Exceptions where the exemption does not apply: postponed gifts
Under IHTA84/S18 (3) (a) a transfer to a spouse or civil partner (IHTM11032) is not exempt if it ‘takes effect on the termination after the transfer of value (IHTM04024) of any interest or period’. We interpret the term ‘takes effect’ as ‘takes effect in possession’ as any other interpretation would be unworkable.
However, IHTA84/S18 (3) (a) does not apply - and so spouse or civil partner exemption is available
- where the gift to the spouse or civil partner depends on survival for a specified period of less than twelve months. If the survival period is more than 12 months, spouse or civil partner exemption is excluded (IHTM11093) under IHTA84/S18 (3) (b)
A gift by Will to the deceased’s spouse absolutely on condition that they survive the deceased by one month is exempt if they do survive for that period.
- where under IHTA84/S29 (2) the transfer of value is a loan by one spouse or civil partner (IHTM11042) to the other, or a disposition allowing the other spouse or civil partner use of property
The application of the postponed gifts provision in IHTA84/S18 (3) (a) can depend on fine points of construction of any Will (IHTM12041) or other instrument. You need to be particularly careful with gifts under which payment of capital and/or interest is
- deferred until a specific date that is more than a year after the death, or
- subject to discretionary powers of trustees over and above the usual demands of administration to which executors are normally subject
‘I give to my wife….a pecuniary legacy of £100,000 and I declare that such legacy shall not begin to carry interest until three years from my death’
We would consider that this provision confers on the widow an immediate vested legacy in possession. It is not prevented from being such a legacy just because it does not carry interest for three years. The full £100,000, subject to any adjustment under IHTA84/S.39A, is exempt. You should not discount the £100,000 to reflect the provision about interest.
You should refer any doubtful case to Technical for advice.