Q&As

Mrs D assigned her life interest in her father’s Will Trust to the General Reversionary and Investment Company in 1973 in return for an agreed sum. Mrs D has now died and the trust has been brought to an end in favour of her children. What are the tax consequences of this and, if the death of Mrs D is not a chargeable event for inheritance tax, is the capital gain tax free uplift available?

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Published on LexisPSL on 11/01/2018

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • Mrs D assigned her life interest in her father’s Will Trust to the General Reversionary and Investment Company in 1973 in return for an agreed sum. Mrs D has now died and the trust has been brought to an end in favour of her children. What are the tax consequences of this and, if the death of Mrs D is not a chargeable event for inheritance tax, is the capital gain tax free uplift available?
  • Interest in possession
  • Qualifying interest in possession
  • Inheritance tax consequences
  • Capital gain tax consequences

Mrs D assigned her life interest in her father’s Will Trust to the General Reversionary and Investment Company in 1973 in return for an agreed sum. Mrs D has now died and the trust has been brought to an end in favour of her children. What are the tax consequences of this and, if the death of Mrs D is not a chargeable event for inheritance tax, is the capital gain tax free uplift available?

In answering the above, we have assumed that Mrs D did not reserve a benefit of any kind in the settlement property. We have also assumed the company which purchased Mrs D’s interest in possession was not a close company as defined by section 102(1) of the Inheritance Tax Act 1984 (IHTA 1984) and remained so at Mrs D’s death.

Interest in possession

The interest in property of a beneficiary interested under a trust may be a fixed interest, entitling them to income and/or capital.

A beneficiary's entitlement to trust property is an interest in possession if:

  1. it is a vested interest at the present time; and

  2. under the terms of the trust, they are entitled to the use of the trust property and/or to the net income of the trust as it

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