I am looking for some commentary which would help with the following query.
Will made in 2004 under which the son is left a legacy the value of which equals the maximum amount which could be given to him without inheritance tax or other duty being payable. The residue of the estate is left to charity so no IHT payable.
The gross value of the estate is just over £1 million of which £500,000 relates to the deceased’s former residence.
The question is whether the residential nil rate band applies to this estate and whether it should be taken into account in calculating the value of the legacy as the son only receives a pecuniary legacy rather than a share of the residue.
All the commentary I have seen revolves around the lineal descendants taking a share in residue.
It depends what you mean by “former residence”.
The actual residence does not have to end up in the hands of the deceased’s direct descendants. An estate could still be eligible for the RNRB if the deceased’s personal representatives sell the residence as part of the administration of the estate and pass the sale proceeds to the direct descendants.
Francesca, to clarify the position on the former residence, the property in which the deceased lived was in the estate at the date of death and valued at £500,000. This was lived in by the deceased until the last few months when they went into a nursing home. Apologies for any confusion.
My concern surrounds the wording in the legislation. It refers to B inheriting the property by a disposition of it by will, intestacy or otherwise. If B is only a pecuniary legatee entitled to a cash sum can it be said that B inherits the property or in this case is it the charities that inherit the property?
All of the guidance I have found refers to the beneficiary taking residue.
Thank you Simon for your thoughts. Any other comments would be gratefully received.
I do not believe the RNRB can apply unless the charity is willing to enter into a DOV with the son to substitute the house for the cash sum-or part of the house if only one normal nrb is available and no TRNRB
HMRC’s guidance is to the effect that a pecuniary legacy cannot attract RNRB even if the executors satisfy the legacy by appropriating a share of the house. It doesn’t make sense, particularly if there are large legacies, and it probably goes against the likely wishes of the testator.
I don’t see why a charity would enter into a DOV to take a smaller share (it would not be empowered to do so).
I am not suggesting the charities take a smaller share, simply that they and the son agree that instead of sum of money going to the son, he receives a percentage of the house instead.