RNRB on gifted property

Trusts Discussion
1

Married couple, Mr passed away 21 October 2008, his will left his half share of the main residence to his adult daughter.

Surviving spouse (currently aged 92) gifted her half share of the main residence to the same daughter around 2 ½ years ago. The mother now lives in a cottage alongside her daughter and daughter funds the rent on the cottage.

Do you think the executors will have a TRNRB for Mr and also a RNRB for Mrs when she passes?

One theory is that for Mr, as he dies before 6 April 2017, 100% of the RNRB will be available to be transferred when Mrs subsequently dies.
As far as RNRB for Mrs is concerned, the downsizing rules will apply, as she gave away her home which she had a QRI in, and so RNRB will apply.

The other theory is that as Mr died before the RNRB was introduced, his RNRB will transfer to Mrs estate. It cannot be retrospectively claimed on the legacy to his daughter as we are outside of the two year claim ‘window’.

For Mrs, if she dies within the next 4.5 years, the gift of the half share of the house to her daughter will be brought back in to account and so would not qualify for RNRB as it cannot be claimed on failed PETs.

Francesca Gandolfi
Canada Life

2

The claim for a transfer of an unused RNRB arising on the first spouse to die (whether on or after or before 6 April 2017) needs to be made within 2 years of the end of the month of the surviving spouse’s death [s8L(1) and (2)]. So currently Mrs is not outside the 2 year window as you suggest as she has not yet died.

The death of Mrs within 7 years of gifting her interest in the property to her daughter whilst giving rise to a failed PET is irrelevant to Mrs being entitled to her own RNRB for use against her death estate due to downsizing or using any TRNRB. It is of course true that any IHT arising on the PET cannot be reduced by offsetting the RNRB/TRNRB against the PET; the NRB or TNRB can, however, be so utilised.

The extent to which Mrs will be able to fully utilise the quantum of her RNRB including any TRNRB will depend upon the value of her interest in the property which she gave to daughter, the amount of lost RNRB including any TRNRB and the extent to which the value of other assets in her estate which are closely inherited.

Malcolm Finney