Part 2: Inheritance Tax Section 13: Settlements with initial interest in possession Summary
This section amends the inheritance tax (IHT) legislation relating to settlements created by individuals before March 2006 giving an interest in possession to themselves or to their spouse, widow, civil partner or surviving civil partner.
	Where "interest in possession" appears in s80 of IHTA, it is replaced with "a qualifying interest in possession" which means that where one party to a couple succeeds to a life interest to which their spouse or civil partner was previously entitled during the latter’s lifetime, section 80 will apply at that time (because neither spouse would then have a qualifying interest in possession). This means that the settled property would then be treated as being comprised in a settlement and as a result subject to the relevant property charges. This measure fixes an unintended effect of the legislation that allowed a (non-qualifying) interest in possession to escape all IHT charges, because the settled property was neither part of the beneficiary’s estate, nor was it comprised in a relevant property trust.