By Dr. Neelam Rani and Samarth SaxenaFree trade and cross-border investments of the 21st century have created a multitude of employment opportunities across the globe. These opportunities often transcend national borders and it is no more unusual for people to seek such lucrative avenues in countries different from their own. This phenomenon of “expat living” is indeed here to stay.However, for estate and succession planning, the cross-border elements of expatriation require careful consideration. Let’s take an example- A, an Indian resident, holds immovable property in India. He is of a very strong opinion that his son, B, should settle in Fantasyland, a nation full of promise. B obeys his father’s wishes and settles permanently in Fantasyland without renouncing his Indian citizenship, i.e. as an NRI. In such a scenario, when contemplating his succession plans, A must consider the following questions- Post his death, will B be able to inherit A’s immovable property? How much of this property will B be able to take the benefit of? What modes are available to A for effecting such testamentary transfers?It is important to realise that wealth plans and bequeaths having overseas application are highly complex and regulated. They are governed by the provisions of Foreign Exchange Management Act 1999 (FEMA). As per FEMA, an NRI can acquire any immovable property in India by way of inheritance from a person resident in India. Therefore, B can inherit A’s immovable property post A’s death.B can also sell such immovable property to a person resident in India. But if selling to another NRI, B is only allowed to transfer immovable properties other than land, farm house and plantation property. In case B was to actually sell such property, subject to certain conditions, he is only allowed to remit outside India, an amount under USD 1 million per financial year. Any remittance exceeding the USD 1 million threshold will require the permission of RBI. Also, such remittances outside India are allowed only through authorized dealers (generally banks).In order to give effect to his estate plan, A can either opt for a gift deed, will or a deed of settlement. Not to mention that A can always choose to do neither, in which case, his property will devolve upon his heirs as per the personal law applicable to him (intestate succession). While making his choice, along with considering the legal pre-requisites, A must also give due consideration to the following aspects:A) Gift will require express acceptance of B. It will also take effect during A’s lifetime itself. Therefore A will have to part with the title of the property before his death.B) Wills are prone to challenges from disgruntled parties. They also require mandatory probate in domestic courts and are therefore time consuming. C) The settlement deed will have to expressly provide that the settlement takes effect from the death of A. While not as time consuming as wills, such settlement deeds are also routinely challenged before domestic courts.D) Intestate succession will lead to multiple parties benefiting from the estate of A that too in a ratio determined by the applicable personal law. Such succession generally results in discord within the family and as is the case with wills, is also time consuming. More often than not, the concerned parties end up approaching the court seeking Letters of Administration (a holder of Letters of Administration has the powers to administer the estate of the deceased).Therefore, it is only after making a qualitative assessment of such considerations that A should make a decision regarding the route most appropriate for him. However, for most people wanting to bequeath immovable property to an NRI, a will or a settlement deed generally suffices. Please note that the above does not constitute legal advice. The concerned parties must consult their bankers and licensed legal professional for proper guidance. (Dr. Neelam Rani is an Associate Professor (Finance) at the Indian Institute of Management Shillong and Samarth Saxena is a practicing advocate at Bombay High Court. Views expressed are personal.)
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