We often attach a second name (second owner) to any property – movable or immovable.
The second name may at times signify actual ownership right and sometimes may not. However, the second owner will not necessarily recognize legal ownership. The actual owner could thus challenge a claim made by the second owner.
The fact that the first owner had left a will or not can have considerable bearing on the ownership rights of the second named individual. Absolute ownership by the second individual cannot be taken for granted. Whether the second named is in the nature of nomination or not will depend upon asset to asset. It is the ownership of shares and investments that has recently been the matter of judicial dispute. Thus, having a clearly drafted will or unambiguously created trust is very essential to avoid disputes.
Where co-ownership of property is concerned it must be mentioned that a second name can reflect absolute ownership rights. These could be as full owner but with or without a right to division and/or the ability to claim an independent divisible share. Often referred to as tenants in common or joint tenants, it would always be desirable to reflect the nature of ownership in the documents that establish ownership. It may often help avoid protracted proceedings. Very often neither party gains as often the property becomes subject matter of a stay which matter remains unresolved for several years.
Personal law which at many times is uncodified is relied upon to claim ownership rights. The absence of judgments from the disputed issues and the amplitude of variation in interpretation of statutes often prove very costly and self-defeating.
In order to help investors meet the challenges of the complex law the legislature often tries to help. As long as the law is capable of just one interpretation, it would certainly help. But in the event that different interpretations tend to emerge, the possibility of disputes can always arise. These questions are therefore matters of concern from two aspects.
Firstly, in the case of individuals who may be in control of their enterprises through carefully drafted documentation regarding their movable and immovable properties may face an issue of how best a division should be achieved without affecting operations and day-today management of the company.
Often, individual shareholding is offered as collateral to lending institutions or personal guarantees given for loans which may be availed. These prior charges to individually owned assets have a direct bearing on the nature and extent of ownership.
They would therefore require careful consideration so as to avoid any burden on the next of kin in the event of devolution. Very often, the owner of the assets desire to keep matters regarding devolution confidential. As a result, the legatees would only know about it after death when the executors inform them about the nature and extent of the disposition which has been made.
As a general rule there is no restriction on whom the property can devolve and to what extent it can be done. However, there are certain geographies and aspects of certain personal law which restrict the devolution which can be made. Does it then mean that an individual may be able to enjoy all the property which is in his name but may not be able to dispose it off entirely in a manner as per his desire? Often referred to as forced heirship rules, there is geography legislation and personal law and convention that has often to be considered where these matters are concerned.
It must be clarified that certain statutes recognize limited rights where a nomination is concerned. Ownership rights in cooperative societies, the ability to become associate member, the right of residence without the right of disposal are matters of everyday occurrence when nominations of second names are often used. As has been stated earlier, there is no absolute law which will give the user of the property absolute rights but can recognize some rights in the property for which the nomination or a second name can prove a useful guide or evidence.
In such matters, a description in the will clearly expressing the desire of the individual will often be given effect to. It has the advantage of keeping confidential the devolution for a life time. One matter to be specifically guarded against is to ensure that wills when so made are carefully drafted and executed so that they can rarely be challenged.
The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.
Dileep C Choksi is the chief mentor and advisor. He has been a senior partner at C.C. Chokshi and Co. and a Joint Managing Partner at Deloitte.