Opinion | How changes in family law can improve household finance

Opinion | How changes in family law can improve household finance

Article:

Article discuss how changes in family law can improve household finance

Important Analysis:

• Reserve Bank of India’s (RBI) committee on household finance report highlights how changes in family law can improve household finance.
• These impediments are often more detrimental for women than for men, leading to important gender imbalances in financial well-being
• According to RBI report of the household finance committee, Indian households can increase their annual real income growth by up to 10% by making sensible changes to their financial arrangements.
• Issues with financial arrangements in India significantly affects the well-being of households such as
  • Investment in Real estates: On average 85 % of total assets are invested in real states.
  • Low saving and investment in Insurance: Most Indian households do little saving for retirement and low investment in insurance
  • Legal framework makes the financial position of widows and unmarried daughters especially fragile.
• However due to some legal and regulatory impediments, these changes are difficult to implements such as:

Issues and implications of coparcenary

• Under Hindu law, there is currently the notion of a coparcenary
• Coparceners have the right to demand partition of an ancestral property.
• However, in practice, there are often long delays arising from the need to secure agreement between coparceners to dispose of ancestral property.
• There may also be significant judicial delays in the case that conflicts between them require court resolution.
• The potential for prolonged disputes arising from the coparcenary structure weakens household incentives to liquidate unproductive investments in ancestral property.
• Dispute also reducing housing market liquidity as disputed properties are unsold for long periods of time.

Issues and implication within Hindu Undivided Family (HUF) structure

• There is a strong role for the karta, who is entrusted with the management of family wealth, as well as given the responsibility of the “general welfare of the family’’ (Gurpreet Singh vs Ram Saran and Ors).
• Such centralized effective control of jointly owned ancestral assets makes problems more likely to occur
• Due to such arrangement disputes can arise from undemocratic decision-making if there are differences of opinion over the optimal arrangement of the HUF’s financial matters.

Recommendation of Law Commission of India:

• A Woman should, regardless of her financial contribution to the family, be entitled to an equal share in marriage property.
• Abolition of the notion of coparcenary at the central level, thus extinguishing the right to property by sheer circumstance of birth.
• Abolition of the Hindu Undivided Family (HUF) structure.
• Reforms in Hindu and Muslim law to make inheritance of property truly gender-neutral.
• Legal framework to improve the financial position of widows and unmarried daughters needed until the financial treatment of men and women is truly equal in law