Inheritance Tax Act 1984 section 49E

Transitional serial interest: contracts of life insurance

Section 49E defines when an interest in possession in settled property that includes rights under a pre-22 March 2006 life insurance contract qualifies as a transitional serial interest, thereby preserving the old inheritance tax treatment for such interests.

• Where a person (C) becomes entitled to an interest in possession in settled property that includes rights under a life insurance contract entered into before 22 March 2006, that interest may qualify as a transitional serial interest if four conditions are met.
• The settlement must have started before 22 March 2006, someone must have held an interest in possession in the contract rights immediately before that date (the earlier interest), and that earlier interest must have ended on or after 6 April 2008 on the death of the person entitled to it, with C's present interest arising either directly or through an unbroken chain of successive interests each ending on the holder's death.
• The rights under the life insurance contract must have remained within the settlement continuously from 22 March 2006 until C became entitled to the present interest.
• The property in which the present interest subsists must not be held on trusts for bereaved minors under section 71A, and the present interest must not be a disabled person's interest.