Commentary

I9.332 Settled property

IHT, trusts and estates

I9.332 Settled property

I9.332 Settled property

Where property comprised in a settlement is situated outside the UK, the property (but not a reversionary interest in the property) is excluded property unless the settlor was domiciled in the UK at the time the settlement was made1. The situs of the property is determined at the time when the potential charge to IHT arises. The rule under which property is excluded property if the person beneficially entitled to it is an individual who is domiciled outside the UK (see I9.331) is disapplied except in the case of a reversionary interest2. For the treatment of a reversionary interest, see I9.341.

Example 1

Trustees resident and domiciled in New Zealand hold property in New Zealand under a trust made by a New Zealand domiciliary, all the beneficiaries of which are resident in New Zealand. Part of the property is sold for the purpose of investment in Belgium, and the sum required is transmitted to a London bank pending completion. While it is so held the life tenant assigns his life interest to his son. The life tenant dies within seven years of the assignment.

The bank balance is not excluded property, and IHT will be charged on it; the termination of the interest in possession by the assignment has become a chargeable transfer3 as a result of the life tenant's death within seven years4.

Example 2

A fund is held by the trustees of a settlement created in 1950 by a person domiciled in New South Wales on trust for L for

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