 Stamp Duty Duty as on value of property in Deed: Other states – Duty on FMV of property SD on Gift of shares? SD is on Value of Shares Even though consideration Nil in T/D? No SD if gift of shares in demat form

66 LEXIM ASSOCIATES 66 Company Law Can a Company make a Gift? No express provision / case Donation permitted Can Company receive a Gift? DCAs view

67 LEXIM ASSOCIATES 67 Company Law Example 1 Private Co. with 5 Brothers as SH owns a flat Gift of flat by Co. to 1 Brother Stamp 2% or 5%? Example 2 Gift of shares by 4 brothers to 5 th brother Stamp 2% or 0.25%?

68 LEXIM ASSOCIATES 68 Company Law Gift of shares in a Company Complete when shares are handed over to Donee with signed T/D Non-recording of transfer by Co. does not invalidate Gift Co. would recognise Donee only after transfer registered But Donee is legal owner of shares He has a legal right to get transfer registered Sheila Devi v. Tara Chand (Cal)

69 LEXIM ASSOCIATES 69 FEMA Gift of money by a Resident to NR Earlier limit of $5,000 per annum Now subsumed under liberalised remittance scheme Gift of money by a NR to Resident No prohibition in FEMA Gift must be Genuine

70 LEXIM ASSOCIATES 70 FEMA Gift of shares by R to NR Not on Automatic Route of RBI Prior permission required Gift of foreign securities by NR to R General permission of RBI

71 LEXIM ASSOCIATES 71 FEMA Gift of Indian Imm. Property General permission of RBI Gift of Imm. Property abroad to R RBIs General Permission if Donor is

72 LEXIM ASSOCIATES 72 Income-tax No tax on Individual / HUF Donee if Gift of money received: From specified Relatives by an Ind. On marriage Gifts in contemplation of Death of Donor Aggregate of Rs. 50,000 in a PY No Gift Tax on Donor Deemed Gifts u/s

73 LEXIM ASSOCIATES 73 Income-tax Gift not regarded as Transfer u/s. 47 Cost to Donee is cost to Donor Period of holding of Donee includes period of holding of Donor Indexation from which date Acquisition by Donor Receipt of Gift by Donee

74 Guardianship

75 LEXIM ASSOCIATES 75 Guardianship of Hindu Minors Hindu Minority & Guardianship Act Applies to? Deals with powers & duties of Guardians: Natural Guardians Guardian appointed by Court Appointed under a Will of minors parents Who can be a Natural Guardian?

76 LEXIM ASSOCIATES 76 Powers of Natural Guardian Can do all acts necessary / reasonable for minors benefit Cant bind minor by a personal covenant Transactions of Imm. Prop. of Minor Courts permission needed?


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