In each example, property has been settled by the X
settlement on the husband (H) for life, who predeceases his wife
(W).
Example 1
Remainder to W absolutely, who, by the Y settlement, settles
her reversionary interest on herself for life, with remainder to B.
Duty is paid on H’s subsequent death on the ‘settled
property’, but there is no exemption on W’s death
because she was competent to dispose (
IHTM04457) before she executed the Y
settlement.
Example 2
Remainder as H by deed or will appoint, and, in default of
appointment, to W absolutely. W settles her vested but defeasible
reversionary interest on herself for life, with remainder to B.
H died without having appointed, and duty is paid on his
death. Even though W was entitled only to a defeasible reversionary
interest during H’s lifetime, it was held, in Att Gen v Hay
[1899] 2 QB 245, that she was competent to dispose. However, this
decision is difficult to reconcile with the Coutts case, see
IHTM04456 (
IHTM04456) and any situation in which
you are considering denying exemption on the authority of Hay
should be referred to TG.
Example 3
Remainder to B absolutely, who, by the Y settlement, settles
his reversionary interest on W for life, with remainder to C. Duty
was paid on the death of H, and exemption is available on W’s
death.
Example 4
Remainder to W absolutely. H and W execute a deed bringing
the X settlement to an end and resettling the property on H for
life, remainder to W for life, remainder to B. Exemption applies on
W’s death; she should not be treated as competent to dispose
of the settled property on which duty was paid when H’s life
interest came to an end.
Example 5
Remainder to W for life, with remainder to B absolutely.
After H’s death (on which duty is paid), W and B resettle the
fund on W for life, remainder to B for life, remainder to C. You
should allow exemption on W’s death, despite the
resettlement, treating the fund on W’s death as the same
‘settled property’ that bore duty on H’s death.
Example 6
Remainder to B absolutely. Duty was paid on H’s death,
and at a later date B settled the property on W for life, with
remainder to C. The settled property on W’s death cannot be
equated with the settled property that bore duty on H’s
death, so no exemption is due.
Example 7
Remainder to W for life, remainder equally to B and C. After
H’s death, on which duty was paid, B died bequeathing his
reversionary interest to W absolutely.
If, on the principle of Fry v IRC [1959] Ch 86, the
settlement has come to an end so far as the half share derived from
B is concerned, the exemption does not apply in respect thereof on
W’s death. But if, on the other hand, that half share is
still regarded as comprised in the settlement at W’s death,
for example, if there has been no assent in W’s favour - see
Rivington v IRC [1964] Ch 149), W should be regarded as not
competent to dispose, and exemption will be available on her death.
Cases involving decisions as to whether the life interest has
merged with the reversion can cause difficulty. Fortunately they do
not arise very often, and if you encounter one about which you are
in any doubt, you should refer to TG for advice at an early
stage.
