(1)On the termination, on the death of the person entitled to it, of [F1an] interest in possession in all or any part of settled property—
(a)the whole or a corresponding part of each of the assets forming part of the settled property and not ceasing at that time to be settled property shall be deemed for the purposes of this Act at that time to be disposed of and immediately reacquired by the trustee for a consideration equal to the whole or a corresponding part of the market value of the asset; but
(b)no chargeable gain shall accrue on that disposal.
For the purposes of this subsection [F1an] interest which is a right to part of the income of settled property shall be treated as [F1an] interest in a corresponding part of the settled property.
(2)Subsection (1) above shall apply where the person entitled to [F2an] interest in possession in all or any part of settled property dies (although the interest does not then terminate) as it applies on the termination of such [F2an] interest.
[F3(3)This section shall apply on the death of the person entitled to any annuity payable out of, or charged on, settled property or the income of settled property as it applies on the death of a person whose interest in possession in the whole or any part of settled property terminates on his death.
(4)Where, in the case of any entitlement to an annuity created by a settlement some of the settled property is appropriated by the trustees as a fund out of which the annuity is payable, and there is no right of recourse to, or to the income of, settled property not so appropriated, then without prejudice to subsection (5) below, the settled property so appropriated shall, while the annuity is payable, and on the occasion of the death of the person entitled to the annuity, be treated for the purposes of this section as being settled property under a separate settlement.]
(5)If there is [F4an] interest in a part of the settled property and, where that is [F4an] interest in income, there is no right of recourse to, or to the income of, the remainder of the settled property, the part of the settled property in which the F5... interest subsists shall while it subsists be treated for the purposes of this section as being settled property under a separate settlement.
Textual Amendments
F1Word in s. 72(1) substituted (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(2)
F2Word in s. 72(2) substituted (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(2)
F3S. 72(3)(4) substituted (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(3)
F4Word in s. 72(5) substituted (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(2)
F5Word in s. 72(5) repealed (with effect in accordance with Sch. 39 para. 5(4) of the amending Act) by Finance Act 1996 (c. 8), Sch. 39 para. 5(2), Sch. 41 Pt. VIII(4)