IHTM16041 - Definition of a settlement for IHT: introduction

The definition of a settlement for IHT purposes is in IHTA84/S43 (2).

Except in cases of trusts made by will, a written instrument/deed is not usually necessary unless the property being settled is real property or an equitable interest (Law of Property Act 1925 S53). However, in the cases of settled property that we see, the reality is that written documents are invariably used.

Under IHTA84/S43 (4), in relation to Scotland the term “settlement” also includes

1. an entail
2. any deed by virtue of which an annuity is charged on, or on the rents of, any property (the property being treated as the property comprised in the settlement); and
3. any deed creating or reserving a proper liferent of any property whether heritable or moveable (the property from time to time subject to the proper liferent being treated as the property comprised in the settlement).

The term “deed” in IHTA84/S43 (4) includes any disposition, arrangement, contract, resolution, instrument or writing.

A liferent is the Scottish equivalent of an English life interest. A proper liferent differs from a trust liferent in that the property subject to it is conveyed direct to the liferenter instead of to trustees to hold for the behoof of the liferenter.