A dispute between two siblings, like we witnessed within the Reliance Group, can trigger a dispute within a family. The two brothers in this case were fighting over the ownership of the company, who owns what part and how much. Without going into the merits of the case we explain in this post, the legal position that a will and a family settlement agreement enjoys, along with the limits and obligations that come with them.
WILL vs FAMILY SETTLEMENT AGREEMENT
A will and a family agreement are legally enforceable documents provided that the requirements under law for their execution are met. A will has been statutorily defined under Section 2 (h) of the Indian Succession Act, 1925, to mean the legal declaration of the intention of a testator, or the person making the will, on how he or she wants his or her property to be treated after his or her death. A person can only will away a property that he or she owns or has the power to dispose of at the time of death. While a court generally does not get into the merits of a will, the document could get nullified if it is proved in a court of law to have been made under suspicious circumstances. In the absence of a will, the legal heirs are governed by the personal laws of the faith that the deceased professed.
A family settlement agreement on the other hand has not been defined statutorily under Indian laws. However, Halsbury’s Laws of England defines it as an agreement among members of the same family, intended to be generally and reasonably for the benefit of the family, either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour.
In other words, it is an arrangement – whether written or verbal – by which members of a family settle their inter se (“among themselves”) rights in relation to a property to avoid disputes. The purpose of a family agreement is to resolve a dispute or avert a future dispute, and to maintain peace and harmony in the family. A family agreement or family settlement agreement is a valid, legally-binding and enforceable contract, applicable to all the signatories to the agreement. While a will relates to a bequest of an estate, a family agreement provides for an arrangement by which some rights are created or declared (or assigned/ extinguished) whether in present or in future.
LEGALLY ENFORCEABLE
On its own, neither a family settlement agreement nor a will is superior or of greater legal character than the other. Since both a family agreement and a will operate on different time planes, no occasion arises for conflict or preponderance of one over the other. Indian courts seem to give greater legal sanctity to a family agreement. Courts have upheld family arrangements that also include those who are not members of a joint family, or those whose entitlement to inheriting a property is doubtful. Courts lean in favour of upholding a family arrangement instead of disturbing the same on technical or trivial grounds even if they suffer from a legal lacunae or a formal defect. The courts in the past have applied the rule of estoppel – a legal bar to alleging or denying a fact because of one’s own previous actions or words to the contrary – to prevent the unsettling of a family agreement.
SAFEGUARDS FOR A FAMILY AGREEMENT
There are two dimensions to any family agreement. One, a legally binding agreement executed by and between family members, and second, a set of policies, rules and restrictions that provide clarity on what is acceptable and what is not. The trouble is that most families have piecemeal awareness about a family agreement, family constitution or a will. To ensure the preponderance of a family agreement, the makers should specifically mention that it is superior to a will or that it will supersede any will made now or in future, in essence a legally signed family agreement should supersede a will, irrespective of whether the will was written prior to or after the family agreement.
CONCLUSION
A family settlement agreement must clearly state how the asset or title is to be divided and that each person to the settlement is absolutely entitled to the same. If it is intended that the property is to be held jointly, the family arrangement should clearly specify this and mention that the property is held as joint property and whether it is intended for the heirs of any members to succeed to their share or not. It is important to appropriately structure a family agreement so as not to leave any disposable residuary bequeathable title or asset with the transferor that can become the subject matter of a will. At the end of the day, it is, of course, harmony among family members that is perhaps the best safeguard for the proper execution of a family agreement.
Where can one find a sample family agreement or family settlement agreement ?
You could download a free sample of the said agreement at our ‘business document section’. Here you will find a sample family agreement and other agreements for your reference. You could separately place an order at our site to have one drafted for yourself .