IHTM11061 - Settled property: exemption where the transferor creates an interest in possession for their spouse or civil partner
When a transferor gives their spouse or civil partner (IHTM11032) a qualifying interest in possession (IHTM16062) in settled property, the exemption on that transfer is not limited to the value of the interest in possession. The exemption is on the property in which the spouse or civil partner takes an interest in possession. This is because a person beneficially entitled to a qualifying interest in possession (IHTM16062) in settled property is treated as beneficially entitled to the property in which the interest subsists and so the settled property is part of the person’s estate for Inheritance Tax (IHTM04029).
Example
By Will Helen gives her whole estate to her surviving spouse, William, for life. On William’s death it passes to their children. Helen and William are both domiciled in the UK.
On Helen’s death in February 2015 the whole estate is spouse exempt.
There are separate instructions for cases where