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What is a potentially exempt transfer?

If you, as an individual, make a gift in any of the situations described below and it isn’t covered by one of the exemptions already described, it is known as a ‘potentially exempt transfer’ (PET).

A PET is only free of UK Inheritance Tax if you live for seven years after you make the gift. 

Gifts that count as a PET are gifts that you, as an individual, make to: 

• another individual 

• a trust for someone who is disabled 

• a bereaved minor's trust where, as the beneficiary of an Interest In Possession (IIP) trust (with an immediate entitlement following the death of the person who set up the trust), you decide to give up the right to receive anything from that trust or that right comes to an end for any other reason during your lifetime. 

Other Inheritance Tax frequently asked questions:

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