IHTM30113 - The settlor: PETs

This instruction applies where

• a PET ( IHTM04057) is made on the lifetime disposal or termination of an interest in possession in settled property ( IHTM16091) during the lifetime of the settlor and
• the PET proves to be a chargeable transfer by reason of the transferor's death (the transferor is the person who had the interest in possession before the disposal or termination).

Example

S settled property on L for life with remainder to R absolutely. During S’s lifetime, L and R bring the settlement to an end by executing a deed under which R becomes immediately beneficially entitled to the whole of the settled property.

The cesser of L’s life interest is a PET and L is the transferor.

L dies within seven years.

In respect of transfers of value and other events occurring on or after 17 March 1987, IHTA84/S201 (3A) provides that the settlor is not liable under IHTA84/S201 (1)(d) for tax on a PET in this kind of situation if

• the settlement was made before 17 March 1987
• the trustees were resident in the United Kingdom when the settlement was made, and
• the trustees have not been resident in the United Kingdom at any time between 16 March 1987 and the death of the transferor.