The disputes in Indian families are growing over property distribution due to the absence of a sound succession planning. Indians believe that at some point of time when they will get older they will discuss this with their legal heirs informally and after their death everything will settle in a smooth fashion. There will be no legal disputes and everyone will cooperate and sacrifice for others if required. But, the fact of the matter is the disputes and fights over wealth within a family can be traced even in our scriptures especially in the Ramayana and Mahabharata. Hence, it is very important to have a formal succession planning. For that one needs to understand applicability of succession laws in India.
In India, succession laws are applied as per the religion of the person and there is no uniformed succession act which is applied to everyone. Hindus, Sikhs, Buddhists and Jains are covered under Hindu Succession Act, 1956 and Indian Succession Act, 1925 whereas the Muslims are governed by their Personal law. Other religions like Christians, Jews and Parsees are covered under Indian Succession Act, 1925. So this shows that in India succession laws are more complex than other countries.
How the wealth will be distributed to legal heirs on one’s deathIJ As per Indian Succession Act, in India distribution of wealth to legal heirs depends upon whether the person who died had written the Will or not. In case of the person who had written valid Will, the distribution will take place according to his Will but for those who died without writing a valid Will, technically in the eyes of law they are considered to have died and distribution of their wealth will take place not as per their wish but as per applicability of succession laws. This is very important because a person works very hard in his life time and accumulates lots of assets which are distributed as per the provisions of law if he dies intestate.
Generally we believe that if a male person with Hindu religion dies his wealth is directly transferred to wife. This is a wrong belief, for this, Hindu Succession Act, 1956 has given a list of class 1 and class 2 relatives. If a Hindu male dies intestate then his wealth should be first distributed to class 1 relatives equally in the following hierarchy. If there are no class 1 relatives then it should be distributed to class 2 relatives.
Agnates: Agnate means a person related to wholly through males either by blood or by adoption. The agnatic relation may be a male or a female. One’s father’s brother, or father’s brother’s son or father’s son’s son or father’s son’s daughter are agnates. So the final relationship may be male or female but it must be through males. The relationship can also be in ascending or descending line.
Cognates: Cognates means a person related not wholly through males. Where a person is related to the deceased through one or more females, he or she is called a cognate. Thus son’s daughter’s son or daughter, sister’s son or daughter, mother’s brother’s son, etc. are cognates. Here also the final relationship may be male or female but there is at least one female in that line of relationship.
Note that if there are more than one widow, then they get one share only and then divide it between themselves and a person immediate family will also be considered as one unit only.
If a Hindu female dies without writing a valid will then her own wealth will be distributed as under:
If the women has acquired any property from her husband, in that case the first right will be of the heirs of her husband, in case of absence of his sons or daughters. If the women has acquired any property from his father or mother, in that case the first right will be of the heirs of her father and not husband, in case of absence of his sons or daughters.
It is clearly evident that one should give importance to formal succession planning for smooth distribution of his hard earned wealth to his legal heirs as per his wish and for that he should write a clear and simple Will because in absence of the valid Will, his/her hard earned wealth will be distributed as per the provisions of law.
Further, when there is no clear Will, it can lead to a situation where there can be disputes between family members and it can take a few years to resolve; so it is very much advisable to ensure our clients have a proper Will in place.
(The author is a Certified Financial Planner (CFP) and managing director, www.ascentsolutions.in, a financial planning firm)