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ESTATE PLANNING�CHAPTER -2�INDIA

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The Hindu Succession �Act, 1956

  • HSA applies to, and governs the intestate succession of:
  • (a).        a person who is Hindu by religion, in any of its developments or forms, a         follower of Prarthana, Brahmo or Arya Samaj;
  • (b).        a person who is Sikh or Buddhist by religion; and
  • (c).        to any person who is not a Christian, Muslim, Jew, or Parsi by religion.
  •         It is not retrospective, and does not affect the succession relating to a Hindu who died before 17th June, 1956.

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  • It also excludes property owned by Hindus who married under the Special Marriages Act, 1954. In the above cases, matters of succession would be governed by the ISA.

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The Hindu Succession �Act, 1956

  • Any child legitimate or illegitimate , one of whose parents is a Hindu,Buddhist, Jain,Sikhs,by religion

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  • Any Person who converts or reconverts to the Hindu,Buddhist, Jain,Sikhs.

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  • Any child legitimate or illegitimate who is abandoned by both the parents or whose parentage is not known and brought up as a Hindu, Buddhist, Jain, Sikhs

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Full-blood relations are preferred over half-blood relations

  • (i) two persons are said to be related to each other by full blood when they are descended from a common ancestor by the same wife, and by half blood when they are descended from a common ancestor but by different wives;
  • (ii) two persons are said to be related to each other by uterine blood when they are descended from a common ancestress but by different husbands;
  • Explanation - In this clause "ancestor" includes the father and "ancestress" the mother.

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Full-blood relations are preferred over half-blood relations

Full Blood Relation

Half Blood Relation

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Uterine blood

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Why to Know

  • Heirs related to an intestate by full blood shall be preferred to heirs related by half blood, if the nature of the relationship is the same in every other respect.
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Right of a child in womb

  • Under section 20, a child in a mother’s womb at the time of the death of the father has the right to inherit property as if the child was born before his death.
  • The child’s share will thus be reserved till birth

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Order of distribution of shares amongst Class I and Class II heirs

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  • Widow
  • Mother
  • Son/Daughter
  • Son/Daughter of a predeceased son
  • Son/Daughter of a predeceased daughter
  • Widow of a predeceased son
  • Son/Daughter of a predeceased son of a predeceased son
  • Widow of a predeceased son of a predeceased son

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Order of distribution of shares amongst Class I and Class II heirs

  • Rule 1- The widow of the deceased (or if there are more than one widow, all widows together) take one share.
  • Rule 2- The surviving sons and daughters and the mother of deceased each take one share.
  • Rule 3- The heirs of each pre-deceased son or each pre-deceased daughter of the deceased take one share jointly.
  • Rule 4 – This elaborates on Rule 3 and provides that in case of a pre-deceased son’s heirs, shares will be taken in equal proportion by the widow(s) and sons and daughters.
  • In case of a pre-deceased daughter’s heirs, the shares are to be taken in equal proportion by her sons and daughters; her husband being excluded.

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If there are no Class I heirs, the property will devolve upon Class II heirs.

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Class II heirs

  • Father
  • Son’s Daughter’s son/daughter, brother & sister
  • Daughter’s son’s son/daughter
  • Father’s father/mother
  • Brother’s widow

Important : Class II heirs will inherit according to their position as specified by the entries of the schedule. Class II is also divided into nine sub-sections or entries, each containing several groups of heirs.

For example, the heirs specified in Entry I of Class II will be preferred over those in Entry II

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Class-2 Heirs�In Every Entry Money are Equally Divided

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Order of succession among ‘agnates’ and ‘cognates’

  • Under section 2(a) a person is an “agnate” of another person if the two are related by blood or adoption wholly by males. For example, a deceased’s father’s brother’s son will be an agnate.

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  • Under section 2(c) a person is a “cognate” of another person if the two are related by blood or adoption but not wholly through males. For example, a deceased’s father’s sister’s son will be a cognate.

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Order of succession among ‘agnates’ and ‘cognates

  • Rule 1-Between heirs who claim to be descendants of a male deceased, the heir that is related by a nearer line to the deceased is preferred to the one from a remote line.

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  • For example, agnates classified as the deceased’s son’s son’s son will be preferred over the deceased’s brother’s son’s son.

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Descendants all be preferred over ascendants who in turn shall be preferred over collaterals.

  • Agnates who are descendants for example son’s son’s son’s son
  • Agnates who are ascendants for example father’s father’s father
  • Agnates who are collaterals who are related to the intestate by degrees of both ascent and descent for example

Father’s brother’s son

Ascendent agnates are always preferred from descendent aganates

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Order of succession among ‘agnates’ and ‘cognates

  • Rule 2 - When an heir in the same line is nearer to the common ancestor than another relation in the same line, the former is preferred to the latter.

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  • For example, a deceased’s father’s brother’s son will be preferred over his father’s brother’s grandson, even though both are in the same line, that is, the line starting from father’s father.

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Hindu Undivided Family

  • A HUF is a body comprising persons lineally descended from a common ancestor and includes wives and daughters. A HUF can be formed only by a family and not by an individual.

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  • Common examples of an HUF are a husband, wife and their children. An HUF comes into existence on its own when a person gets married. A married couple themselves can be considered an HUF.

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  • Under section 2(31) of the Income Tax Act, 1961 (IT Act) an HUF is considered a ‘person’ and is assessed as a separate legal entity. Income of an HUF is taxed in its hands

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Who can be members

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Wife

Children

Children wives and their children

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Female members can only be members not a co-parcener however unmarried daughter can be co-parcener also ( but now its changed)

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Senior most male member will be called Karta (Manager) and typical HUF consists of Karta, his sons, unmarried daughters,grandsons,great grandsons,their wives

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Difference between co-parcener and members

  • CO-Parcener can demand partition of HUF
  • Members would be entitle to get maintenance from HUF

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Types of Property under Uncodified Hindu Law�

  • Ancestral Property
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  •         Ancestral property is acquired through inheritance from ancestors. It is always shared by coparceners equally. This type of property is also known as Coparcenary Property.
  • Joint Family Property
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  •         Joint family property is acquired by the members of a joint family together and also consists of ancestral property, wherein every coparcener has a joint interest in the property.
  • Self-acquired Property
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  •         Self-acquired property is property that was either originally joint family property and has now become separate, or property that is self-acquired by an individual and HUF having any interest in such property. A member of an HUF may own separate or self-acquired property whilst continuing to be a member of the HUF.
  •         It is important to understand these different types of properties as they are dealt with differently under the HSA.

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HUF

  • Self-acquired property of a person can be dealt with in total and devolves upon his or her successors through succession.

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  • Although both can be made subject matter of a testamentary disposition, ancestral property and joint family property is limited to the share of the deceased

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Nature of Interest:

  • All coparceners acquire interest in ancestral property by virtue of their birth into the family.

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  • Self-acquired property is the exclusive property of a person, and the HUF and its coparceners do not acquire any right to it.

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  • The coparceners of the HUF cannot gift or transfer their rights in the assets of the HUF during their lifetime but are entitled to bequeath their share in the assets of the HUF through a Will��

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HUF

  • In case no Will is made by the coparcener, the share of the deceased in the HUF property passes to the successors as mentioned in class 1 of the first Schedule of the Hindu Succession Act, 1956.

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  • The assets acquired by such successors become their absolute property which they are entitled to dispose off the way they want.��

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Partition of HUF

  • Since all the coparceners have right in the assets of the HUF so the Karta cannot dispossess any coparcener of his right. In case the coparcener demands partition of the assets of the HUF, the karta has to give his share to such coparcener from the assets if the HUF.��

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Alienation by Gift

Self-acquired property can be freely gifted. A right or undivided interest in ancestral property cannot be gifted by a coparcener

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Alienation by Will

  • Prior to the HSA, no coparcener could alienate his undivided interest in ancestral property by way of will.

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  • Self-acquired property could be freely dealt with. However, Section 30 now enables a Hindu to dispose of his interest in a coparcenary property by way of will.

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  • Self-acquired property can be dealt with freely by creation of a will.

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Allotment of shares in coparcenary property to Hindu females

  • : If a Hindu male (in a joint Hindu family governed by Mitakshara law) died after the 2005 Amendment, his daughter will be allotted the same share as his son.

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  • The share of a pre-deceased son or pre-deceased daughter will be allotted to their surviving child/children.
  • The 2005 Amendment does not affect the rights of a Hindu male to dispose of his self-acquired property under a will. If a male dies intestate, then his property will devolve by intestate succession above

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The Hindu Succession (Amendment) Act, 2005 (2005 Amendment) brought about a revolutionary change to Hindu family law

  • Granting of coparcenary rights to Hindu females
  • Allotment of shares in coparcenary property to Hindu females
  • A remarried widow of a pre-deceased son will inherit property of the intestate. ( In several Court Cases)

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The Muslim Personal Law (Shariat) Application Act, 1937 (Sharia Act)

Muslim personal law (shariat) is to apply to all cases where the parties are Muslim.”

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Primary Sources of Muslim Law in India�

  • The Quran
  • The Sunna
  • Ijma
  • Qiyas

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  • The Quran
  • The Sunna
  • Ijma
  • Qiyas

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Quran�Sunnah�Ijma�Qiyas

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Bequest of property by will (Wasiyatnama)

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  •         Property under Muslim law is anything which is capable of being transferred and which exist at the time of the testator’s death. The Fatwa-i-Alamgiri defines a will as the “conferment of a right of property in a specific thing, or in a profit or a gratuity to take effect on the death of the testator”.

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  • Under Muslim Law, only one-third of a person’s net estate may be bequeathed by will, subject to certain conditions and exceptions prescribed under Shia and Sunni law.

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Bequest of property by will (Wasiyatnama)

  •         Under Shia law, a testator can only dispose of one-third of his estate by will, either to an heir or a complete stranger (non-heir), without the consent of heirs.Bequests in excess of one-third, either to an heir or a complete stranger, will not take effect and will be invalid, unless the other heirs consent to it. Such consent may be given before or after the testator’s death.

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  • Under Sunni law, a testator may dispose up to one-third of his estate only to a stranger, without the consent of the other heirs.
  • However, bequest of up to one-third to an Legal heir will not be effective without the consent of other heirs, which consent is required to be given after the testator's death

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Muslim Succession

  • Bequest of property where a testator has no heirs If a Muslim has no heirs, there are no rules governing bequest of his estate and the same may be bequeathed entirely to a stranger

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Manner of abatement of legacy in case bequest exceeds one-third without consent of heirs

  • Under Shia law, the process of abatement is undertaken in a preferential manner, that is, shares given to heirs under a will are not reduced but are distributed in chronological order, as stated in the will.
  • The first name listed in the will, will receive the full shares bequeathed by the testator, and remaining shares will be passed in favor of the second, and then the third and so on, till the property reaches the one-third limit.
  • 100 Rs. = 1/3 = 33%
  • Out of total 100, 25% is was given to Elder brother in will and 25% younger brother
  • Here elder brother will get 25% and younger will get 8%

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Manner of abatement of legacy in case bequest exceeds one-third without consent of heirs

  • If a bequest exceeds one-third of the whole estate, and heirs do not consent, the ratio of heirs receiving property under a will is subsidized to maintain the rule of one-third.

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  • This is called abatement of legacy. Under Sunni law, the process of abatement is done in a rateable manner or proportionally, that is, reducing the ratio of the property bequeathed to the heirs to maintain the rule of one-third. The property will be reduced in the same ratio as the property was bequeathed to such heir in the testator's will.
  • 100 Rs. = 1/3 = 33%
  • For an example Two legal heirs who was having will in favour of had 50% share each. Each will get 50 % out of 1/3 share

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Bequest of property to an heir causing the testator's death�

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  •         Under Sunni law, bequest to an heir causing the testator's death, whether intentionally or by accident, is not effective.
  •         Under Shia law, bequest to an heir causing the testator's death, only intentionally, is not effective. 

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