Meg Saksida explains how to recognise a qualifying interest in possession trust and outlines the implications
An important date in the trust world was 22 March 2006. Prior to this date, trusts were taxed depending on the type of trust that they were; namely, an interest in possession trust (IIP) or a discretionary trust (DT).
Property settled into an IIP was a potentially exempt transfer (PET) for inheritance tax (IHT) purposes, so was only chargeable if the donor did not survive for seven years. An IIP was then liable to IHT by being added in with the free estate of the life tenant. On average, if each life tenant lived a generation before the trust property was passed to the remainderman, there would be a 40% IHT charge every 70 years. The remainderman would not be charged to IHT on their receipt of the trust property, as it would have already been taxed on the life tenant. Thus, their receipt of the reversionary interest
