I have a Trust which was set up with a property in 1993. Trustees have sold and repurchased and settlor lived in both properties at some point. In more recent years she has been in a home and the property let.
Daughter is ultimate beneficiary.
On death, value is taxed in Settlor’s estate for IHT but as pre-GROB can RNRB be claimed? I’m thinking not, even though was her home, as she hadn’t lived in it for many years?
Previous comments on this matter are all impacted by GROB, hence my question.
A settlor interested trust gives rise to a reservation of benefit on the part of the settlor.
However, no RNRB applies on the settlor’s death even though a lineal descendant (ie daughter) inherits at that time. IHTA 1984 s8J(6)(b) is not satisfied ie gift was not initially made to the daughter.
If the property was self-settled prior to March 2006 there is no GROB as there was no transfer of value ( the settlors estate being worth the same before and after) the property just moved from the settlors free estate into her settled estate. The settlor has a QIIP.
If on the death of the settlor/life tenant the property passes absolutely to the daughter then RNRB is in point if there is a Qualifying Residential interest.
HMRC Manual at IHTM46011 says “A ‘residential property interest’, means an interest in a dwelling-house which has been the person’s residence at a time when their estate included that, or any other, interest in that dwelling-house. For example, this would include a house owned by the deceased that they had been living in. It could also include an apartment that the deceased lived in previously and still owned, but which was rented out at the date of death.”
I would conclude in your situation that the RNRB could be claimed and would be interested to see if anyone agrees.
Where the settlement was effected pre March 2006 then I agree with Nigel that no reservation of benefit arises [FA 1986 s 102(3)]. For post 2006 lifetime settlements, where a reservation arises pursuant to a lifetime settled gift due to retention of a life interest, my original view stands.
Thank you everyone. I agree and have advised the trustees accordingly. It just shows the impact a change in legislation can have and being aware of it.