Finance Act 2006

“Immediate post-death interests” and “transitional serial interests”

5 (1) In IHTA 1984, after section 49 insert—

“49A Immediate post-death interest

(1) Where a person (“L”) is beneficially entitled to an interest in possession in settled property, for the purposes of this Chapter that interest is an “immediate post-death interest” only if the following conditions are satisfied.

(2) Condition 1 is that the settlement was effected by will or under the law relating to intestacy.

(3) Condition 2 is that L became beneficially entitled to the interest in possession on the death of the testator or intestate.

(4) Condition 3 is that—

(a) section 71A below does not apply to the property in which the interest subsists, and

(b) the interest is not a disabled person’s interest.

(5) Condition 4 is that Condition 3 has been satisfied at all times since L became beneficially entitled to the interest in possession.

49B Transitional serial interests

Where a person is beneficially entitled to an interest in possession in settled property, for the purposes of this Chapter that interest is a “transitional serial interest” only—

(a) if section 49C or 49D below so provides, or

(b) if, and to the extent that, section 49E below so provides.

49C Transitional serial interest: interest to which person becomes entitled during period 22nd March 2006 to 5th April 2008

(1) Where a person (“B”) is beneficially entitled to an interest in possession in settled property (“the current interest”), that interest is a transitional serial interest for the purposes of this Chapter if the following conditions are met.

(2) Condition 1 is that—

(a) the settlement commenced before 22nd March 2006, and

(b) immediately before 22nd March 2006, the property then comprised in the settlement was property in which B, or some other person, was beneficially entitled to an interest in possession (“the prior interest”).

(3) Condition 2 is that the prior interest came to an end at a time on or after 22nd March 2006 but before 6th April 2008.

(4) Condition 3 is that B became beneficially entitled to the current interest at that time.

(5) Condition 4 is that—

(a) section 71A below does not apply to the property in which the interest subsists, and

(b) the interest is not a disabled person’s interest.

49D Transitional serial interest: interest to which person becomes entitled on death of spouse or civil partner on or after 6th April 2008

(1) Where a person (“E”) is beneficially entitled to an interest in possession in settled property (“the successor interest”), that interest is a transitional serial interest for the purposes of this Chapter if the following conditions are met.

(2) Condition 1 is that—

(a) the settlement commenced before 22nd March 2006, and

(b) immediately before 22nd March 2006, the property then comprised in the settlement was property in which a person other than E was beneficially entitled to an interest in possession (“the previous interest”).

(3) Condition 2 is that the previous interest came to an end on or after 6th April 2008 on the death of that other person (“F”).

(4) Condition 3 is that, immediately before F died, F was the spouse or civil partner of E.

(5) Condition 4 is that E became beneficially entitled to the successor interest on F’s death.

(6) Condition 5 is that—

(a) section 71A below does not apply to the property in which the successor interest subsists, and

(b) the successor interest is not a disabled person’s interest.

49E Transitional serial interest: contracts of life insurance

(1) Where—

(a) a person (“C”) is beneficially entitled to an interest in possession in settled property (“the present interest”), and

(b) on C’s becoming beneficially entitled to the present interest, the settled property consisted of, or included, rights under a contract of life insurance entered into before 22nd March 2006,

the present interest so far as subsisting in rights under the contract, or in property comprised in the settlement that directly or indirectly represents rights under the contract, is a “transitional serial interest” for the purposes of this Chapter if the following conditions are met.

(2) Condition 1 is that—

(a) the settlement commenced before 22nd March 2006, and

(b) immediately before 22nd March 2006—

(i) the property then comprised in the settlement consisted of, or included, rights under the contract, and

(ii) those rights were property in which C, or some other person, was beneficially entitled to an interest in possession (“the earlier interest”).

(3) Condition 2 is that—

(a) the earlier interest came to an end at a time on or after 6th April 2008 (“the earlier-interest end-time”) on the death of the person beneficially entitled to it and C became beneficially entitled to the present interest—

(i) at the earlier-interest end-time, or

(ii) on the coming to an end, on the death of the person beneficially entitled to it, of an interest in possession to which that person became beneficially entitled at the earlier-interest end-time, or

(iii) on the coming to an end of the second or last in an unbroken sequence of two or more consecutive interests in possession to the first of which a person became beneficially entitled at the earlier-interest end-time and each of which ended on the death of the person beneficially entitled to it, or

(b) C became beneficially entitled to the present interest—

(i) on the coming to an end, on the death of the person entitled to it, of an interest in possession that is a transitional serial interest under section 49C above, or

(ii) on the coming to an end of the second or last in an unbroken sequence of two or more consecutive interests in possession the first of which was a transitional serial interest under section 49C above and each of which ended on the death of the person beneficially entitled to it.

(4) Condition 3 is that rights under the contract were comprised in the settlement throughout the period beginning with 22nd March 2006 and ending with C’s becoming beneficially entitled to the present interest.

(5) Condition 4 is that—

(a) section 71A below does not apply to the property in which the present interest subsists, and

(b) the present interest is not a disabled person’s interest.”

(2) Sub-paragraph (1) shall be deemed to have come into force on 22nd March 2006.