IHTM11161 - Settled property: background

Subject to the general exceptions (IHTM11171) and the specific exceptions for settled property mentioned on this and the following pages, exemption for transfers of value to charities or registered clubs is available on the termination of a qualifying interest in possession (IHTM16091) in settled property (IHTM16000).

Example 1

Laura has a qualifying interest in possession (IHTM16062) for life, in a trust set up under her late husband's Will. On Laura's death the property passes to a charity absolutely.

On Laura's death the charity exemption is available.

Example 2

Laura has a qualifying interest in possession (IHTM16062) for life, in a trust set up under her late husband's Will. On Laura's death the property passes to Robin absolutely. While Laura's life interest still subsists, Robin gives his future interest to a charity.

On Laura’s death the charity exemption is available.

Charity exemption applies to a termination of a qualifying interest in possession in settled property, but only if the charity then takes absolutely and indefeasibly. So when the qualifying interest in possession comes to an end the settlement also comes to an end (at least to the extent to which the settled property is given to charities (IHTM11112)). If the gift to the charity does not bring the settlement to an end in relation to the settled property concerned, then IHTA84/S56 (3) (a) prevents exemption from applying.

Example 3

Laura has a qualifying interest in possession (IHTM16062) for life, in a trust set up under her late husband's Will. On Laura's death one half passes to a charity absolutely and the other half to Robin for life, then to Josh.

On Laura’s death the settlement of the half given to the charity comes to an end, so that half is exempt.

Example 4

Laura has a qualifying interest in possession (IHTM16062) for life, in a trust set up under her late husband's Will. On her death it passes to a qualifying charity. Laura brings the settlement to an end by surrendering her life interest to that charity.

The charity exemption applies.