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HMRC internal manual

Inheritance Tax Manual

Meaning of estate for s.142: settled property

Settled property (IHTM16000) in which the deceased had an interest in possession (IIP) (IHTM16061) is excluded from the death estate for the purposes of IHTA84/S142(1) by IHTA84/S142(5).  However we do not apply that exclusion to settled property

  • in which the deceased had a beneficial IIP, and
  • the deceased had a general power of appointment over  the settled property and exercised it by their Will.

Where both these conditions are satisfied you should treat the settled property as part of the death estate for the purposes of IHTA84/S142(1).

The taxpayers may seek to extend this treatment, to cases where the deceased

  • had exercised the general power of appointment by deed
  • had a general power but had not exercised it, or
  • had a general power but not a beneficial IIP in the trust property.

You should ask them to demonstrate the grounds on which they consider the particular situation falls within the scope of the legislation and refer the replies to Technical.