I’m advising an unmarried couple. No assets in joint names, they each have an estate with a value close to the nil rate band, slightly over. They own their residence as Ts in C in equal shares.
Both are divorced. She has children from a previous relationship, he doesn’t
I have advised them to consider setting up a DT on first death, objects to be survivor and the children (who he wants to benefit also).
First question - for unmarried couples is it usual to pass the WHOLE estate to the DT and not just a value up to the NRB? Presumably so because there are no IHT exempt beneficiaries to pass the balance to.
Second question - Problem if she dies first as her estate won’t benefit from the RNRB. I presume all I can do is warn the clients of this possibility and suggest the only alternative that would work is for her to gift her share of the property directly to her children but explaining that this might compromise survivor’s security in the property. Is this the only option?
So if he dies first - whole estate to DT
If she dies first - her half share of the property to kids (presumably I can’t write in a right to reside for him as this would affect the availability of the RNRB), then balance of her estate to the DT.
It’s a tricky one. They could get married? But I’m sure they’ve been bitten once so twice shy. I would prepare full discretionary trusts for both parties. If she dies, then they could appoint so much of the house as is required to the children within two years of death and still benefit from the RNRB. A lot would depend on what their priorities are? Each other first and then the children, or the other way round? Also, choice of trustees is critical.
The asset make up may also be relevant, it may be a possibility for children to receive a share of the house and for this to be ‘brought back’ from them, but with the estate having benefited from the RNRB.
I would be fearful that on the first death the deceased’s next of kin will raise the point that you acted where there was a conflict of interests or a significant risk of conflict as a result of which the claimant has suffered substantial financial loss. Responding to such a challenge is exceptionally time consuming and expensive (whatever the outcome) involving reference to your PI insurers and adjustment of your premium for the duration of the dispute and subsequently. I would err on the side of caution and refer one party to another solicitor.
Thank you both. My clients have decided to get married once they can so will proceed with the DT wills for now with a contemplation of marriage clause and will replace the DT with a IPDI in due course once married.