RNRB and time limited Right of Occupation

Trusts Discussion
1

I appreciate this questions has been posted before, and I have looked through some of the threads, but I would like to pose a similar question if I may.

W dies with 1/2 share property valued at £400K left on 5 year RoO to 2nd H (usual ending on death, re-marrying etc). Residue approx £120K equally between her two children and H. I don’t know Hs age, health or wealth etc (this is a tentative query at this stage from a friend of a friend).

Having discussed with a colleague we believe RNRB available but would then be a PET on Hs estates when he vacates the property. Though we are unclear what happens if he dies while still in occupation - would it aggregate as a Trust asset, which seems to us the correct outcome.

Putting other issues aside for this question, would executing a DoV so daughters receive Ws property share absolutely and retain 2/3 residue, could even alter the residue slightly, be worth considering. On estimated figures this would lead to NRB/RNRB of £475K with approx £480K to chargeable benefs = IHT £2K. This IHT charge now may be considered worthwhile, particularly for H as he would have a further 7 year wait where his estate could take the hit. I don’t know the extent of Hs personal wealth though it will be at least £450K, assume higher, with house and Ws estate.

Thoughts from greater minds than mine welcome as always…

Karl Taylor
Parker Rhodes Hickmotts

2

Not sure I fully understand, but W’s half share of the property is being left on an IPDI for H. No RNRB due W’s death.

During H’s lifetime his IPDI is terminated presumably causing the children to take the 50% property interest. Again no RNRB as children have not inherited on death. H makes a PET.

If H dies within the 5 years and the 50% of the property interest passes absolutely to children RNRB is available and property interest forms part of H’s estate.

Re the DoV option I agree the 2k IHT charge.

Malcolm Finney

3

Hi Karl

I recently took Counsel’s advice on a Will in similar terms. He felt that RNRB would not be available on the Right to Occupy, but that spousal exemption would apply initially and then a PET by the spouse when he vacates. He also felt that RNRB and TRNRB could be used on the surviving spouses death.

Hope this helps

Victoria Armour
VP Legal Solicitors