How to distribute proceeds from sale of property built or purchased by forefathers?

• Post-1956 inherited property is personal, not ancestral, under Hindu law.
• Sale proceeds of personal property need not be distributed among family members
• HUF asset sale proceeds must go to HUF; partition must be communicated.

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Wondering whether you should mention your name in the sale deed to sell the old property and distribute the proceeds among members of your family. Today’s Ask Wallet Wise explains how the treatment of property inheritance is done under the Hindu Succession Act, 1956.

Ask Wallet-Wise initiative offers expert advice on matters related to personal finance and money-related queries. You can email your queries to askwalletwise@nw18.com, and we will try to get a top financial expert to address.

The sale of our ancestral property is to be distributed legally between me, my wife and my children equally. For convenience's sake, only my name will be mentioned in the sale deed as the number of beneficiaries is large. Should I consider naming myself on the sale deed, or transfer the proceeds to my HUF so that all beneficiaries can have equal rights?

Expert’s Advice: Ancestral property under Hindu law refers to property that has been inherited from paternal ancestors up to three degrees—from father, grandfather, or great-grandfather. The concept of ancestral property is no longer prevalent after coming into force of the Hindu Succession Act in 1956 pertanining to the death of the father leaving without a valid will, the assets inherited by the legal heirs as their personal assets.

So a property can only be treated as ancestral property if the same was inherited by a Hindu before June 17, 1956. With the Hindu Succession Act, 1956, in effect, the assets inherited by a person take the character of his personal assets and not ancestral property.

So, in all likelihood, the property which you are referring to as your ancestral property is your personal property. If the property were an ancestral property, it would have been in the name of your HUF, which is not the case.

So what you are selling is your personal property, even if it is inherited by you from your forefathers. Therefore, you need not distribute the sale proceeds among the family members. If it is HUF property, the sale consideration received has to be credited to the account of the HUF and needs to be credited in its books of accounts.

In case the property is the only asset in the HUF, you can distribute the sale consideration equally between yourself, your wife and all your children in equal shares. Such a distribution will result in full partition of the HUF, which needs to be communicated to the assessing officer. You need to obtain an order from your assessing officer, taking on record the full partition of the HUF to make it effective.