Settlement of property among family members and others is
a mode of distributing both movable and immovable properties and has been
defined under Section 2 (24) of the Indian Stamp Act and Karnataka Stamp Act. A
settlement deed is a non-testamentary disposition, in writing, of movable or
immovable property made
1.In consideration of marriage,
2.For the purpose of distributing properties of a Settler
among his family or those for whom he desires to provide for or for the purpose
of providing for some person dependent on him, or
3.For any religious or charitable purposes.
Settlement also includes an agreement in writing to make
such a disposition or where a disposition is not made in writing, any
instrument recording, whether by way of a declaration of a trust or otherwise,
the terms of any such disposition. The Karnataka Stamp Act has similarly
defined settlement.
The essential ingredients are:
1.It is a non-testamentary disposition that is it is not
a Will. As such it operates immediately on execution, whereas a Will comes into
operation only after the death of its author. However, a settlement may also
contain a clause for reservation of life estate.
2.The Act specifies it must be in writing; So an oral
disposition is not a settlement.
3.There may be an agreement to make such a disposition.
4.If it is not in writing, any record evidencing such
disposition is also a settlement.
5.There must be a settler i.e. the owner of a movable or
an immovable property.
6.There must be people that are family members or other
persons who are dependent on the settler in whose favor the property is to be
settled. It may be for religious or charitable purposes.
Trust
Vs Settlement:
A settlement deed should not be mistaken for a trust
deed. In the case of trust, the author vests the property in favor of its
trustees, who manage and administer the property /properties as per the
direction of the author for the benefit of third person/s called beneficiaries.
The trustees will act only as per the directions of the author of a trust deed
and the beneficiaries do not have any say in the management of the said
properties.
However, in settlement, there is no intermediate person,
like a trustee and the beneficiaries have complete control over the
administration, management of the property settled in their favor and enjoy the property as absolute owners subject to the conditions of the settlement deed.
Will
Vs Settlement:
Settlement deed is different from Will, since a Will is a
testamentary document, which becomes operative after the death of its author,
whereas a settlement becomes operative immediately.
Another distinguishable feature is that a Will is
revocable and that any number of Wills may be executed by its author in respect
of a single property during his life time, though only the last Will executed
becomes operative. Whereas, settlement is not revocable and after proper
execution of a settlement deed, the Settler relinquishes all his rights, title
and interest over the said property, subject to the terms and conditions contained
in the settlement deed.
Partition
Vs Settlement:
Usually partition of joint properties is mistaken for
settlement. However, partition constitutes division of properties between the
joint owners as well as the division of joint interest ownership in the
property. Thus, the division amounts to severance of the joint interest in the
ownership of the common properties and the common property is thus divided
among them. Each partner becomes the absolute owner of his share and each
partner's share is subject to a pre-determined percentage, governed by either
the inheritance laws or by the partnership deed as the case may be. In
settlement, however, the property is owned by a third person and is settled in
favor of persons who do not have any previous interest in the said property and
the share of the beneficiary is as per the wishes of the settler.
Gift
Vs Settlement Stamp duty-Registration:
There are marked differences between gift and settlement.
Gift is not made for any consideration, whereas settlement may be for
consideration. Like-wise gift may be made to any person, whereas a settlement
is mostly made in favor of dependents. Also gift requires acceptance, whereas
settlement does not. The gift is revocable or may be suspended as per section
126 of the Transfer of Property Act on happening of any specified event, which
does not depend on the will of the donor unlike that of settlement, which is
final & binding once it is executed by the settler.
Advantages:
Settlement has a very simple procedure where the
properties are distributed to the dependents or for religions charitable
purposes during the lifetime of the settler.
The deed of settlement attracts stamp duty as
registration of the settlement deed is compulsory. Article 58 of the Indian
Stamp Act and Article 48 of Karnataka Stamp Act refers to stamp duty payable on
execution and registration of settlement deeds. Since, settlement amounts to
conveyance of property, the stamp duty payable is similar to that payable on a
sale deed, i.e. based on the market value of the property. However, concessions
are available in case of settlement made in favor of family members, i.e.
Rupees One thousand as stamp duty and access of Rupees Fifty. Family members
include the spouse, son, daughter-in-law and grand children of the Settler.
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