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Difference between Inheritance and Succession
Though the prominent legal principle, ‘ignorance of law is not an excuse’ echoes around, its practical application is questionable. The legal jargon within the words of the law is often not understood by the majority, forcing many to turn to it only when the situation arises.
When it comes to family law, the major misconception that prevails is the difference between inheritance and succession and how one is different from the other. While both involve the transfer of assets or responsibilities from one person to another, they differ significantly in scope, context, and legal implications. It is very essential for one to understand these differences, when one is planning to transfer their assets to their loved ones or while deciding upon the future of their business transactions.
Inheritance in general refers to the transfer of the assets and properties of an individual to his heirs upon the death of the former, whereas succession is the process of transferring control, ownership, or leadership of a business from one entity to another. Unlike inheritance, where the transfer of assets takes place posthumously, a succession often takes place during the lifetime of an individual, especially in the context of business or leadership transitions.
The concept of inheritance is generally governed by customs and the laws of the land. For instance, in India, the laws of inheritance are governed by the Hindu Succession Act, 1956, Muslim Personal Law (Shariat) Act, 1937, and, Indian Succession Act, 1925. Through inheritance the financial investments, real estate, business entities, if any, and the personal belongings of the deceased are transferred to the heirs as determined through the above-mentioned acts and customs. In many cases, the individuals wish to choose their heir and the manner of asset distribution as opposed to the ones instructed under the rule of law, this is facilitated through writing a legal document called Will which explicitly states the desired legal heirs of the deceased and the manner of distribution of his assets.
Succession in organizations involves adherence to legal and corporate governance requirements such as agreements between the party or shareholders, bylaws, and other essential regulatory compliances.
Though inheritance and succession are distinct, they are interconnected concepts that play a role in asset transfer. The main difference lies in inheritance, primarily being the transfer of assets upon the death of a person, whereas succession focusses on a person transferring the ownership and leadership to the heirs during his lifetime.
