Kindly guide on the below situation.
My husband and I own 3 flats. Calling them as A, B, C for convenience.
We are living in flat A(largest value), co-owned by both, his is first name, and mine is second. Entire contribution by him. Flat B also identical situation, which is empty. Flat C similar value as B, here, am first owner, he is second, but contribution is around 90% by him and remaining 10 by me(I was earlier working). Flat C was given for rental all these years, but rental income was credited to a joint account which both of us have. But he wasn’t ok with my using the amount in this account as he said saving it for son higher studies etc. But annual tax was paid by me, which he reimbursed to me later.
Now , he wants to sell both flats B and C, as B has been lying empty for years and C is difficult to manage as in a different city. In their place, want to buy 2 equivalent new flats(capital gain tax etc).
But for the 2 new flats, he wants to change ownership as follows. Reason he is mentioning is so that later our son doesn’t have to deal with inheritance tax etc.
1. For flat purchased with sale of flat B amount, he wants to put his name as first owner and second as our son who is 18 years old and is a student. (he is ok with putting my name as 3rd)
2. For flat C where I was first name, he is proposing buying equivalent flat with my name first and our son’s name second. For this, he wants to transfer his share of the sales proceeds(90%) to our son, as gift, and then use that to buy the flat. (he says as son is blood relative it doesn’t incur tax)
My concerns / queries are as below.
1. There have been lot of friction between my husband and me from time to time , and cannot say what is the future. Am worried whether he is doing this to somehow remove me out of ownership. But he says , that am anyway second name in flat A which is the biggest value.
2. Am not comfortable with adding my son’s name at this stage, as he is 18 and a student and I don’t want him to get involved into financial matters / owning flat / paying income tax etc till he finishes studies / higher studies etc.
3. Am also worried that this should not cause any dispute or conflict between me and my son in future.
4. Also, my query is , if am joint owner in a flat, then even if he has contributed most of it, do I still have any rights? And in his proposed plan, am I at risk of not having any financial security w.r.t the flats, for myself?
5. If in the flat where my son and I will be joint owners, majority of the funds will come through my husband’s gift amount to son, then even if my name is first, who will be the actual majority owner of the flat? Who will get the rental income and who will pay tax?
6. I would prefer status quo, that is , in the new flats bought in place of B and C also, same ownership as before continues. And it can all be passed to son after our lifetime, or through a will etc.
Ans: This is a thoughtful and complex situation involving financial, legal, and emotional aspects. I'll provide detailed guidance addressing each concern individually and from a holistic perspective.
1. Concerns About Ownership and Friction
You mentioned past friction with your husband and uncertainty about the future.
As a co-owner of Flat A and B (even if contributions are primarily from him), you retain legal rights, including consent on sale or transfer.
Joint ownership protects your stake in these properties. Even if his contribution is larger, legally, your name on the property ensures shared rights unless explicitly defined differently in a sale deed.
Given potential concerns about exclusion from ownership, it's wise to formalize any agreement regarding your rights and contributions.
Suggestion:
If your husband insists on involving your son, ensure that you remain a co-owner with clear legal documentation securing your share and rights in all flats, including future sales or inheritance.
2. Discomfort with Adding Son as Co-Owner
At 18, your son is legally an adult but may not be financially mature enough to manage property ownership responsibilities.
Property ownership can expose him to complications, including potential tax liabilities, legal obligations, or unintended liabilities if issues arise.
Ownership changes can also affect financial aid eligibility for higher education.
Suggestion:
Consider postponing adding your son’s name until he is older and capable of making informed financial decisions. Instead, secure his inheritance through a well-drafted will.
3. Potential Conflict with Son in the Future
Inheritance and joint ownership sometimes create misunderstandings or disputes between parents and children.
Suggestion:
Clearly document ownership shares and rights through a formal family agreement or by registering a legal document defining your respective stakes.
Additionally, consult a legal expert to draft a comprehensive will specifying how properties should be distributed upon your and your husband’s demise.
4. Rights as a Joint Owner Even with Minor Contribution
In a joint property ownership setup, your rights are determined by the registered sale deed, not just the financial contribution.
Your legal status as a co-owner entitles you to decision-making rights and a share in the property's income or sale proceeds.
Your husband cannot unilaterally sell or transfer a jointly owned property without your consent.
Suggestion:
Ensure all documents clearly reflect your co-ownership.
5. Gifting to Son and Tax Implications
Your husband plans to gift his share of proceeds to your son for purchasing a flat.
Gifts between blood relatives (father to son) are tax-exempt under the Income Tax Act.
However, rental income from such a flat would belong to your son as a legal owner and may trigger tax liability in his name.
If you are listed as a co-owner but funds are primarily from your husband's gift, your son would technically have the dominant financial claim.
Suggestion:
Consider keeping ownership proportion aligned with the contribution, or ensure your financial rights are explicitly protected through legal documentation.
6. Preference for Status Quo Ownership Structure
You prefer maintaining the same ownership structure for the new flats as with B and C. This is a practical and simpler solution.
Retaining the current ownership pattern avoids unnecessary tax implications and legal complications.
It ensures continuity and clarity regarding property rights for both you and your husband.
Suggestion:
Discuss this preference openly with your husband, emphasizing the ease of inheritance through a will rather than restructuring ownership prematurely.
Final Recommendations
Legal Documentation: Engage a legal professional to draft a family settlement agreement and update your will to reflect inheritance intentions.
Ownership Clarity: Ensure new properties reflect the same ownership structure as existing ones unless both parties agree otherwise in writing.
Will Preparation: Clearly state property distribution to your son after your lifetime.
Rental Income: Formalize agreements on how rental income will be shared and taxed to avoid disputes.
Family Discussion: Have a transparent conversation with your husband and involve a legal expert to mediate if necessary.
This approach will protect your rights, simplify inheritance, and avoid future disputes.
Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
