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Commentary

I5.221 Lifetime termination of QIIP—general

IHT, trusts and estates

I5.221 Lifetime termination of QIIP—general

Lifetime charges on settled property that is subject to qualifying interest in possession (QIIP) are imposed by a set of rules which are separate from but parallel to those relating to dispositions of free estate. These rules provide that a disposition of all or part (I5.223) of a QIIP is not a transfer of value by the trustees but is treated as the coming to an end of the interest in possession. This termination is treated as being a transfer of value by the person beneficially entitled to the interest (often called the 'life tenant'), the value transferred being the value of the property in which his interest subsisted1.

A lifetime termination of the beneficiary's interest will sometimes be treated as a chargeable lifetime transfer (CLT) by the former life tenant (where, say, the trust fund continues on further trusts).

A transfer will however be a potentially exempt transfer (PET) where:

  1. Ìý

    •ÌýÌýÌýÌý the life tenant gives it up in favour of another individual (or a disabled trust; see I5.207),

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