Will – An Asset Turn into a Liability

Will – An Asset Turn into a Liability..
by Mr. G.Karthikeyan, Chartered Accountant, KOVAI

If someone dies intestate in India even transferof telephone connection requires nominee to prove that he / or she is a legal heir of the deceased

My client, a leading automobile parts manufacturer, died intestate & is survived by his wife & two children. The family was in for another shock when his financial position was reviewed.

The liabilities to the bankers & creditors were more than the receivables in short- term assets.

On the bright side though, the fixed assets in terms of land and buildings were more than adequate to take care of the liabilities.

 

G.Karthikeyan,
Chartered Accountant

 However, the client had died intestate & there was no will. Here began the family’s long drawn out struggle to obtain heirship / succession certificates and then dispose of the properties to pay off liabilities.

Wealth Creator..

A simple will document would have ensured that assets were readily available to pay off the debt but the absence of a will effectively turned the assets into a liability until the issue of succession could be legally decided.

Ancestral property is a major wealth creator in India. Most of us have property or a share in some property which was passed down for at least two generations.

Whether the property has actually passed down to the inheritors or not, at least the right to it is definitely created by the laws of succession.

Add to this any property our own parents might purchase during their lifetime and succession becomes an even more complicated issue, especially in the absence of a will. 

Simple legal declaration

A will document is a simple legal declaration by which a person provides for the transfer of his / or her property at death. Perhaps because of its association with death, it is a document that most people postpone drawing up, especially in India.

However, not drawing up a will these days has far more consequences. If someone dies intestate in India even a simple transfer of a telephone service connection requires the nominee to prove that he/she is a legal heir of the deceased.

To effect any transfer in the name of a nominee, including telephone or / electricity connection, requires supporting documentation in addition to the nomination.

In many cases of ancestral property, the title obviously does not pass on to the next generation though the possession and title of the same are with the legal heirs.

Upon a situation where the property needs to be mortgaged or sold, the requirement of the will and supporting documents becomes absolutely crucial. It has been the experience of many that the ancestral property becomes non-saleable when the required will or supporting documents are not available.

What is even more worrying is the fact that many of us are not aware of the legal requirements if someone dies intestate. In different situations, when a parent passes away and the children are settled abroad, the surviving spouse is left alone to handle these matters and may not be sufficiently aware of all facts unless he/she has a legal advisor.

Add to this the fact that India is a vast country and succession laws in each state require forms that must be filled in the local language, the scenario becomes almost a nightmare to the heirs.

Writing a will should be a slated activity for all earning members of a family. A will is a simple document that can be changed any number of times. A will can be written on a white paper without any formal point just indicating the intention of the testator.

The only thing certain in life is death and morbid as that statement may seem, it is true nonetheless. “Where there is a will there is a way” and where there is no will there are many lawsuits.

About the author...

Mr. G.Karthikeyan is a Coimbatore-based chartered accountant. Karthikeyan & Jayaram - Chartered Accountants
 

Mr. G.Karthikeyan

Email:tax.coimbatore@gmail.com, karthikeyan.auditor@gmail.com

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