Recently, a woman posted a query on social media asking about the status quo of the benefits paid to her deceased husband by the employer, which was transferred to her father-in-law as he was the nominee. The money due included the unpaid salary, gratuity, and other employment benefits, such as insurance and provident fund.
“I stay with my in-laws. My father-in-law wants to transfer all the proceeds from these death benefits into my bank account. But he received these benefits a few weeks ago, and spent some of it, mostly on groceries and other household items. As per my understanding, since we are Hindus, and though my husband gave my father-in-law’s name as the nominee, my son and I am the legal heirs. Is this a correct assumption?” the reader asked.
Ruchika Bhagat, chartered accountant, and managing director, Neeraj Bhagat & Co, a New Delhi based CA firm, says that according to the Hindu Succession Act, 2005 in case of intestate (no Will) succession, the property rights are transferred to class 1 heirs, which includes son, daughter, widow, mother, son of a predeceased son, others.
“The property of the deceased has to be divided among the class 1 heirs equally, and where some of the members are willing to give up their share, a no-objection certificate or settlement deed is required in this regard,”Bhagat adds.
In this particular case, any unilateral transfer by the deceased’s father to his daughter-in-law without consulting the deceased’s son or other legal heirs would be void, says Bhagat.
According to Bhagat, the aspect of marriage also needs to be taken into consideration in these matters. If the spouse was divorced before death, then the basic identity of marriage itself has changed, and “therefore, she will not be classified as a legal heir, and hence, will not be entitled to a share in the property.”
Abhinay Sharma, managing partner, ASL Partners, a New Delhi-based law firm, advises that if the deceased did not make a Will, then the legal heir should ideally apply for a legal heir certificate or a succession certificate from the civil court/tehsildar officer or the designated civil court, respectively.
Both of these documents will legally prove that the persons are indeed the legal heirs of the deceased.
A succession certificate will be required to acquire movable or immovable property by the legal heir in his/her own name. The certificate will also transfer the debts on the successors of the deceased. Only successors (children or grandchildren) of the deceased can approach the designated court for this.
A legal heir certificate has limited relevance in the Succession Act, 1925 and is required for claiming benefits like provident fund, pension, others. It can only be obtained by legal heirs–parents, spouse, children, or siblings of the deceased.
Says Mihir Tanna, associate director, SK Patodia and Associates, a Mumbai-based CA firm, "Any income earned after the date of death of the deceased is taxable in the hands of the legal heir but practically it takes times for transferring assets in the name of legal hair. Accordingly, income earned after death is also reported against PAN of deceased and TDS (if applicable) is deducted on the PAN of deceased till the time assets are transferred."
Technically, there is no such specified time limit within which the nominee has to transfer the proceeds to the legal heirs. Rather, the main concept of having a nominee is to just ensure that the deceased’s estate doesn’t remain ownerless during the period where succession disputes are being resolved.
“Thus, on the event of settlement of the succession disputes, the nominee is bound to transfer all the assets to the legal heirs,” Bhagat adds.
Bhagat says that the nominee is a trustee of the estate and, therefore, should take care of it until it is transferred to the legal heirs. Further, the nominee is also an authorised representative under the Income-tax Act, 1961, and so, “he is also liable to file the income tax return of the deceased and pay the taxes due from such deceased, out of the money received from his estate.”
But under no circumstances can the nominee withdraw from the estate except for the benefits of the legal heirs. Where he uses them for any other purpose, then the legal heirs are lawfully entitled to claim back the money.
“Further, it is also possible that on mutual understanding, the legal heirs, after the nominee has expended such an amount, may approve for such transfer in writing,” Bhagat adds.