IHTM20554 - Split or retained interest trusts: single lump sum investments: what to do

The gifted fund should be returned on the IHT403 as a lifetime transfer by the settlor if it was made within seven years of the date of death. Obtain a copy of the policy schedule and the trust document to establish the total sum invested and the value of the retained fund. The transfer of value is equal to the difference between the total investment and the value of the retained fund at the date of transfer.

The retained fund should be returned as an asset of the deceased’s estate on form IHT410. Obtain a copy of the trust and the policy schedule and, if not provided with the IHT400, ask the taxpayer or agent to provide

  • confirmation from the insurance company of details of the withdrawals received by the deceased in their lifetime
  • confirmation of the total fund value at the date of death, and
  • confirmation of the amount or percentage of the deceased’s retained fund at the date of death

Provided the lifetime transfer has been returned at the correct value and the deceased’s retained interest has been correctly returned as part of the estate, the position can be accepted. Where you have any doubts or the calculations do not seem to match the details provided, refer the case to the Actuarial Team.

If the settlor’s retained portion is small at the outset, or if the arrangement is in place for a number of years, it is possible for the settlor’s interest to be completely exhausted before their death. If the settlor continues to receive payments after their portion has been exhausted, these payments can only come from the gifted element. This would result in the gifted element being a gift with reservation (IHTM14301). If you think this situation arises, refer to the Technical Team.