Where there is a will, there is a dispute FRANKLY SPEAKING

All of us have read about the travails of Vijaypat Singhania who was a leading industrialist till a decade ago. He relinquished control of his business empire to his son and is now publicly repenting the fact. It is not known why he transferred his shares in the company during his life time itself. Probably, he must have considered all options and taken legal advice before he relinquished both the control of his business empire, as well as his shareholding to his son.

I had a client come in to my office (let’s just call him Aditya) who specifically raised this issue. Aditya was a selfmade man with a flourishing business and many properties. He wanted to leave the business to one of his sons who was assisting him in the business and divide up his other properties among his other two sons. He had made a will accordingly, but was apprehensive that the sons who were not getting the business may raise a dispute after his death and delay the transfer of business. Hence, he was considering transferring the business during his life time itself, but was worried of suffering a fate like that befell Singhania. Hence, his preference was to leave the business to his son only after his death even though it meant disputes with other brothers – a classic catch-22 situation. There are other ways which can achieve both these objectives but cost time, effort and money. Aditya, at least, was able achieve his objectives because he had the necessary resources. But most common people do not have such help.

Typically, most people want to leave their assets to heirs after their death as they also want the right to change their mind till the last minute. In addition, they want confirmation that their instructions on inheritance should be recorded by the concerned third-party such as the cooperative housing society, the bank, the depository participant, the mutual fund company and others.

They would, of course, want to ensure a smooth transfer and without the involvement of lawyers and courts and of course, without costing the earth. On paper, the nomination process fulfils all these needs, except the most important last one. That is, a nominee does not get title to the property but only holds the property in trust for the legal heirs. The courts have always interpreted that, in the absence of specific provisions in the relevant laws, the nominee only has a right to get the asset transferred in his/her name but continues to remains accountable to the legal heirs.

This is a very simple and easy to use inheritance tool that is not being used (or is ineffective) simply because the legislature had not yet come around to amending the relevant laws. Both the Parliament (for banking, depository, Companies and securities acts, etc) and the state governments (cooperative societies Act) are to be blamed for this. The only place where this has already happened is the Insurance sector where certain related nominees get the policy proceeds in their own right, and not as trustees for the eventual legal heirs.

Much like the Insurance sector, the government (both the state and central governments) needs to amend the Act to give teeth to the nomination process thereby, making it simple and a court-free process to reduce disputes.

Giving teeth to nomination, which the insurance industry has done, will ease matters substantially