Lifetime transfers: when does property becomes comprised in the estate of an individual?
Under IHTA84/S3A (2)(a), property (IHTM04030) which becomes comprised in the estate of an individual (IHTM04053) will be a potentially exempt transfer (PET) (IHTM04057). The most obvious example is an outright gift of cash from one individual to another.
On 1 January 2015, Harry gives Evie a cheque for £200,000.
The gift satisfies the condition in IHTA84/S3A (2)(a). It is a PET, except so far that it may be an exempt transfer. (IHTM04024)
On 1 January 2004, Joshua settles £200,000 on trust for Joseph for life with remainders over.
As Joseph has a qualifying interest in possession (IHTM16062) in the trust, the gift satisfies the condition in IHTA84/S3A (2)(a). It is a PET, except so far that it may be an exempt transfer.
Because of this condition, transfers which
- do not result in the transferee receiving property which becomes comprised in their estate, for example the release of a debt, and
- are not to individuals, for example, on discretionary trusts or to companies,
cannot be PETs under IHTA84/S3A (2)(a) – although they may be PETs under IHTA84/S3A (2)(b) if the estate of another individual is increased (IHTM04060). This transfer would not be a PET if Joshua had made it on or after 22 March 2006.
PET treatment for gifts by way of renewal premiums on life policies is discussed at IHTM20331.