 "What have you inherited?")
Assets typically inherited
Such assets include immovable property, bank balances, jewellery, silver/gold coins and shares of public, private and partnership companies. Anil Harish of DM Harish & Co says, "People are increasingly making provisions for their art and, occasionally, intellectual property rights, too." Besides these assets, a few also inherit memberships of prestigious clubs which are difficult to secure. Uncommon assets such as numismatic, wine and wooden article collections are also making their way to wills.
If case there's no will or nomination, the assets would be distributed according to the Indian Succession Act, the Hindu law, Mohammadan law, etc. According to the Hindu law, usually, assets are equally distributed between the mother, wife and children. Every religion has a different way of distributing assets within family members.
Is it important to value an asset? Not if the asset would remain with you alone. However, one has to value an asset that would be shared or distributed among other members as well. These include properties, shares or businesses - dividing these assets equally might not be practically possible. If one wants to distribute and divide assets equally, one would have to value and liquidate these and divide the money received (after selling it) in the given ratio. The only disadvantage of liquidating the asset is one wouldn't be able to hold the asset as such; he/she has to take his share in monetary terms.
Formal valuation
An asset can be formally valued through registered valuers. One could either find a list of such valuers on the income tax department website or Yellow Pages or approach a lawyer who could help scout one. Ameet Hariani, managing partner at Hariani & Co, says, "There is a registered valuer in every field. They charge a fee that depends on the asset they are valuing and its value."
Informal valuation
"An asset can be valued informally, too. One way to go about it is to look up the ready reckoner manual, which has the average rates prevailing in a particular area. If a family doesn't want to involve an outsider, it could use this method and arrive at an approximate value. Another way is to carry out a bidding process within the family, of members entitled to that property. One could discover or arrive at an asset's value after this process," says Harish. However, informal valuations through bidding within a family could sour relations.
Valuation issues could be mitigated through a will, in which assets can be bequeathed separately to different heirs. Financial planners, therefore, suggest the moment you build an asset, you should have a nominee for it. According to law, a nominee is a trustee or a caretaker, not the owner of the asset. He/she is empowered to hold the asset as a trustee and is legally bound to transfer it to the rightful heir. Therefore, it's important to have a nominee, if not a will.
Disposing inherited assets
Once an asset is valued, it is up to an individual to decide whether to keep it or sell it, based on his/her maintenance ability, requirement of money, the asset's usefulness, etc. Many opt not to sell the inheritance, owing to the emotional value attached to it. "What he/she wishes to do with inherited properties is completely the person's discretion," says Hariani. As property, in terms of land, house or office space, is something people usually inherit, it is important to keep deeds and other related papers ready, in case one decides to sell the property after inheriting it.
Sanjay Dutt, executive managing director (South Asia) at Cushman & Wakefield, says people face problems while selling inherited properties because family members could move court, saying the person concerned isn't the rightful owner of that property. "The seller should apply for mutation (change of title ownership) so that the buyer is assured there would be no claims on that asset." However, a person would have to ensure stamp duty and registration separately. Movable properties such as jewellery, gold and silver are the easiest to sell.
"Selling properties, whether inherited or not, is the same. The only difference is in the case of inherited property, the period of holding and cost is taken into consideration," says Parizad Sirwalla, executive director (tax) at KPMG. That the holding period is calculated from the time the property was originally held is an advantage. Such properties usually attract only long-term capital gains tax, which stands at 20 per cent. Short-term capital gains tax is based on one's tax bracket.
"The asset will attract long-term capital gains tax if it is held for more than three years. Only shares have to be held for more than a year to attract long-term capital gains tax; if the shares are of listed companies, these attract 15 per cent short-term capital gains tax. Therefore, one should be careful while selling such properties and pay the tax he/she is liable to pay," says Sirwalla.