RNRB

I have attempted to draft a clause in a Will defining that part of the trust fund, on the death of the first spouse to die with a life interest, which is to go to children/grandchildren/issue absolutely, so as to maximise the RNRB on the death of the second spouse to die. The remainder of the trust fund goes to children/grandchildren/issue at an age. The power of appointment is only exercisable during the life of the survivor, and can only apply to the remainder trusts. I have borrowed from James Kessler’s drafting, for which I am grateful.

I set out the clause below, and the terms of the limited power of appointment.

I should be grateful for any comments/suggestions.

7.2. subject to the above, and subject to and in default of any appointment under the Power of Appointment, my Trustees shall hold the Trust Fund upon the trusts declared in clauses 7.3 - 7.5.

7.3.1 This clause 7.3 shall only take effect if the provisions conferring an extra nil rate band contained in section 8D Inheritance Tax Act 1984 (the Residence Nil-Rate Band) are in effect at the time of the death of my Spouse.

7.3.2 In this clause 7.3:

(a) “the Residence” means the qualifying residential interest (within the meaning of the Inheritance Tax Act 1984), in relation to my Spouse, if any, held by my Trustees on the death of my Spouse.

(b) “the Residence NRB Assets” means:

        (i) the Appropriate Share of the Residence; and

        (ii) the Sum.

© “the Residence Nil-Rate Amount” shall have the same meaning as in the Inheritance Tax Act 1984.

(d)(i) “the Appropriate Share” means the whole or such share of the Residence (if any) as is necessary to ensure that there is obtained the maximum benefit of the Residence Nil-Rate Amount on the death of my Spouse; and

(d)(ii) “the Sum” means such amount (if any) as is necessary to ensure that there is obtained the maximum benefit of the Residence Nil-Rate Amount on the death of my Spouse, if the value of the Residence is insufficient for this purpose; but

(d)(iii) the size of the Appropriate Share and the Sum shall be the smallest share and/or amount as shall be necessary to obtain the maximum benefit of the Residence Nil-Rate Amount on the death of my Spouse, after taking account of the benefit of the Residence Nil-Rate Amount that would otherwise be obtained (if any) by my Spouse’s free estate and/or by virtue of section 8J(6) Inheritance Tax Act 1984 (gifts with reservation of benefit).

7.3.3 My Trustees may ascertain and fix the Residence NRB Assets so as to bind all persons interested under my Will.

7.3.4 On the death of my Spouse, my Trustees shall hold the Residence NRB Assets upon trust for such of my children as are then alive, and if more than one equally, PROVIDED THAT if any of my children is now already dead, or dies before my Spouse, and leaves issue alive at my Spouse’s death, then such issue shall take, if more than one equally through all degrees according to their stocks, the share of the Residence NRB Assets which that dead child would otherwise have taken, but so that no such issue shall take whose ancestor (being such issue) is then alive and so capable of taking.

7.4 Subject to the above, on the death of my Spouse, my Trustees shall hold the Trust Fund upon trust for such of my children as are then alive and reach 25, and if more than one equally, PROVIDED THAT if any child of mine is now already dead, or dies before my Spouse, or is alive at the death of my Spouse and dies before reaching 25, and leaves issue (whether born before or after the death of my Spouse) alive at the death of the survivor of that child and my Spouse who reach 25, then such issue shall take, if more than one equally through all degrees according to their stocks, the share of the Trust Fund which that dead child would otherwise have taken, but so that no such issue shall take whose ancestor (being such issue) is then alive and so capable of taking.

“the Power of Appointment”:

the following power of appointment:

a. My Trustees may during the Trust Period appoint that they shall hold any Trust Property for the benefit of all or any of the Beneficiaries, on such terms as my Trustees think fit PROVIDED THAT any such appointment shall be subject always to my Spouse’s Life Interest and affect only the remainder trusts.

b. An appointment may create any provisions and in particular:

b.1 discretionary trusts;

b.2 dispositive or administrative powers;

exercisable by any Person.

c. An appointment shall be made by deed, and may be revocable or irrevocable.

d. the Power of Appointment shall be exercisable by my Trustees in respect of all or any part of the Trust Fund, but only:

                    a.         during the Trust Period and

b. at a time, when my Trustees comprise at least two individuals or a company carrying on a business which consists of or includes the management of trusts, or when the power to appoint additional trustees cannot be exercised.

Simon Northcott