Lifetime transfers: when is a gift made to another individual or to a specified trust?
Before 22 March 2006, to be a potentially exempt transfer (PET) (IHTM04057) a transfer must have been a gift to another individual (IHTM04053), to an accumulation and maintenance trust or to a disabled trust. However, where the gift is made on or after 22 March 2006 only gifts by one individual to another or to a disabled trust will qualify as a PET.
There is also a PET where an immediate post-death interest comes to an end on or after 22 March 2006 and the settled property
- continues to be held on the trusts of the settlement, and
- becomes property to which s.71A (trusts for bereaved minors – IHTM42815) applies, IHTA84/S3A (3B).
A gift can be made to an individual and so be a PET
- to the extent that the value transferred is attributable to property (IHTM04030) which, by virtue of the transfer, becomes comprised in the estate (IHTM04059) of that other individual, IHTA84/S3A (2)(a)
- or so far as that value is not attributable to property which becomes comprised in the estate of another person, to the extent that by virtue of the transfer the estate of that other individual is increased, (IHTM04060) IHTA84/S3A (2)(b).
For the exclusion of settled property before 17 March 1987, see IHTM04063.
A transfer is a gift to a specified trust to the extent that the value transferred is attributable to property which, by virtue of the transfer, became settled property to which IHTA84/S71 (accumulation and maintenance trusts) or IHTA84/S89 (disabled trusts) applies, IHTA84/S3A (3) and (3A).
S71 cannot apply to property settled on or after 22 March 2006 (IHTA84/S71 (1A)) except in specific circumstances where rights under a life insurance policy were settled on accumulation and maintenance trusts (IHTM42807) prior to 22 March 2006, but premiums continue to be paid after that date. In those circumstances, the payment of premiums on or after 22 March 2006 will continue to be treated as PETs if they are made to an individual, IHTA84/S46B (5), (IHTM20202).
You should refuse PET treatment for value-shiftng transfers (which would fall within IHTA84/S3A (2)(b) if for the benefit of an individual) to accumulation and maintenance trusts or to disabled trusts. The value transferred by the gift is calculated by reference to the loss to the transferor’s estate. (IHTM04054)