INHERITANCE OF PROPERTY

What is Inheritance of Property?

Inheritance is passing on the property, titles, debts, rights, and obligations to another person upon the death of an individual.

Which Act governs Inheritance Law in India?

The Hindu Succession Act, 1956 was established to assure equal inheritance rights to both sons and daughters.

It implements to all Hindus inclusive of Buddhists, Sikhs, and Jains but won’t refer to a Hindu wedded to a Non-Hindu under the Special Marriages Act.

It provides a basic play as to how to deal with inherited.

How can one inherit a Property?

As per Inheritance Law in India a person can inherit property in two ways:

1. Through Will

2. Through state laws of Intestate Succession

Who inherits the property if a Hindu Male dies intestate?

As per the law, ownership of a Male Hindu who dies intestate is divided among his heirs.

The division among heirs has to take place as per a particular rule.

First the Class I Heirs share the assets among themselves (one share each).

If the departed person doesn’t have a Class I heirs, then The Class II Heirs are entitled to share the concerned property.

If there is no heir, then the property is divided among Agnates (descendant or akin through male’s side) and then among Cognates (blood relative or descended from a common maternal ancestor).

If there is no heir or relative to claim the property, it passes on to the Government by way of Escheat. In such a case, the government attains all the rights related to the assets along with the duty to fulfil all the obligations attached to the assets.

Classification of Heirs in Class I and Class II

Class I Heirs -

The intestate’s widow

The surviving sons and daughters

The mother of the intestate

The heirs in the branch of every pre-deceased son or daughter of the intestate

Class II Heirs -

The father of the intestate

The intestate’s grand-parents and the grand-children

The brother or sister of the deceased

Other relatives such as father’s brother/sister, mother’s brother/sister, brother’s widow/son/daughter or sister’s son/daughter, etc.

Who inherits the property if a Hindu Female dies intestate?

The ownership of a Female Hindu dying intestate shall be divided as per following rules:

• first among the sons and daughters (including the children of any pre-deceased son/daughter) and the husband
• then amongst the heirs of the husband
• then among the mother and father
• then amongst the heirs of the father
• then among heirs of the mother

What are the rights of Female as per Inheritance Law in India?

As per the Inheritance Law in India, the Females have the following rights:

• equal right of inheritance to their father’s property as sons
• to receive a share in mother’s property
• have to bear the same liability for the property as the son
• to dispose of the property inherited or gifted by selling, gifting or willing to others as she deems fit

What to do once you inherit property in India:

Step 1: Legal transfer of property ownership on your name

The first thing you need to ensure is to get it transferred in your name when you inherit property ownership. In a case when it is a movable property, which may include bank balances and securities, it should also be transferred in the name of the beneficiary.

While, in a case of immovable property, it should be transferred and mutated in the name of the recipient in the relevant government department or revenue records which depend upon the nature of the estate (commercial, residential and agricultural)?

A land can only be transferred if you have substantial proof to claim your inheritance. When a person dies with leaving behind a Will, his executors need to administer the estate as per his/her wishes set out in the Will, provided the same are not contrary to law.

When there is no Will, there is a chance of arising many problems. In such cases, the legal heirs of the person can choose amongst themselves at least one administrator who then acquires Letters of Administration to the assets of such person.

The distribution can be chosen or decided mutually or can also be settled by the court. All the legal beneficiaries can pass on their rights commonly to a sole heir or another person.

In the situation of the absence of a Will, the relevant succession laws come into effect. 

So, for instance, According to the Hindu succession law in India, if a Hindu man leaves behind assets without making a Will, it is initially passed on to Class I heirs (which include the widow, mother and children) in equal share. If there are no any Class I heirs, Class II heirs (which include father, brother, grandchildren, sister and few other relatives) can claim the estate.

While in case, if the owner is a Hindu woman, her husband and children become equal shareholders of all the assets. However, if none of them is present, all assets go to the legal heirs of her husband, to her mother and father, so on. Thus, if a Hindu woman wishes the belongings to go to her sister, then she has to say so in her Will.

One must remember that one can only pass on the real estate as per his/her wish if the real estate was only through self-acquired and not inherited.

Step 2 : Get Property Ownership Documents or Title of the land

When the beneficiaries and their shares, rights and liabilities are decided, the land has to be transferred in their names. For this situation, you need to apply for transfer of property at the sub registrar’s office. In most of the times, documents required can be Will or Will with probate and succession certificate.

To concern with the assets, the property ownership documents of movable and immovable assets are also required. In the absence of a Will, you may also need to prepare an affidavit, along with a no-objection certificate (NOC) from the other legal heirs or their successors.

Once property gets transferred in your name, the next important task is to apply for mutation of land or title of the land. It is required to be done to record the transfer of a title of immovable property from one individual to another in the land records.

Mutation of estate records takes place at the local municipal authority office in whose jurisdiction the inherited property is located. In the mutation process, required documents and fees differ from state to state in India.

When you inherit property, besides proving your claim or rights, the other vital thing is to have clear ownership evidence of the estate. If proper all required documents are available, the transfer process becomes easier, but in a situation, when it is an ancestral property and ownership of property records are not available, the job can become difficult.

In such case, one needs to trace the title of the land. Initially, you should find out whether any consideration was paid by the deceased in acquiring the land and make out a claim based on the evidence available together with the details of the consideration paid. Take help or guidance of a legal adviser or a lawyer.

Step 3 : Liabilities

Given the high capital values of properties, most are bought with the aid of home loans. Thus, what happens if you inherit a property that has an outstanding home loan?

Whatever assets you inherit, you do so with clogs, mortgages, disputes and so on. Thus, if there is an outstanding home loan against the land, it also gets passed on to the inheritor. Apart from this, mortgaged property can be transferred only with the written consent of the lender.

It means, if a person passes away while the home loan was still running on the belongings that have to be bequeathed to the beneficiary—who might be the children or spouse of the deceased—they will have to pay the outstanding loan. However, if home loan insurance was taken, the insurer pays the outstanding loan to the lender.

In such situations, once installment is made by the insurer, you should collect the loan clearance certificate from the lender and all the original documents of the land that were given to the lender to avail the loan.

If the land you inherit has been let out, you become obliged to adhere to the lease agreement signed by the lessee and the lessor. Similarly, if there is any dispute related to the estate or if there is any litigation which involves the land, you also become part of it.

Lease agreements with the consent of the lessor would be inheritable. In civil litigation, the heirs of the deceased are brought on record in place of the deceased with all his rights and obligations.

No doubt, inheriting a property is not a regular incident. Therefore, one should take care to have all details in place. Only possession of property does not make you a legal owner; a proper transfer is a must. Thus, If needed, do take legal advice and help to get the inherited land transferred in your name.

Probate : What is it?

The entire probate process deals with the distribution of properties and assets by the court. If there is a will, the distribution is done according to the provisions in the will. If there is no will, the court decides how distribution is done. While there are certain types of inheritance that can avoid probate, such as beneficiary designations for 401 ks and life insurance policies, trusts, and assets jointly owned, most real estate properties often must pass through probate.

Other types of properties that will be required to pass through probate include cash assets and cash accounts solely owned by the decedent, personal property such as jewelry, cars, valuable artwork, and assets that allow the naming of beneficiaries, such as insurance policies where none have been named.

The 4-Step Probate Process

File petition and give notice

The first step is to file a petition in court to admit the will or appoint an administrator for the estate if there is no will. The court then issues a notice of hearing to all interested parties such as the decedent’s heirs, beneficiaries, creditors and any other party who has an interest in the decedent’s estate.

Inventory of estate properties

The court may appoint an appraiser to conduct an inventory and appraisal of all assets, including cash and cash accounts, bonds,stocks, business interests, personal and real estate properties.

Payment of Taxes and Other Liabilities

Once the estate has been appraised, the representative or executor determines which creditor claims are legitimate so the estate can start payments. This is also the stage where properties may be sold to pay off medical and funeral expenses, overdue real estate taxes, and other liabilities.

Transfer of Titles

Once all debts and liabilities are settled, the representative may petition the court to transfer the remaining properties to the decedent’s heirs, as provided for in the will or by law.

This can only be done after the waiting period for filing of claims by creditors has expired. Once the court grants this petition, the representative may start drawing up deeds for the transfer of real estate and personal property, stocks and bonds, and transfer the properties to the heirs.

Probate can be a costly and time-consuming process for all parties involved but it is necessary before assets can be distributed to beneficiaries. Heirs are likely to spend on court fees, appraisal fees, and attorney fees. Depending on the size of the estate and the state where the deceased lived, the entire probate process can take between four months to two years to be completed.

Dealing with Probate Properties : First Steps

Heirs to a decedent’s estate are required to comply with certain requirements to formally inherit the property, whether they plan to keep the property or sell it. For real and personal properties that are inherited, heirs may be required to pay for estate, inheritance, and other taxes. It is therefore important that as early as possible, you procure the necessary documents such as bank account statements, copies of the will, information on stocks, bonds and other investment accounts. It is also important to compile a list of legal heirs, creditors and other names who may have an interest in the estate to help the court speed up the probate process.

Should you sell inherited property?

Selling the property has its pros and cons. For one, not all states provide a tax exclusion for the sale of inherited properties. In most states, a tax exclusion is only available if you are selling an inherited home that you have lived in for two years prior to the sale.

However, heirs are also given the benefit of a stepped up basis when they sell inherited property. The stepped up basis depends on the fair market value of the property at the time of death, as opposed to the original purchase price paid by the decedent. The stepped up basis is the difference between the two, and this value is considered the capital gain and therefore the value that is subject to tax.

If you do decide to live in the property for two years before selling it, you become eligible for capital gains exclusions, which is $250,00 for individual taxpayers and $500,000 for married couples who file jointly.

If you have enough liquid assets to support a second property, experts recommend waiting before making the decision to sell the inherited property. Doing so can help you make avoid emotional decisions. The time can also be useful for doing maintenance and repairs if you, later on, decide to rent the place instead. This option can be the ideal solution if you need additional passive income.

Tips for Quickly Dealing with Inheritance Estates

Your lawyer can help you make the best decision when it comes to dealing with inherited estates. For one, if accepting the property can cost you more than it’s worth, you can always refuse the inheritance. This is the primary option for heirs who do not want to deal with the property at all. You can do this by executing a disclaimer that you then submit to the representative of the estate or file with the probate court handling the probate proceedings.

Another option is short sales. Homes with attached liens that are greater than the market value of the house may be disposed of through a short sale with the lender or quick sale buyers.

Advantages of Selling an Inherited Property

There are many advantages to selling a house or any other piece of real estate. There could be more than one heir and they do not agree on how to divide the property. Selling is one way to avoid conflict and disagreement among heirs. Selling the property is also a way to avoid spending more on holding and maintenance costs, taxes and mortgage payments. Inherited properties tend to come with needed repairs and maintenance which the heirs may not be interested to attend to or spend on. Selling the property is one way to avoid these expenses. There are some cases when selling the property may be part of the decedent’s will, which is enough reason to put it up for sale.

At the end of the day, any decision regarding inherited property of considerable value must be done with ample thought and preparation. Allowing some time to pass before making any major decisions, such as putting the property up for sale is ideal so that you can make the decision with a clear head and with a good idea of what to expect, whether you decide to keep the property or sell it. Your lawyer can help you in the process of fulfilling the legal requirements for succession and in making the decisions concerning your ownership of the inherited property. He or she can also help you through the legal process of probate to ensure that it goes as smoothly as possible.

Inherited Property - Check out 5 Imp Points before Purchase

1. Details of Inheritance : As a buyer, the first step is to understand the inheritance process i.e. how the seller inherited property. I love to quote an example. In the recent case of the client from Maharashtra, the seller gets his name updated in the records of the co-operative society. He shared NOC from his siblings for inherited property. It is not the right process. At the macro level, the seller can get the title of inherited property transferred either through succession certificate or probate. I will not get into nitty gritty of the same. It is advisable to take all details from the seller. You can consult a lawyer whether the proper process is being followed or not.

Once the buyer is assured that correct process is being followed, he can capture all these details in his sale deed with the seller. 

2. Indemnity : To further safeguard his financial interests, a buyer can include an indemnity clause in the sale deed specific to the inherited property. The crux of this clause will be that in the case of any future dispute on inherited property, the seller indemnifies the buyer. The terms and conditions of this clause can be mutually decided between buyer and the seller. In the case of any doubt or high perceived risk, you can also execute a separate indemnity bond in the court.

3. Confirming Witness : A buyer can insist on including all the legal heirs of the deceased as confirming witness. In short, all legal heirs should be signatory as a confirming witness in the sale deed. It is important to make the sale deed 100% fool proof. In future, none of the legal heirs can stake any claim on the property. Though it will be an operational nightmare for a seller but you can clarify this point before closing the deal. If the seller is hesitant and is not able to share any logical reason then there is every reason to doubt.

4. Token Money : If there is a dispute on the inherited property then seller demand high % of the token money. On the other hand, the buyer should pay bare minimum token money. Reason being, if the buyer is not satisfied with the title of the inherited property then his money should not get stuck. If the seller demands high % of token money then it is first red flag for the buyer. Secondly, in the case of dispute seller will be in a hurry to sell the property. Therefore, you should be extra cautious to pay token money for the inherited property.

5. Court Case : All said and done, sometimes the dispute is from unknown quarters. For example, in one of the scenarios the deceased person had availed a loan from his one of friends. After he died, there was NO dispute among legal heirs but they refused to clear the loan of deceased. The friend of deceased filed a court case to recover his dues from the sale proceed of property. On the other hand, the legal heirs had a tacit understanding to dispose of the inherited property hurriedly. Though it unlikely scenario but there is a possibility. In such cases, a buyer can hire a lawyer to check whether there is pending litigation against the inherited property.

Words of Wisdom : For any property transaction, it is imp to understand the history of property transfer. Typically inherited property is close to the heart of a seller. It is sold to fulfill family settlement reached between all the legal heirs. In case you are buying from multiple sellers i.e. 2 or more sellers based on succession certificate/probate. It is not necessary that all the sellers will have an equal stake in the property. You should only pay in the proportion of ownership as per succession certificate or probate. Last but not the least, the buyer should be beware of counterfeit documents like succession certificate. You can check the authenticity of the documents and retain the original ones if possible.

Though this post, i covered five important points but as i always mention, each case is different. If you are buying an inherited property then it is must to hire an experienced property lawyer who guides you. The probability of fraud is high in such cases. I hope no buyer would like to get trapped in a legal tangle.

Do we need the consent of other co-owners to sell the share in an inherited property?

According to the Transfer of Property Act, every co-owner has a proprietary right of the entire property. The sale has to be made with the consent of all co-owners. But if there is an agreement that gives the co-owners exclusive rights to certain parts/portions of the property, a co-owner can sell his portion.

However, if the dwelling house is the subject matter of sale, then

All co-owners who jointly own the house must give their consent.

The transferee does not get the right to joint possession with other co-owners.

REAL ESTATE

The real estate market is both tricky and unpredictable. Investing in real estate involves analyzing all possible risk factors and taking sensible decisions based on these. In the light of the unpredictability and vast gamut of options available, it becomes slightly tough for NRIs to put their money in ventures because they are too far away to be able to judge the credibility of projects where investment is possible. NRI Legal Services offers invaluable assistance and expertise to buy or sell real estate to individuals, corporates, real estate developers etc. The company has competence in handling the full spectrum of real estate properties since there is sound awareness of the most competitive costs and fees involved in a transaction. Our experts make a constant endeavor to come up with practical, constructive and innovative solutions for all property related issues. We follow a professional, business oriented approach to ensure best possible prices for our clients which is backed by our advantage of having an understanding of the dynamics and volatility involved while investing in real estate. The company makes sure that we give detailed information to the client regarding risks, technicalities and legal considerations involved in the transactions. Specifically, the scope of our services is related to the following:

Real Estate Services :

1. Identification of buyer/seller.

2. Identification of a suitable property as per the requirements of the client.

3. Establishing title to the property.

4. Ensuring that all documents are properly executed and delivered.

5. Preparing & evaluating all the documents necessary to complete a transaction efficiently & correctly.

6. Negotiating, drafting and reviewing sale and purchase agreements.

7. A thorough physical inspection of the property in order to negotiate a better purchase price.

8. Representation before various authorities such as Sub Divisional Magistrate, Registrar, Courts etc.

9. Repatriation advice, tax advice and any other compliance advice.

4 Easy Steps For NRIs To Sell Inherited Property In India

Step 1 : Transfer Title of Property

After inheriting the property from your ancestors, the first thing you must perform is transfer the title of the said estate to your name. This can be achieved through the process “Mutation of revenue records”. For this you need a copy of the will; in case there is none, a Succession Certificate from a local court would also work.

Step 2 : Get The Required Legal Documents in Order

Here is a complete list of all the documents you need to sell inherited property in India The original Purchase agreement, i.e. Title document of said property.

Original Share Certificate, in case of a unit in a co-operative society.

No objections certificate, issued by the said society.

A copy of the approved plan and the occupation certificate issued by the concerned authority, a municipal corporation.

Lawyer certificate, if the seller does not possess the original documents mentioned above, a certificate from his lawyer declaring that he is the rightful owner would be required.

PAN number, it is important to apply for a Tax Exemption Certificate under Section 197.

Step 3 : Identifying Preferred Sales Method

To conduct the transaction for sale, the NRI can either hire a professional company or he can do it himself. These companies provide end-to-end solutions including buyer identification, handling legal issues, due diligence and tax issues. But for those services that they provide, they charge a fee, which is a percentage of the sales’ consideration.

Step 4 : Finalization Of The Transaction

This can also be pointed to as the actual sales process, and this can be further subdivided into the following steps:

Identifying the sale value to sell inherited property in India, if you have hired a firm, they would provide you with the full data to determine the price like the value of similar properties in the same place. If you carry out the transfer yourself, you need similar data.

Managing structure of the transaction, unlike the prevalent practice of using cash, which the NRIs do not favour, one can easily sell inherited property in India without considering the cash component.

Issue an admit power of attorney, an Admit-PoA indicates that while the documents are being executed by the owner, the PoA holder would merely represent him in the registration office.

Tax issues, immovable property sold after 3 years of purchase, is taxed at 20.6% in India. Moreover, in the case of NRIs, it is essential for the buyer to deduct taxes at the source, which is another set of complications for the NRIs to sell inherited property in India.

How do we transfer the title?

While title transfer needs to be effected locally, within India where the immovable property is situated, an NRI can execute it through a Power of Attorney (PoA). With regard to the succession certificate, the NRI needs to hire a local professional (in the area) to represent him/ her through the PoA. 

The PoA should be in favour of the local representative/ professional, authorising him/ her to act on behalf of the inheritor for specific actions of title transfer. 

The PoA needs be duly notarised by an attorney in the country of the NRI’s residence followed by attestation at the nearest Indian consulate in the said country.

The PoA is then also registered in India (via adjudication process) by paying the requisite fees/stamp duty at the registrar’s office. Documents for transfer of inherited property Documents needed to transfer the title of inherited property to be shared with the legal authority (initially attested photocopies) include: h The official registered Will. Though the Will needn’t be a registered document, legal exper tsre c o m m e n d otherwise. It is better to register the Will as one always tends to keep revising the registered Will at key junctions in the transfer process.

Documents for transfer of inherited property

The heirs need to submit documents such as death certificate of the deceased, the birth certificate of the heirs, a copy of the ration card (if any), bank statement of the heirs to prove that the heirs are indeed the rightful successors.

Original purchase deed of property and registration documents

 In case of absence of this document, one needs an authorisation to procure certified copies of these title deeds from the jurisdictional registrar’s office.

The Encumbrance certificate

This records and reflects all transactions that occurred with respect to the immovable property; including all sale, lease, mortgage, gift, partition and release transactions.

The record that shows the entry of the property owner’s details in the records of the Corporation/ Municipality. This includes proof of property tax paid, type of property and conversions if any. Once these documents are submitted to the legal expert specialising in property inheritance along with the legal authorisation on your behalf, it is a matter of time before the title is transferred.

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PG - 19122019