IHTM04059 - Lifetime transfers: when does property becomes comprised in the estate of an individual?

Under IHTA84/S3A (2)(a), property ( IHTM04030) which becomes comprised in the estate of an individual ( IHTM04053) will be a PET ( IHTM04057). The most obvious example is an outright gift of cash from one individual to another.

Example 1

On 1 January 1998, A gives B a cheque for £200,000.

The gift satisfies the condition in IHTA84/S3A (2)(a). It is a PET, except so far that it may be an exempt transfer. ( IHTM04024)

Example 2

On 1 January 1998, A settles £200,000 on trust for B for life with remainders over.

As B has an interest in possession ( IHTM16000) in the trust, the gift satisfies the condition in IHTA84/S3A (2)(a). It is a PET, except so far that it may be an exempt transfer.

Because of this condition, transfers which

• do not result in the transferee receiving property which becomes comprised in their estate, for example the release of a debt, and
• are not to individuals, for example, on discretionary trusts or to companies,

cannot be PETs under IHTA84/S3A (2)(a) – although they may be PETs under IHTA84/S3A (2)(b) if the estate of another individual is increased. ( IHTM04060)

PET treatment for gifts by way of renewal premiums on life policies is discussed at IHTM14000.