Annuity to spouse or civil partner: annuity payable out of the income of the estate
Where an annuity (IHTM16211) is payable out of the income of the estate, you should treat it as a pecuniary legacy (IHTM12072) of the capital or slice of the estate required by its annual income to produce the annuity. This does not apply where the annuity is of a variable amount (IHTM11077).
If the estate produces little income, you should refer the case to Technical after asking how the estate intends to pay the annuity.
For an annuity which is payable out of the general income of the estate, it may help to progress the case if you suggest a notional capital. Your suggested capital should be based on the mean of the interest rates prescribed (IHTM16212) for IHTA84/S50 (3). You calculate the mean by adding the higher and lower rate together and dividing by two. You should not, however, indicate or imply that, that IHTA84/S50 (3) sets out how the value of the gift of the annuity should be calculated for the purposes of the partly exempt transfer (IHTM26001) provisions.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
For detailed instructions on the operation of IHTA84/S50 (3) in relation to charges on settled property, you should look at the guidance on Settled Property (IHTM16212).