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Interest in possession settlements

Where a person with a qualifying interest in possession (QIIP) dies the settled capital will be aggregated with the deceased's free estate to ascertain the applicable rates of IHT¹ – see I5.201.

The deceased's PRs are liable for IHT on the free estate and the trustees for IHT on the settled property (except in the case of settled land ceasing to be settled on the death and so vesting in the deceased's personal representatives who are then liable to the exclusion of the trustees)².

However, the PRs must deliver an account of both the free estate and the settled property, and property which forms part of the estate by virtue of FA 1986, s 102(3) (the GWR provisions – see I3.436)³. On delivery of the account they must pay the IHT on the free estate and they may pay the IHT on the settled property if the trustees so request