I am in the early stages of administering an estate which the left a RoO for the deceased’s unmarried partner. The RoO is for life, with option to buy another property if partner requests, so is, I think, an IPDI. The two property valuations obtained are a higher than I anticipated, in the region of £340K. The other assets are a few relatively small bank accounts.
On termination of the RoO, there are 4 legacies of £10K to each Grandchild, with the remainder shared equally between the partner and the deceased’s two daughters.
No doubt you know what is coming next…
Will the RNRB apply as £40K and two thirds of the property proceeds will ultimately end up with lineal descendants? If the RNRB is not available, is there any way to save the situation? I am reluctant to vary so the property passes straight to the daughters as the relationship with one of them is not great.
Thanks Simon. Just looked at that post. So, the suggestion is a DoV to create and IPDI in favour of one, or both daughters? Am I to take it that means her/them as Life Tenant with remainder as stated in my initial post - i.e. the legacies with the three way share of the sale proceeds? Say 50%, or a third of the property? Any suggestions for the wording, or sources to refer to would be greatly appreciated.
Been giving this some more thought. Is it possible to vary so an IPDI for the partner and two daughters with provision that IPDI can be ended when partner moves out/dies, or a sufficient timeframe? If so, the proportions of the property on IPDI for the daughters would be sufficient for the RNRB, while still protecting the partner’s occupation.
If one of the daughters is uncooperative, there may well be human/practical issues if all 3 have an IIP, even for a limited period, in the property. That will need to be considered by the partner before agreeing to such
a course.
Each daughter could be given a right to the income of a proportion of the house for 2 years and 1 month-or the death of the partner whichever is the earliest, with the partner having a right to income in the rest until
she ceases occupation of that or any replacement house. The daughters’ proportion need not be greater than required to reduce the iht bill to nil.
At the end of the daughters’ interests the proportions should be held in trust for the partner as applies to her interest, so you are back where you started. This will be a PET by the daughters, but modest and a better
bet than paying iht now. However there would also potentially be cgt-but if the proportion is small this would hopefully not be much if anything, and in any event less than the iht I imagine.
It seems to me that under current
legislation, assuming occupation by the partner and other private residence
relief criteria are met there will be no need to consider potential CGT.
The property is being held in trust and
Crowe v Appleby will apply.
The cessation of the IPDIs of the daughters
will not result in a trust CGT occasion of charge.
If property is sold by the trustees then
the IPDIs that the daughters had will not affect a claim by the trustees for
private residence relief under s225 TCGA 1992.
Where there is more than one beneficiary only one beneficiary needs to meet the relief qualifying criteria for full relief to be available