The Private Client team at Cyril Amarchand Mangaldas is delighted to share, via our Private Client blog, our comments and opinions shared in various leading media publications globally. We hope these inputs help our clients and readers gain a practical perspective into key legal, financial, commercial and other aspects that need to be duly considered in Estate Planning.
The following Q&A was published by the Mint Newspaper on 14 Jan 2020 and the online edition of the same can be found at: https://www.livemint.com/money/personal-finance/trust-made-under-will-works-well-for-bequeathing-assets-to-a-minor-11578997625506.html.
For further information, please contact our Partner & Co-Head of our Private Client team, Mr. Rishabh Shroff, at Rishabh.firstname.lastname@example.org
I am writing a Will. I want to give one of my properties to my grandson who is 11 years old right now. Is it possible to transfer a property to a minor or will I have to appoint my daughter as the custodian? What are the other options?
We usually recommend the use of a testamentary Trust, i.e., a Trust formed under your Will. This is premised on the assumption that it fits within your budget. While there are no restrictions on a minor legatee inheriting assets directly, we would recommend that a Trust option be considered. A Trust acts as a shield and allows the trustees (to be sensibly chosen) to administer the estate for the eventual benefit of the beneficiary.
Your daughter could be named as the trustee and, accordingly, she would be entitled to manage the assets on behalf of your grandson until the termination of the Trust. Only your grandson would be entitled to benefit from the assets under the Trust and not your daughter.
If it is undesirable to name your daughter as a trustee, you could also consider appointing a professional trustee to manage the assets. The Trust could be terminated when your grandson turns 18, at which time the property can belong to him outright. It is recommended that you take proper tax and legal advice and explore this route.
Is it possible to have detailed conditions when writing a Will? I have an ancestral land. I want my two sons and one daughter to have equal shares in it. However, I want to include a clause that states that the property can only be sold to the adjacent temple that has always wanted to acquire it. Else, it can only be sold to a family member. If they don't adhere to this, the property will go to an orphanage.
—Name withheld on request
We have assumed that you are a Hindu and the said ancestral property is coparcenary in nature, forming part of your Hindu Undivided Family (HUF), and is currently being managed by you in your capacity of karta. At the outset, note that any alienation of the property in its entirety during your lifetime would need the consent of all the HUF coparceners. The facts mentioned by you do not meet the tests for alienation of the property by the karta directly.
Similarly, in the case of bequeathing the said property through a Will, you would only be entitled to bequeath your share in the said property. So, if there are three coparceners in your HUF, you would be entitled to bequeath your one-third share in the ancestral property under your Will. The other two coparceners (such as your sons and daughter individually) will continue to own their undivided share in the HUF. Accordingly, only your one-third share can be bequeathed to your children, if so desired, under your Will.
Your bequest under your Will needs to be done in compliance with the Indian Succession Act 1925. While the Act states that conditional bequests can be made, any bequest being made subject to a condition, which would restrict the alienation of the property by the legal heirs, would be void (Section 138 of the Act). Accordingly, in the present case, if your HUF share in the property is being bequeathed under your Will with your desired restrictions, the HUF share would be bequeathed to your children under your Will. However, the said conditions restraining the alienation of the property would not be valid and, hence, the legal heirs would be entitled to the said property without any such conditions being binding on them.
A more viable approach would be for you to enter into a family arrangement with the children during your lifetime, which can provide for the above mentioned understanding regarding the alienation of the property.
This would be a valid and binding document, if done correctly, and this would ensure your objectives are met. It is advisable to speak to a lawyer and reconfirm the exact status of the property and the nature of your ownership interest.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.