I have an HUF account. How will my assets get distributed among my children after my demise?

In my HUF account I have shares of market value of Rs 25 lakh, Rs 2 lakh in bank account and Rs 10 lakh as advances to a firm. I have 2 married sons and one married daughter. After my demise how the shares get transferred to my childrens’ account, and what about the other assets. Or is it better if I dissolve my HUF now itself and distribute all the assets among my children?

Reply by Balwant Jain, an investment and tax expert

HUF is a distinct legal entity and can own property in its name. Thus the property in HUF does not belong to you absolutely and belongs to all the members of the HUF.

Prior to change in Hindu Succession Act in 2005 the daughter was not treated as coparcener. However, with the amendment of Section 6 of Hindu Succession Act, the daughters now are made coparcener and have equal rights as that of a son in the HUF property. So in case you want to distribute the property of the HUF, your married daughter will have equal right as that of your sons and is entitled to equal shares in the HUF property as and when it is partitioned.  

Please note that she can forgo her right in the HUF property. The share which one gets on partition of the HUF should be equal but with the consent of all the coparcener the distribution can be unequal or even some of the coparceners get higher shares even to the exclusion of some coparceners. Importantly, while daughters and sons get the status of ‘Coparceners’, women entering the HUF upon marriage are called ‘Member’ only.

The law to succession to HUF property has also been changed in 2005. Earlier the HUF property would devolve by survivorship but now the share of individual coparcener passes on to the legal heirs of the deceased. After one’s death, shares in the HUF property will go to legal heirs as per the order given in Schedule of the Hindu Succession Act. You can decide to bequeath the property by will but cannot gift away your share in the property while you are alive. The remaining property continues to remain as property of the HUF. Your HUF can continue even after your death and your elder son can become Karta of the HUF.

So as explained the different scenario as to how the HUF property would devolve on the death of a coparcener.  You can decide which course of actions suits you.

If you want to partition the property of the HUF, you will have to make a full partition and get an order from the income tax officer recording such partition. Partial partition are not recognised under the income tax laws. The assets received on partition is not treated as income and is exempt under Section 10 of the Act.

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