Legacy & Inheritances: The Risks from Family Settlements Nobody Told You about
What happens when a will, registered or otherwise, an intestate demise (where there is no will), or a combination of factors causes a family to come apart over differences in the resolution of a person’s estate because mutual cooperation becomes impossible? Even when the legatees, beneficiaries and heirs are in broad consensus, there are many small points over which beneficiaries/inheritors fall out.
 
It often happens that wills and similar documents do not cover every possible complexity and wrinkle that can stall an amicable resolution of your legacy. I have witnessed this often enough, even in close-knit families. Some of the reasons can be:
 
1) The person who made the will (the testator) and heirs (legatee / beneficiary / inheritors) do not necessarily die in sequence. This brings in a different class of heirs as defined under the law.
 
2) Across different jurisdictions, people understand their 'rights' differently, and then try to impose their understanding from perceived positions of strength.
 
3) Assets have been alienated or have withered away, and counter-claims are made.
 
4) Beneficiaries try to change the jurisdiction to one that they find more convenient.
 
e) Multiple other reasons, even when wills are not being contested.
 
An upwardly mobile middle-class today, whether rural or urban, has greater moveable and immoveable assets to leave behind. At the same time, they do not have the time, inclination or skillsets to plan their legacy or even make a will, forget about anticipating possible problems. This makes it all the more important to work at avoiding typical pitfalls that could stall an equitable distribution of inheritances. Before running off to consultants, a little bit of study is well worth the effort.
 
In the Indian context, it is important to know that many communities have their own personal laws. Which one do you fall into? With an increasing number of inter-community marriages and people living under different jurisdictions, domestic as well as international, determining this itself can take a long time unless one writes a will and specifies that it will be under the Indian Succession Act; otherwise settlements often falter on this point.
 
So what next? 
 
The broad term 'family settlement' comes into play as the important document for future resolutions and not the documents which were made in the first place by the venerable ancestor. A 'family settlement' pre-supposes that normal oral communications are unable to resolve issues and, therefore it is required to place things in writing broadly under the head of 'as per Indian laws' if it pertains to India. And to try to resolve issues without going in for litigation. It often then supersedes as well as reduces the rights of the unwary and uninformed.
 
I have often observed that the number of failed settlements is directly proportional to the value of the real estate involved. In hindsight, it then appears that a partition suit may be a quicker option, even while admitting that a clear will would have been the best choice.
 
People tend to go in for settlements because they appear to be a cheaper method. Family settlements make sense only for large joint families which are in business and have enormous assets that are jointly managed.  Otherwise a will is always a superior option. A will enunciates the wishes for the person, but the language of the will or lack of clarity in understanding what the testator had wanted, could lead to disagreements. So family settlements are recommended as a way to avoid long and expensive litigation. But even a formal settlment has pitfalls which I shall endeavour to describe.
 
Once it is prepared, a family settlement becomes the base document to divide assets, or in case of a disagreement, to move into the legal arena. Therefore, a badly written settlement becomes a cause for more litigation rather than a means to reduce litigation, and favours the person or persons who are sharper. Settlements signed on the basis of 'trust' between potential adversaries are often an oxymoron.
 
Here is a check list of things to consider while understanding why a family settlement is risky.
 
1) Check if all heirs and assets are under the same jurisdictions – if some are located abroad, tax laws in different countries or even different states can make a big difference. Wills are better options here because all heirs / beneficiaries can move ahead with their shares of the proceeds separately, while judgements and decisions from courts keep matters in one jurisdiction.
 
2) A family settlement, when made as a part of the family’s sccession planning, often becomes weak because of circumstances like death, marriage, birth—a family tree by definition, keeps evolving. 
 
3) Understand the concept of 'class of Heirs' very carefully as defined under the law and even more so if the settlement is under a personal law specific to a religion/community. Also, be prepared for more ‘potential claimants’ jumping out of the woodwork. Heirs who have been divorced, re-married, have changed citizenship, offspring born out of wedlock, or who were minors at the time of the settlement, are possibilities that need to be considered and solutions planned in advance.
 
4) The concept of equal division of assets and liabilities, costs and effort, is flawed. Whilst the asset side may be easily divisible by allocating the share of entitlement of heirs, the expense and liability sides, not to mention human connections, are usually totally different. Heirs bring to the negotiating table different tax laws, to start with, but also unknown liabilities by way of their own fiduciary responsibilities and problems. Be very careful before placing all of these together. Each heir has to be responsible for their own costs and liabilities. 
 
Examples of costs and liabilities that cannot, and should not, be shared are given below: 
 
a) One heir may have to travel from another country whilst another may have to take just a local bus for the legal work involved in claiming inheritance. How can these costs be shared?
 
b) Attesting, documentation and more varies by city, state, country. These costs can add up substantially. The cost of getting documents attested by embassies, for example, should be borne by that beneficiary who lives abroad—these costs are pretty stiff.
 
c) The difference in costs should also depend on the class of the heirs. Sort this out clearly while writing a settlement. For instance, class-1 heir resident in India vs a class-2 heir, who is a citizen of a foreign country, is just one example. To elaborate, a class-1 Heir who is an Indian citizen needs to simply present his ID, residence proof and the required Indian affidavits. One of the points in the affidavit is that there will be no encumbrance or alienation till the assets are distributed. 
 
A class-1 or 2 or more heir who is a foreign citizen will need to prove bonafides and also obtain attestation by respective embassies, and often also provide indemnities acceptable and enforceable in the country and/or state of jurisdiction of the suit.
 
d) Taxation and liens of an individual nature are certainly going to be different. An heir abroad usually has some sort of mortgages. Sometimes, people avail of loans abroad by offering assets in India as a collateral. Permitting this, in case of a joint family is a huge risk that you wake up to learn about only when the fat yellow envelope lands up at your home. What happens if the family member living abroad dies suddenly leaving behind a fat mortgage with a claim on a jointly held asset? There is no easy way for heirs in India to find out if the foreign citizen has other claims/encumbrances, which can be enforced on jointly held Indian assets. It is also difficult for those living in India to check on divorce proceedings, bankruptcy, liens of any sort in the foreign country which can be then applied here, if the person fails to reveal them while making a settlement. 
 
The risks of expense and liability side falling on whosoever is left behind in the jurisdiction of the settlement is huge. Consider it carefully. Indemnities may not help here.
 
5) There is a tricky word called 'assigns' which can be seen in many settlement deeds. What does 'assign' mean? Legal definitions are available all over, but broadly it means that a participant in a settlement can part with the rights and obligations and more of what is his/her share—even if he or she does not own it at that juncture. Do not accept the word 'assigns' in any form till the assets and liabilities have been sorted out and you have got your share in your bank.
 
6) There is always a 'narration' of facts included in a settlement deed. If your understanding of the narration is different, it can become the basis of future litigation. Ideally, write your own narrative, match it with what is suggested in the ‘settlement document’ and seek changes if required before agreeing to the settlement. In many family settlements, the narrative is imposed upon the rest by family elders, so be watchful of your rights.
 
Remember, a written settlement is made to avoid disputes and differences, so contribute to this effort by reading each word of the draft carefully while the settlement is being prepared. And never be rushed into any sort of settlement. 
 
If you can research the subject online, there is a wealth of information available on what can go wrong with distribution of immoveable properties. 
 
Finally, beware the snowflakes in your own family - it is not necessary that their interests are aligned with yours. For instance, if you as a grandparent cash in your immoveable assets in your lifetime, what is left for the grandchildren? And if you do not have enough to see you through your twilight years, your grandchildren may have legitimate concerns about the financial burden (unless they abandon a helpless senior citizen).
 
Incorrectly drafted settlements often lead to more litigation than they were supposed to avoid. Do not rush into a family settlement without considering all the pitfalls. The list above is very minimal and just a starting point.
 
It is my submission that a formal partition suit through a court in India, instead of a family settlement, makes a lot more sense when wills have led to disputes, the number of heirs is large, or the assets to be distributed are huge.  
 
And if any of the beneficiaries or legatees or heirs are foreign citizens, or live abroad, then a settlement, registered or otherwise, is often not worth the paper it is printed on. If they can't trust you in India, then why and how can you trust them in some country beyond the reach of Indian authorities?
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    sushilprasadassociates

    1 month ago

    The biggest challenge is to get people to make a will and / or file nomination for bank accounts. For shares, if held jointly, the company M&AA has to be scrutinised as to what happens if one of the joint share holders dies. Typically, the remaining shareholder(s) becomes the sole (joint) owner.

    REPLY

    veereshmalik

    In Reply to sushilprasadassociates 4 weeks ago

    Nominee is not a beneficiary, best to not even visit the bank account till all beneficiaries come on the same page, the risks are too high. Will or no will.

    Remaining shareholder, even if the first named, can keep singing and dancing forever. Best to buy everything in single name. And set out the succession.

    Harish C Kohli

    1 month ago

    I have made my will and appointed an executor. Can I add in the will "in the event of a dispute, the executor's decision will be binding on all the beneficiaries. If any beneficiary takes the issue to court, he/she will be excluded from the inheritance". Will this have any standing if one of the beneficiaries does go to court.

    REPLY

    jskhattar

    In Reply to Harish C Kohli 1 month ago

    Conditional bequests are permissible under Indian Succession Act, 1925. Specifically see Section 134 of Indian Succession Act, 1925.

    As far as the power of the executor to decide the disputes between the beneficiaries is concerned, it could be debatable whether such power could be given, because this takes away the beneficiaries right to challenge the Will before a court. It could be seen as a clause against public policy.

    Better suggestion would be to put in a clause to say that the beneficiaries won't challenge the grant of a probate and in the event any beneficiary disputes the legacy under the Will, the beneficiary will forfeit his/her right to the legacy and it will vest in the other beneficiary etc.

    Trust this helps.

    Please do consider taking proper legal advice after discussing all facts with the concerned professional.

    jskhattar

    In Reply to jskhattar 1 month ago

    Just an additional point that at the end of the day, the executor will have to apply for probate of the Will.

    Harish C Kohli

    In Reply to jskhattar 1 month ago

    Many thanks Khattarji

    veereshmalik

    In Reply to Harish C Kohli 1 month ago

    I am not competent enough to opine on your question pertaining to legalities and suggest that you may wish to consult with the correct professionals on the subject . Good luck.

    jskhattar

    1 month ago

    I would like to add, there is also a tricky legal issue on registration of family settlements.

    In recent SC decision of Ravinder Grewal, the SC held that if the family settlement is merely a recording of a family settlement and does not otherwise create a right in the property then it doesn't require registration.

    I guess as a thumb rule, it would be advisable to register the family arrangement / family feed. Else its a question of trial whether the given document creates a right in the property or is merely a recording of a family settlement.

    Ofcourse as we may all know, a Will doesn't necessarily require registration and can be changed prior to the death of the testator.

    REPLY

    veereshmalik

    In Reply to jskhattar 1 month ago

    Point noted, thanks - larger point I am making is that there are multiple scenarios, settlements work against the unwary, and even if if the heirs/legatees/beneficiaries are or are not not challenging the Will/Wills, then it is better to proceed without introducing yet some more documents like formal general settlements. Especially when immoveable assets have to be sold/disposed off and proceeds distributed across multiple jurisdictions.

    And the word "assigns" in a family settlement when it is not present in the Wills is a huge danger signal. None of the beneficiaries should be able to "assign" anything (or alienate any interests) till the assets have been disposed off.

    LESSONS FROM THE PAST: Noiseless HR
    Keith Roy, who was an ICS officer with the government of India, quit the service in 1947 and joined the private sector, as personnel director of Glaxo India – the largest pharma company in the country at that time. An impressive personality he was – tall, fair and handsome, the product of a Bengali father and a Scottish mother, very erudite and a thorough gentleman! He was in charge of human resources (HR), which was called personnel management at that time. In the early-1960s, personnel department was low key. In the post COVID era, one can join into at least one webinar on HR every other day. What a sea change! HR is the flavour of the year!
     
    About two years into my joining Glaxo – and still a management trainee - I was at the bus stop at Worli, waiting for a bus to take me to Queen’s Road, to All India Radio (AIR), where I used to do some programmes in my spare time.
     
    A posh car came to a halt and Mr Roy opened the window and asked me to hop in. I did and told him where I was headed. He lived at Carmichael road, which was half way. He said, doesn’t matter. We can have a chat at least for some time – ‘and my driver will drop you after he drops me home.’ We had a lovely, frank chat. He got to know a lot about me in those 20 minutes. In some ways, we became friends – in spite of the wide gap in our corporate positions. Mr Roy was truly an HR man! 
     
    A few months later, I was to accompany Mr Roy to Delhi for a few days to see how he works with the government departments. A day before, he came to know that I would be at the Janpath Hotel (what I was eligible for at my level in the hierarchy), while he would be at the Ashoka. He got this immediately changed. He said he could not have me in the lobby of Ashoka, waiting for him three times a day! He got my accommodation changed to Ashoka. And, thanks to Mr Roy, it was my first five-star hotel stay in life. It was a pleasure to see government officials treat Mr Roy with respect – not just as a past superior, but as a mentor and well-wisher. They seemed to have loved to work with him when he was in the service. 
     
    There was a situation where Ted, a young 25-year old management trainee, was posted in the advertising department of the company. The department was headed by a 45-year old divorcee, Margaret, who was efficient, careless in the way she dressed, and fond of India where she had been for over 15 years. 
     
    But after they fell in love, Margaret’s look changed. She now dressed well, had make-up on her, and had her hair done, and as she walked down the directors’ corridor to a meeting, it looked as if a box of essences was broken in the air (Tennyson). First there were murmurs. When they moved to live together, there were louder whispers. Mr Roy took this event as a personal challenge. He went to Darjeeling to meet Ted’s parents and convince them that this match may not work. But to no use. 
     
    Finally, Mr Roy arranged a job for Ted in Calcutta and agreed with both of them that they can get married if they still feel the same way about each other after a full year of separation. They did feel the same. After a year, they both resigned their jobs and took the flight to Canada, to start a new life together. It was an example to all of us, young execs and single, of the kind of personal interest that Mr Roy was capable of taking, when it came to a serious challenge!  Mr Roy was truly an HR man.
     
    Sometime later, I found that Mr Roy always hosted a Christmas party every year at his home. It was 10am-12.30pm on Christmas day, when everybody was invited, from the peon to the director – to have a coffee or a beer and a piece of Christmas cake. I went to the party. And found peons as well as directors there. 
     
    Mr Roy treated each one as a special guest on this Christmas day. It was goodwill to all! This event created so much goodwill, not just among those who attended but also those who did not – (and had only heard about it). Mr Roy was indeed an HR man. 
     
    My interaction with Mr Roy was limited. But from what I saw and observed, there was a lot to be learned – in small matters as well as in larger issues – things that one will find hard to forget, even in a world where values are a-changing! 
     
    Mr Roy managed human resources without fanfare – and without noise!!
     
    (Walter Vieira is a Certified Management Consultant; and a Fellow of the Institute of Management Consultants of India (FIMC). He was a corporate executive for 14 years and pioneered marketing consulting in India in 1975. As a consultant, he has worked across the globe in four continents. He was the first Asian elected Chairman of ICMCI, the world apex body of 45 countries. He is the author of 16 books; a business columnist; visiting professor on marketing in the US, Europe and Asia. He now spends most of the time in NGO work.)
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    BR

    1 month ago

    Good to know of such people. As a student I heard of & later at work, I met Mr Rusi Hormusji Modi the first Welfare officer of TISCO & TELCO who was known to be a good person in Personnel Mgt. Contrast these with the dismal dirt, to be brief, in a mill for Recruitment & Promotion, like Indian Airlines & Air India Ltd & Vayudoot P Ltd the abyss of failure of good HR practices & matchless corruption, which led to its present state. Strangely, the ways are continued to benefit its employees, till a full destruction. I experienced the worst of anyone's life in that quagmire of Caste & Language politics, greed, favoritism based on many factors like opposite gender, etc., which are a cancer of the country.

    Song stuck in your head? Just hum to search on Google
    In a delight for music lovers, Google has announced a new capability where you can hum, whistle or sing a melody to find out the song that has been stuck in your head -- no lyrics, artist name or perfect pitch required.
     
    On your mobile device, open the latest version of the Google app or find your Google Search widget, tap the mic icon and say "what's this song?" or click the "Search a song" button.
     
    Then start humming for 10-15 seconds.
     
    On Google Assistant, it's just as simple. Say "Hey Google, what's this song?" and then hum the tune.
     
    "This feature is currently available in English on iOS, and in more than 20 languages on Android. And we hope to expand this to more languages in the future," Google announced during its virtual 'Search On' event on Thursday.
     
    "After you're finished humming, our machine learning algorithm helps identify potential song matches. And don't worry, you don't need perfect pitch to use this feature. We'll show you the most likely options based on the tune," said Krishna Kumar, Senior Product Manager, Google Search.
     
    You can select the best match and explore information on the song and artist, view any accompanying music videos or listen to the song on your favourite music app, find the lyrics, read analysis and even check out other recordings of the song when available.
     
    According to Google, a song's melody is like its fingerprint.
     
    "We've built machine learning models that can match your hum, whistle or singing to the right fingerprint," Kumar said.
     
    When you hum a melody into Search, the machine learning models transform the audio into a number-based sequence representing the song's melody.
     
    The models are trained to identify songs based on a variety of sources, including humans singing, whistling or humming, as well as studio recordings.
     
    "The algorithms also take away all the other details, like accompanying instruments and the voice's timbre and tone. What we're left with is the song's number-based sequence, or the fingerprint," Kumar explained.
     
    Similarly, the machine learning models recognise the melody of the studio-recorded version of the song, which "we can use to match it with a person's hummed audio".
     
    The new feature builds on the work of Google AI Research team's music recognition technology.
     
    The company launched 'Now Playing' on the Pixel 2 in 2017, using deep neural networks to bring low-power recognition of music to mobile devices.
     
    In 2018, the company brought the same technology to the SoundSearch feature in the Google app and expanded the reach to a catalog of millions of songs.
     
    "This new experience takes it a step further, because now we can recognize songs without the lyrics or original song. All we need is a hum," Google said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 4 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone