Settlement Deed: Meaning, Types, Deed Format and Document Required

Regarding properties such as land or buildings, the settlement deed's meaning shifts to a legal instrument in which parties work out their differences or conflicts. According to the legal standard, the settlement is the disposal of real estate – whether mobile or inanimate at the landlord’s discretion. It must be written down and recorded for a settlement deed to be valid. Court lawsuits, property partitions, and payment settlements are common conflicts resolved using a settlement deed.

A family settlement agreement is another name for a settlement deed. It is a contract or legal instrument among family members that states that in the event of a disagreement, all family members adhere to the same terms and conditions. A settlement deed between family members involves family members who are most typically related to the distribution of properties. The settlement deed is a legally binding contract that must be documented.

What is a Settlement Deed in Property?

Settlement deeds in India are a quick and easy technique for resolving situations. It is a peaceful resolution to problems. When people live in a society, disagreements are a common occurrence that cannot be stopped. It is a non-litigation option with legally binding provisions the parties have agreed to. Because the settlement is declared final, these contracts frequently restrict the parties from pursuing a future lawsuit.

For those who are unsure what litigation entails, it's just the process of bringing a case to a court of law for resolution. Litigation can be perplexing and consume a significant amount of time and money. As a result, a Deed of Settlement can be a time - and cost-effective way to resolve a legal dispute. A settlement deed format has to be precise for this to take place.

Settlement Deed Format

The settlement deed is similar to other agreements in that it follows particular protocols. All parties must agree on the terms of the settlement agreement. External factors such as deceit, coercion, or deception should not undermine free consent.

All sides must sign the settlement deed if it is used to divide the family property. The settlement deed sample between brothers, sisters, etc., becomes null or void if they are omitted and have not signed it. There are also many other family settlement deed formats you can easily find details about from the lawyer or the court.

DRAFT OF MEMORANDUM RECORDING ORAL FAMILY SETTLEMENT

THIS MEMORANDUM RECORDING ORAL FAMILY SETTLEMENT is made at _________ this ________ day of ____________ between Shri ____________, an Indian inhabitant residing at __________ _________ _________ (hereinafter called "the Party of the First Part") of the FIRST PART, Shri ______________, an Indian inhabitant residing at _____________ _____________ (hereinafter called "the Party of the Second Part") of the SECOND PART and Shri _________, also an Indian inhabitant residing at ____________________________________ (hereinafter called "the Party of the Third Part") of the THIRD PART.

And reference to the parties hereto shall, unless repugnant to the context or meaning thereof mean and include their respective successors and assigns.
WHEREAS: -
1. The parties hereto are related to each other, the party of the first part being the ____________ of the party of the Second Part, etc;
2. Serious disputes and differences have arisen between the parties hereto, relating to ___________, and which have disrupted the peace and harmony of the family affected the business and family relations and threatened to resort to litigation;
3. With the object of resolving the disputes above arising out of the conflicting claims made by the parties hereto as stated above and for effectuating a permanent solution of all the outstanding disputes once and for settlement was arrived at to ensure family peace and harmony after considering what was best in the interest of the parties and in the expectation that the settlement would result in achieving amity and goodwill among the Parties. It was agreed that the parties and it were agreed that the settlement arrived at would be final and binding upon all the parties hereto and avoid any further disputes and or differences amongst the parties hereto.
4. The parties hereto have come to a settlement after the discussion above with the help of mutual friends to resolve the disputes and differences. A memorandum of settlement with specific terms and conditions was drawn to avoid any future conflicts and or differences amongst the parties hereto and that this memorandum has been entered into to record the said terms and conditions of the Family Settlement already agreed upon by the parties hereto.

NOW, THEREFORE, THIS MEMORANDUM OF FAMILY SETTLEMENT WITNESSETH THE SAID TERMS AND CONDITIONS AS FOLLOWS:

1. In pursuance of the said agreement and in consideration of the premises, the parties hereto agree that the Party of the Third Part shall apply to the Court for the grant of letters of administration with the will annexed of the estate of the late ___________, the deceased.

2. Without prejudice to their right to get their shares in the deceased's estate as from now on fixed and agreed to by the parties hereto, the heirs shall give their letters of consent to the Party of the Third Part for obtaining the letters of administration as aforesaid.

3. In consideration of the premises, the Party of the Third Part shall immediately after the letters of administration have been obtained, grant, deliver and transfer one-third of the said properties and assets (after setting apart a sum of Rs. ___________/- for discharging the liabilities of the late _____________ and also to meet the expenses for the grant of letters of administration in favour of the Party of the Third Part.) to each of the said heirs and retain the remaining one-third for himself.

4. An inventory of the assets of the deceased and of the respective agreed values thereof, is listed in Part I of Annexure B, hereto. A list of the debts due and owing by the estate of the deceased is listed in Part II of the said Annexure B hereto. An estimated sum of Rs______ has been taken into consideration and set apart by the Parties in a separate Savings Bank Account no. with __________ Bank, _____________ Branch, towards the expenses of obtaining the Probate / Letters of Administration with the will annexed and the transfer/distribution of the estate of the deceased in accordance herewith and the said sum shall be utilised by the parties hereto, accordingly. In case of any deficit in meeting the debts of the deceased and/ or the expenses of proving the Will and distribution of the estate, the parties hereto shall contribute equally to such deficit.

5. After setting apart sums to meet the debts of the deceased and the estimated expenses of distribution of the estate, The assets allotted to the said Party of the First Part under the Family Settlement arrived at are more particularly described in the First Schedule hereunder written. Similarly, The assets allotted to the said Party of the Second Part under the Family Settlement arrived at are more particularly described in the Second Schedule hereunder written. The assets allotted to the Party of the Third Part under the Family Settlement arrived at are more particularly described in the Third Schedule.

6. All expenses of and incidental to the grant of letters of administration as also of transfer of the shares to the respective parties hereto shall come out of the deceased's estate.

7. It is expressly agreed by and between the parties hereto that the heirs shall not claim any rights under the said codicil, and the Party of the Third Part shall not, after obtaining the letters of administration with the will annexe, claim any rights under the said will save as hereinbefore provided.

8. The parties hereto confirm and declare that all the disputes and differences between them are settled and that none of the parties has any further claim or demand of any nature whatsoever against the other or others of them.

9. The parties hereto expressly agree and declare that they have arrived at this Family Arrangement in order to put an end to existing and future disputes between the parties and with a view to bring about amity and goodwill amongst them and to maintain peace and bring about harmony in the family. The parties hereto further agree and declare that the terms of the Memorandum of Family Settlement arrived at between them and recorded herein are fair and bona fide and in the interest of all the parties.

10. The parties hereto shall sign and execute or cause to be signed and executed all such documents, deeds, writing and/or instructions as may be necessary to give effect to the Family Arrangement arrived at amongst the parties hereto. On ___________ and which is recorded in this Memorandum of Family Arrangement-cum-Compromise.

Annexure 'A'

(Copy to the Will)

Annexure 'B'

Part I: List of assets of the deceased and estimated agreed values

Thereof.

The first schedule hereinabove referred to

(The assets allotted to the said Party of the First Part)

Part IV: List of Debts of the Deceased.

The Second schedule hereinabove referred to

(The assets allotted to the said Party of the Second Part)

The third schedule hereinabove referred to

(The assets allotted to the said Party of the Third Part)

IN WITNESS WHEREOF, the parties hereto have hereunto set and subscribed their respective hands on the day and year first hereinabove written.

SIGNED AND DELIVERED by }

the Party of the First Part }

Shri.......................... }

in the presence of ___________ }

SIGNED AND DELIVERED by }

the Party of the Second Part }

Shri.......................... }

in the presence of ___________ }

SIGNED AND DELIVERED by }

the Party of the Third Part }

Shri......................... }

in the presence of ____________ }

Documents Required for Settlement Deed

When preparing a settlement deed, ensure you have the necessary documents ready. These include:

• Original settlement deed document.
• Passport-seized photos of all parties & witnesses.
• Title or sale deed of the property involved in the settlement.
• PAN card or Form 60/61 (if applicable) for all parties.
• Identity proof (Aadhaar card, voter ID, passport, etc.) and address proof for all involved parties. 

Types of Settlement Deeds 

A settlement deed can take different forms. The two main types are the con dictionary settlement deed and the absolute settlement deed.

Conditional Settlement Deed

The settlor can include conditions in the conditional settlement deed format that the claimant must obey. The requirements can be any terms requiring the claimant to pay a specified sum every month or every year. The settlement can potentially become void if the requirements are not met. If any of the requirements are not met, the settlor can revoke the agreement, rendering it void.  Otherwise, the agreement becomes void if the beneficiary fails to meet the agreed-upon terms. As a result, the settlers are free to impose their conditions. Both parties must follow the deed of settlement format.

Absolute Settlement Deed

The settlement is not conditional, and no conditions are indicated in the event of an absolute settlement or unconditional settlement. Any condition that does not obligate the claimant is stated directly in the deed. The claimant is under no legal responsibility, and the asset is handed to the beneficiary without condition, with no power of revocation for the defendant. No clause can render the unconditional settlements void, and no conditions can render the settlements void.

Gift Settlement Deed

A gift settlement deed is a document that transfers property from one person to another without financial compensation. It is often used to give property as a token of love and appreciation. This settlement deed document can be recorded as a gift for tax purposes. It offers a simple way to transfer property without litigation. Parties agree on legally binding terms, allowing each side to express its concerns. In a family settlement deed, the stamp duty is usually lower than that of a gift deed.

Difference Between Gift Deed and Settlement Deed

Both options help avoid litigation by allowing the involved parties to address their concerns. Here are the differences between a settlement deed and a gift deed [1]: 

Particulars	Gift Deed	Settlement Deed
Purpose	Used to transfer property out of love and affection without monetary consideration.	Used to distribute property among family members as part of an arrangement or settlement.
Consideration	No monetary consideration involved.	May or may not involve consideration.
Revocability	Generally, irrevocable once executed and registered.	Can be revocable or irrevocable depending on the terms.
Parties Involved	Between a donor (giver) and a donee (receiver).	Usually between family members or legal heirs.
Stamp Duty	Lower compared to sale deeds, varies by state.	Stamp duty may be similar or higher depending on local laws.
Registration Requirement	Mandatory under the Registration Act, 1908.	Also mandatory under the Registration Act, 1908.

Settlement Deed vs Gift Deed: A settlement deed generally incurs less stamp duty and involves a mutual agreement, while a gift deed is a one-sided property transfer.

How do Settlements Take Place?

A settlement deed is better than a will. If you use a settlement deed, you become the owner right after you file it. You don’t have to wait for court decisions like with a will. You can also say in the deed what should happen to your things after you pass away. In a settlement, both sides talk and agree on how to solve their problem. They write down their agreement, and both sign it. This makes the agreement as strong as if a judge had decided the case. 

Transfer of Property Through Settlement Deed

Transferring property through a settlement deed is straightforward. It ensures a smooth transfer of property rights between parties. It is commonly used to settle disputes or distribute assets among family members. A settlement deed must be clear and agreed upon by all involved parties. It helps avoid legal issues and ensures everyone understands the terms.

To transfer property through a settlement deed, follow these steps:

• Draft the settlement deed with clear terms.
• Get the deed signed by all parties and witnesses.
• Register the deed at the local sub-registrar’s office.
• Pay for the necessary stamp duty and registration fees.
• Obtain a certified copy of the registered deed. 

What is a Family Settlement Deed?

The legal document that resolves property disputes among family members is called a family settlement deed. It ensures a fair distribution of assets without going to court.

Settlement Deed Between Family Members

A settlement deed between family members helps distribute property and assets fairly. All family members must agree to the terms and sign the deed. This method avoids legal battles and keeps family harmony. The deed clearly outlines each member’s share, making the process transparent and fair. 

Family Settlement Deed Between Brothers

A family settlement deed between brothers is often used to divide ancestral property. Brothers agree on how to split the property and sign the deed. This ensures each brother receives a fair share and prevents future conflicts. The deed provides a clear legal framework for property division, keeping family relationships intact.

How to Cancel Settlement Deed?

Cancelling a settlement deed can be complex. Once a settlement deed is executed and acted upon, it cannot be revoked. If you have agreed to the deed and transferred assets to your name, the deed stands, and the original owner cannot cancel it.

If someone tries to disrupt your peaceful ownership, follow these steps:

• File a Lawsuit: Seek a judgment declaring the second settlement deed invalid.
• Maintain Possession: Ensure you do not lose possession of the properties.
• Legal Assistance: Consult your lawyer for the specific procedure to cancel the deed.

Your lawyer will guide you through the cancellation process. For more information, refer to family settlement deed formats available online. 

Can a Deed of Settlement be a Challenge?

The agreement will be assessed as stamp duty depending on the property's worth. It can be challenged under certain circumstances under the Settlement Deed Transfer of Property Act [2]. 

• A settlement agreement can be contested in court, but it can only be cancelled by a court order. 
• If there is fraud or coercion, deception, or illegal execution, a settlement agreement might be contested. 
• While an adequately prepared family settlement cannot be revoked without a court order, it can be legally challenged in the following situations. 
• Any fabrication of facts about the contested property's title can also lead to future disputes. 
• However, a family settlement deed may be challenged in court in the following circumstances: when a contract was obtained by deception, when a contract is forced into existence, or when facts relating to the title, for example, have been manipulated.

Is the Money from a Divorce Settlement Taxable?

Taxation on the money received in a family settlement deed registration - accumulation of income - because the complete asset existed at the time of division and interested family members had their interests/shares, it was a family settlement. As a result, the family arrangement is exempt from tax.

Is stamp duty due on property transfers between family members?

If the property is being passed as a gift in the name of the father, mother, son, sister, daughter-in-law, grandson, or daughter, 2.5 % of its value must be paid in stamp duty.

Does a Settlement Deed need to be Recorded?

A property settlement deed must be recorded to ensure its legal validity and enforceability under the Registration Act, 1908. Recording the deed provides official proof of ownership transfer and protects both parties from future disputes or claims. 

• The agreement must be stamped rather than registered if the settlement is for collateral. 
• If the deal is written, it must be registered to be considered legal and admissible in court. 
• Although an unregistered settlement is illegal in the eyes of the law, the validity of the unregistered family settlement deed can be enforced because it has already been signed and has the legal heirs of the dead titleholder. 
• A family settlement might be either oral or written. Remember this basic idea in the family settlement: if a family settlement is to be effected through a document, that document must be registered.

Get Legal Expert Help Via NoBroker Legal Services

We hope this article has given you a general understanding of the settlement deed and the difference between a settlement deed and a gift deed. NoBroker provides end-to-end property legal services by simplifying documentation and verification for buyers, sellers, and tenants. If you’re looking for some family settlement deeds in India, seek help from NoBroker Legal Services for hassle-free assistance related to settlement deeds or any other issues. Contact us today for more information!

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