Qualifying interest in possession trusts—IHT treatment

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Practice notes

Qualifying interest in possession trusts—IHT treatment

Copyright © 2025 LexisNexis

Produced in partnership with Paul Davies of Clarke Wilmott LLP

Practice notes
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Trust property, which is the subject of a qualifying Interest in possession (QIIP), may become chargeable to inheritance tax (IHT) on the following occasions:

  1. •

    on the death of the beneficiary with the interest in possession (the life tenant)

  2. •

    on the death of the beneficiary (life tenant) within seven years after a transfer or lifetime termination of their Interest

  3. •

    on the transfer or conversion of the interest to a non-qualifying or discretionary interest

For further information about QIIPs, see Practice Note: The meaning of qualifying interest in possession.

Property in which a QIIP subsists is not relevant property so it is not subject to principal and exit charges during the life of the trust. See Practice Note: The meaning of relevant property for details.

Death of the beneficiary with the qualifying interest in possession

When the beneficiary with the QIIP (the life tenant) dies, the trust property will be valued and counted as part of the deceased's estate, and the IHT estate charge will be levied on that property (in

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Jurisdiction(s):
United Kingdom
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Key definition:
Interest definition
What does Interest mean?

The return earned on funds which have been loaned or invested (ie the amount a borrower pays to a lender for the use of their money).

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