5 October 2008 marks the end of the period in which transitional serial interests (TSIs) can be created other than on death. After this date, TSIs can no longer be created. The important issue is that succeeding life interests created during the life of a life tenant of a trust will generally be chargeable lifetime transfers for Inheritance Tax (IHT). You need to take immediate action if you are to take advantage.
Major changes were made in the Finance Act 2006 to the treatment of trusts for IHT and these took effect from 22 March 2006. However, a transitional period, originally set to end on 5 April 2008, was created to create a breathing space for trustees to rearrange their trusts without triggering an IHT charge.
TSIs can only be created after 5 October in two circumstances, both of which arise as a result of death. The first is where the deceased was the life tenant immediately prior to 22 March 2006 and is succeeded on death by his or her spouse or civil partner. The second is where the settlement commenced prior to 22 March 2006 and is a trust in relation to an interest in possession over a contract of life assurance.
Major changes were made in the Finance Act 2006 to the treatment of trusts for IHT and these took effect from 22 March 2006. However, a transitional period, originally set to end on 5 April 2008, was created to create a breathing space for trustees to rearrange their trusts without triggering an IHT charge.
TSIs can only be created after 5 October in two circumstances, both of which arise as a result of death. The first is where the deceased was the life tenant immediately prior to 22 March 2006 and is succeeded on death by his or her spouse or civil partner. The second is where the settlement commenced prior to 22 March 2006 and is a trust in relation to an interest in possession over a contract of life assurance.
