Some families might prefer to resolve disagreements over real estate outside of court. To this end, they may enter into a family settlement agreement, which must be signed by all parties, attesting that it was not reached through deception, coercion, or force from any family members. Shares, claims, and family disputes are other areas where a family settlement agreement is helpful, in addition to real estate and other movable property.
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Given that it allows for an amicable resolution between the parties and takes less time than going to court, a family settlement agreement is beneficial. Please be aware that any transfer of assets or property under this agreement is neither a gift nor the passing of rights. Therefore, the issue of capital gains tax is moot. In the 1998 case of Commissioner of Income Tax v. AL Ramanathan, the Madras High Court issued a decision supporting this conclusion.
Does the family settlement agreement require registration?
A family settlement agreement can be expressed verbally or in writing, although documentation is advised because it helps prevent misunderstandings. You must decide whether registration and stamping are necessary. The agreement may be marked but not registered for a collateral purpose. If a settlement is oral, no registration is necessary. But because it is recognised in a court of law, registration is a good choice if you want the written word to be regarded as legal. Keep in mind that another document should be created if there are changes to what has already been accepted, but it is not required to be registered because it is exempt from the Registration Act of 1908 (Section 17 (2)).
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The family’s ongoing property issue must be resolved by the members publicly stating that they are in accord with one another, have agreed to the terms and conditions, and that this agreement is final. The settlement deed has legal power, and all parties agreeing to its terms and conditions must abide by it. Those who sign the deed must keep this in mind. Additionally, it would be delivered to the relevant authorities, who would facilitate the distribution and transfer of property in accordance with the terms and circumstances stated in the contract. A No Objection Certificate and other documents must be signed by the parties in order for a property to be changed.
Does registration of the family settlement agreement apply?
A family settlement agreement can be expressed verbally or in writing, although documentation is advised because it helps prevent misunderstandings. You must decide whether registration and stamping are necessary. The agreement may be marked but not registered for a collateral purpose. If a settlement is oral, no registration is necessary. But because it is recognized in a court of law, registration is a suitable choice if you want the written word to be regarded as lawful. Keep in mind that another document should be made if there are changes to what has previously been accepted, but it is not need to be registered because it is exempt from the Registration Act of 1908 (Section 17 (2)).
Even if your family settlement agreement isn’t officially recorded, it still has the power of estoppel. Estoppel is the legal doctrine that forbids someone from saying something contrary to what they have previously implied, either orally or in writing. However, if it alters the family members’ legal rights, you will need to register the agreement. The court had taken into account the legality of a family settlement deed in the Tek Bahadur versus Debi Singh and Others case. It maintained the legitimacy of an oral family settlement and decided that only written agreements need to be registered.
A family settlement agreement's structure and conditions
You may view an example of the agreement here, which is comparable to a partition deed. The agreement must include the names of all family members whose opinions are relevant in this situation, information about who owns the property, and the specifics of how the property will be divided. It is advised that you include all pertinent information about the property, including the house number, neighborhood, and, if feasible, a site plan.
The family’s ongoing property issue must be resolved by the members publicly stating that they are in accord with one another, have agreed to the terms and conditions, and that this agreement is final. The settlement deed has legal power, and all parties agreeing to its terms and conditions must abide by it. Those who sign the deed must keep this in mind. Additionally, it would be delivered to the relevant authorities, who would facilitate the distribution and transfer of property in accordance with the terms and circumstances stated in the contract. A No Objection Certificate and other documents must be signed by the parties in order for a property to be changed.
There are additional information that must be included, such as the payment of any past-due or potential future debts. In most cases, subsequent owners are not required to pay these expenses; instead, the beneficiary or transferee must do so and no claims may be made at a later date. It is also advisable to use thumbprints to formally seal this agreement.
