interest-in-possession trust

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A type of fixed-interest trust in which there is an entitlement to the income generated by the trust assets. The beneficiaries of an interest-in-possession trust, the life tenants, are entitled to the income arising for a fixed period or until their death. The capital in the trust then passes absolutely to a recipient known as the remainderman.

Formerly, any lifetime transfer into an interest-in-possession trust was a potentially exempt transfer for purposes of inheritance tax; from March 2006, however, such transfers are no longer possible unless the trust is for the benefit of a disabled person. Compare discretionary trust.

Subjects: Financial Institutions and Services — Accounting.

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