Family Settlement Agreement to resolve NRI property disputes

Introduction:

Historically, ancestral property distribution has become a bone of contention in all families. When the situation becomes uncontrollable, matters are dragged into the Court. Everyone wants a fair share in the ancestral property, but when you are denied your inherent right, you should know the rights and legal remedies available. NRIs, though living abroad, are also entitled to an equal share in their ancestral properties. However, it is a usual occurrence that relatives living in India try to usurp the rightful claims of NRIs. One option to resolve your family property disputes is to take the matter to the Court and wait for the judge to give a judgment in your favour. Another option for NRIs to resolve NRI property disputes without getting into a long-drawn legal battle is to enter into a family settlement.

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Family Settlement Agreement

A Family Settlement Agreement (FSA) is a legally binding agreement reached among family members to amicably settle family disputes relating to ownership, division, or management of family properties or assets. NRI property disputes within the family are often resolved through family settlements, as these agreements aim to avoid lengthy and adversarial legal proceedings in Indian Courts.

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Key features of the Family Settlement Agreement:

Here are the key features of a family settlement in the context of NRI property disputes:

1. Voluntary Agreement: A Family Settlement Agreement can only be entered if all the parties voluntarily agree to the terms and are not induced by force, fraud or coercion.
2. Oral or written: Family Settlement Agreement can be verbal or written. Oral agreements do not require registration. However, entering into a written agreement is advisable, given it will be easier for NRIs to prove if a future dispute over the agreement arises.
3. Registration: In case the agreement is reduced into writing, then the written agreement needs to be registered. Registration of family agreements makes these agreements strong and valid proof in the eyes of the law in case any of the parties later denies the terms of the agreement.
4. Tax implications: A Family Settlement Agreement is not treated as a transfer or conveyance; rather, it only solidifies and recognises the pre-existing rights of the members. Therefore, there is no tax implication under capital gains regarding family settlements.

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In essence, a family settlement for NRI property disputes is a mechanism that allows family members to come to a consensus on property disputes and provides legally recognised solutions to often complex and emotionally charged conflicts.

Benefits of family settlements in resolving NRI property disputes

Family settlements have various distinctive advantages which make them ideal for NRI property holders in India; these advantages are listed below:

1. Resolving conflict privately considering the sensitivity of the dispute: NRI property disputes often involve a disagreement with blood relations, which makes the matter emotionally charged, sensitive and intricate. Family settlements let NRIs resolve the dispute in private, avoiding irreparable damage to ties with the family.
2. Resolve the issue sitting overseas: NRIs can enter into a family settlement by authorising a trusted person in India through Power of Attorney. If NRIs do not wish to visit India to explore the option of family settlement, then your Power of Attorney holder can act on your behalf.
3. Avoidance of future conflict: Legal proceedings often escalate the conflict and create animosity among the parties, which may lead to future disputes. On the other hand, family settlement encourages open dialogue and compromise. Family settlement not only resolves the issue in a short period but also prevents future conflicts among family members.
4. Legally Acknowledged and Binding: Properly executed family settlement is legally binding and recognised in the eyes of the law. Proper execution ensures future enforceability of the terms of family settlement if any party challenges the said settlement and wants to create an adverse title.
5. Cost-effective dispute resolution: Legal proceedings are time-consuming and financially draining and still involves the risk of unfavourable outcome. In contrast, family settlement is a financially prudent way of resolving conflict.

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Note: It is highly recommended that NRIs seek the Advocate’s advice or hire a professional to draft a family settlement agreement. A legal professional can draft a legally sound Family Settlement Agreement that effectively resolves present or future NRI property disputes while maintaining family harmony.

Conclusion:

A Family Settlement Agreement is a legally binding document that resolves disputes such as the distribution of property or assets (movables or immovables) amongst family members. This agreement can be oral or written, depending upon the discretion of the parties. Family Settlement Agreement is a cost-effective and financially prudent way for NRIs to resolve their property disputes. These settlements are a practical and legally recognised solution to often complex and emotionally charged disputes. NRIs can hire a legal counsel to draft or review the Family Settlement Agreement to ensure legal compliance and enforceability.

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