RNRB and a private residence held within a discretionary trust

Trusts Discussion
1

The situation is this:

1 Some years ago, Jane put a 85% share of her house into a family discretionary trust, retaining the other 15% herself.

2 Jane died recently, but has always lives in the house, rent-free, as her only private residence.

3 Because of the gifts with reservation legislation, the house forms part of her estate for IHT.

Logic suggests that RNRB should be available because to all intents and purposes it was her private residence, but law and logic often differ!

Any thoughts, please?

John Nevile

2

The 15% interest if inherited by a lineal descendant qualifies for the RNRB but the 85% interest will not (IHTA 1984 s.8J(6)).

Malcolm Finney

3

The RNRB does apply to a GWROB.

Simon Northcott

4

The RNRB available to her estate will be the lower of the value of her Qualifying Residential Interest (the value of her 15% share) and the default allowance on her death (eg RNRB of £125,000 in 2018/19) as long as it is inherited by lineal descendants. This excludes discretionary trusts.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm46027

Francesca Gandolfi
Canada Life

5

Malcolm is quite right, although the RNRB can apply to a GWROB, it would only do so if the gift had been to lineal descendants-not to a discretionary trust

Simon Northcott