Section 72 | Termination of life interest on death of person entitled.
From legislation.gov.uk
(1)On the termination, on the death of the person entitled to it, of an interest in possession in all or any part of settled property—F1
(a)the whole or a corresponding part of each of the assets forming part of the settled property and not ceasing at that time to be settled property shall be deemed for the purposes of this Act at that time to be disposed of and immediately reacquired by the trustee for a consideration equal to the whole or a corresponding part of the market value of the asset; but
(b)no chargeable gain shall accrue on that disposal.
For the purposes of this subsection an interest which is a right to part of the income of settled property shall be treated as an interest in a corresponding part of the settled property.
(1A)Where the interest in possession mentioned in subsection (1) above is one to which the person becomes entitled on or after 22nd March 2006, the first sentence of that subsection applies in relation to that interest only if—F2
(a)immediately before the person's death, the interest falls within subsection (1B) below, orF2
(b)the person dies under the age of 18 years and, immediately before the person's death, section 71D of the Inheritance Tax Act 1984 (age 18-to-25 trusts) applies to the property in which the interest subsists.F2
(1B)An interest falls within this subsection if—F2
(a)the interest is—F2
(i)an immediate post-death interest, within the meaning given by section 49A of the Inheritance Tax Act 1984,F2
(ii)a transitional serial interest, within the meaning given by section 49B of that Act, orF2
(iii)a disabled person's interest, within the meaning given by section 89B of that Act, orF2F3
(b)section 71A of that Act (trusts for bereaved minors) applies to the property in which the interest subsists.F2
(1C)Subsection (1A) above does not have effect in relation to the operation of subsection (1) above as applied by subsection (2) below (but see subsection (2A) below).F2
(2)Subsection (1) above shall apply where the person entitled to an interest in possession in all or any part of settled property dies (although the interest does not then terminate) as it applies on the termination of such an interest.F4
(2A)Where the interest in possession mentioned in subsection (2) above is one to which the person becomes entitled on or after 22nd March 2006—F5
(a)subsection (2) above, andF5
(b)the first sentence of subsection (1) above as applied by subsection (2) above,F5
apply in relation to that interest only if, immediately before the person's death, the interest falls within subsection (1B)(a) above.
(3)This section shall apply on the death of the person entitled to any annuity payable out of, or charged on, settled property or the income of settled property as it applies on the death of a person whose interest in possession in the whole or any part of settled property terminates on his death.F6
(4)Where, in the case of any entitlement to an annuity created by a settlement some of the settled property is appropriated by the trustees as a fund out of which the annuity is payable, and there is no right of recourse to, or to the income of, settled property not so appropriated, then without prejudice to subsection (5) below, the settled property so appropriated shall, while the annuity is payable, and on the occasion of the death of the person entitled to the annuity, be treated for the purposes of this section as being settled property under a separate settlement.F6
(5)If there is an interest in a part of the settled property and, where that is an interest in income, there is no right of recourse to, or to the income of, the remainder of the settled property, the part of the settled property in which the ... interest subsists shall while it subsists be treated for the purposes of this section as being settled property under a separate settlement.F7F8
(6)An interest which is a disabled person's interest by virtue of section 89B(1)(a) or (b) of the Inheritance Tax Act 1984 is to be treated as an interest in possession for the purposes of this section.F9