IHTM16042 - Definition of a settlement: the
statutory definition
A simple example of a settlement is where a person -
- gives property to trustee(s)
- to hold it for a beneficiary for life [the
life tenant] and
- on death of life tenant, to give the
property to
- the children of the life tenant
absolutely.
The statutory definition of a settlement in IHTA84/S43 (2) is
that a settlement means any disposition or dispositions whether
effected by -
- instrument i.e. a formal document, or
- parol i.e. oral, or
- operation of law, e.g. under an intestacy,
or
- partly by one of these ways and partly
another
- whereby the property is held on trust
-
- for persons in succession e.g. life tenant
then remainderman, or
- for any persons subject to a contingency
e.g. for a beneficiary on attaining age 30 absolutely (the
contingency being that the beneficiary will not take absolutely if
they do not live to be 30), or
- by trustees to accumulate any income of
the property, and/or with power to make payments out of income at
the discretion of the trustees [in shorthand a discretionary trust
- this trust is within the category of non-interest in possession
settlements] or
- charged with the payment of an annuity
i.e. a defined [usually fixed] sum of money payable out of the
trust income for the benefit of a beneficiary known as an
annuitant. The existence of even a small annuity, e.g. £200
per year, brings the whole fund within the definition of settled
property
Property in a foreign settlement is dealt with under the last
paragraph of IHTA/S43 (2).
S43(2) specifies ‘dispositions’ in the plural to
ensure that ‘settlement’ includes cases where the trust
is created by more than one document, deed or action.
Even if the property does not come within the categories
above there are circumstances where a settlement is deemed to have
been created
- where a lease for life is created. (
IHTM16191)
- if the property would have come within the categories above had
the disposition been regulated by any part of the law of the UK or,
even if not, if the property is governed under foreign law by
provisions which are the foreign equivalent of those that would
apply. You should refer this type of situation to Technical
Group
There are further statutory provisions which apply to the
definition of a settlement in Scotland. (
IHTM16041).
