Legal background to trusts and estates: death of a life tenant
On the death of a life tenant, trustees are deemed to have
- disposed of the settled property, then
- immediately re-acquired it at market value.
Assets cease to be settled property
The trustees are regarded as bare trustees (TSEM6272). They act for whoever became absolutely entitled to the trust property. They can hand over the assets after paying any inheritance tax due. For CGT purposes, the beneficiary is regarded as absolutely entitled from the date of death (CG36454 onwards).
There is a clawback of any held-over gain (CG36510). Apart from that, there is no CGT charge on property that was subject to the life interest.
Assets continue to be settled property
There is a clawback of any held-over gain (CG36510). Apart from that, there is no CGT charge.