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Interest in possession trust
From Wikipedia, the free encyclopedia
An interest in possession trust is the most common example of a life interest trust.
An interest in possession is a "present right to the present enjoyment of something"[1]. A beneficiary of a trust with an interest in possession will have the right to receive all the income from the trust, minus tax and trustees' expenses, for a fixed period or, more usually, for the rest of the beneficiary's life.
The interest in possession ends when the beneficiary, also called the life tenant, dies. The capital of the trust will then pass to another named beneficiary.
Interest in possession trusts are often created as part of a will. Typically, a surviving spouse will be granted a right to the income of the trust by the settlor. When the surviving spouse dies, the rest of the fund (the remainder) may pass to the couple's children or other named persons.
- ^ Viscount Dilhorne in Pearson v IRC [1980] STC 318 at 323
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