Commentary

I3.401B GWR—The reservation

IHT, trusts and estates

I3.401B GWR—The reservation

I3.401B GWR—The reservation

Definition of a gift with reservation

A gift falls within the gift with reservation provisions when either:

  1.  

    (a)     possession and enjoyment of the property is not bona fide assumed by the donee at or before the beginning of the relevant period: or

  2.  

    (b)     at any time in the relevant period the property is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of the donor and of any benefit to him by contract or otherwise1

Thus, the question of whether the gift remains taxable in the donor's estate hinges on the nature of the reservation as defined above. This article examines the two elements of that definition.

The 'relevant period' is the period of seven years before the donor's death or, if the gift was made less than seven years before the death, it is that shorter period2. Note that the relevant period is the time during which the reservation is to be considered, not the date of the gift itself. Any gift made after 18 March 1986 can be subject to the GWR provisions if the reservation still applies at the date of death of the donor or at any time during the seven year period before death.

Assumption by the donee of possession and enjoyment

For the donee to assume possession and enjoyment of the gifted property, the beneficial interest must have been effectively vested in the donee and the donee must have had enjoyment of the gifted property by, for example, occupying it or

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