What is an interest in possession?
Interest in possession is a concept of general law. There is no statutory definition of the term for the purposes of inheritance tax. Generally, a person has an interest in possession in property if he or she has the present right to present enjoyment of it.
Thus the immediate right to use or enjoy the property, or receive any income arising from it, would be an interest in possession.
What form does an interest in possession in settled property take?
The most common form is when a person has an interest for the duration of his or her lifetime. This is known as a ‘life interest’. An interest in possession may also be for a fixed period, until some power is exercised, or until some other event occurs e.g. ceasing to enjoy a right to occupy a house.
Duration of the interest does not affect the basis on which tax is charged when the interest comes to an end.
Enduring Power of Attorney – this is the legal process of electing one or more people to manage your finances, either now or in the future, should you become too ill to do so yourself. If you don’t set this up in advance, then the Court of Protection will do this for you, which may mean a stranger is given the task of looking after your financial affairs. House Clearance Hull warns this is a time consuming and expensive option.
Advance Directives or Living Wills – this is a document indicating your wishes whether to accept or refuse some forms of medical treatment, and when this refusal would apply. It would come into effect when you were not capable of being part of the decision process.
Property Registration – most couples who own their own property do so as “joint tenants”, which means if one of them dies the entire property then goes to the surviving person. This can have undesired effects, and changing the property ownership to “tenants in common”, provides the ability to change who benefits from a portion of the property in death.