RNRB - Discretionary Trust and a revocable life interest


(spg) #1

I am instructed on the probate of W. My questions concerns the availability of RNRB. The facts are as follows:

09/02/2003 H dies
19/03/2003 W obtains probate to the will as sole executor and beneficiary
7/02/2005 Deed of variation by W varying the will to leave a NRB discretionary trust (DT) the beneficiaries to be W, H’s son (W’s step son) and his issue, the nieces and nephews of W and their issue.
26/09/2005 Loan Agreement for the sum of £38,697 from the Trustee of DT to W in respect of the cash element in the estate of H
03/03/2006 Declaration of Trust declaring that the former matrimonial home (FMH) is held as to 50% for W and 50% to the DT
03/03/2006 Revocable deed of appointment by trustees of DT whereby 10% of the half share in FMH was declared to held for W for life remainder over to the 90% share. 90% held on trust for Son for life and then to his issue.
2006 FMH vested in the trustees of DT being W Son and 2 nephews of W
27/05/2016 FMH sold and a new property purchased in name of Trustees.
17/06/2018 W dies

The son has not occupied the FMH or the new property or received any rents from them. FMH and the new property has been occupied solely by W.

Sorry for the long narrative but thought it important.

On the sale of the FMH nobody seemed to take note of the DT or deeds of appointment and the residue of the sale proceeds were paid to W

W’s will provides for her estate to be divided as to 1/7 to step son and remainder to her nieces and nephews

The new property is valued at £270,000

We are now trying to establish the correct reporting of all the above on W’s IHT return.

the view we are taking is :

1 W was in sole possession of the whole of the property part as beneficial owner, part as life tenant and part because Son had never request or been paid rent. Therefore in one way or another the whole value is included in the IHT calculation

2 Only 1/7 W’s share of the property about 37.5% is eligible for RNRB as it is to be inherited by H’s son who is W’s step son.

3 The remaining 62.5% of the property value is not eligible for RNRB as it is subject to the DT and the revocable deed of appointment.

Would members agree this is a correct interpretation. I would welcome your views

Simon Greener
Davis Gregory Solicitors