Settled Property
Settled Property refers to assets held within an interest-in-possession trust, where these assets are bestowed upon a life tenant—a person who enjoys the benefits of the property during their lifetime. Upon the life tenant’s curtain call (also known as passing away), the settled property’s valuation plays a leading role in the theater of inheritance tax assessments.
Why It Matters
For enthusiasts of estate gymnastics, the settled property doesn’t do simple somersaults! Under the spotlight of the inheritance tax, this property does a triple backflip, landing squarely in the tax computation of the life tenant. However, it’s not the life tenant but the trusty trustees who foot the tax bill.
How It Works
- Creation: Settled property is set into a trust, laying the red carpet for the life tenant.
- Benefit: The life tenant gets the VIP pass to use or earn from the property, without the deed to it.
- Evaluation & Taxation: When the life tenant exits stage left, the property value is assessed. While the inheritance tax is a solo performance by the property, the payment is a duet with the trustees.
Practical Implications
For those managing or part of an interest-in-possession trust, understanding the nuances of settled property is not just good manners; it’s an obligation! Why, you ask? Because handling these properties improperly could lead to a dramatic tragedy in your tax narrative.
Related Terms
- Interest-in-Possession Trust: A trust where the beneficiary has the right to the income generated from the trust property as it arises.
- Life Tenant: The star of the trust who enjoys the property during their lifetime but can’t pass it down the family tree.
- Inheritance Tax: The tax that haunts the estates of the deceased, particularly when they hand over property rights ghost-style (i.e., when they die).
Further Reading
To deepen your plot with the settled property:
- “Trusts and Estates: Tax and Legal Strategies” by Lisa N. Tell
- “The Art of Estate Planning: Practical Trust Insights and Strategies” by Gerard W. Brew
Through the lens of settled property, estate planning isn’t just another dusty ledger. It’s about providing the life tenant a curtain call worthy of an encore, handling the trustees with grace, and choreographing a smooth transition of wealth—without getting tangled in the tax tape.
