Specific Gift of RNRB to non-exempt beneficiary, rest of estate to charities

Trusts Discussion
1

I have a client who has an estate iro £1.1M, which includes a property iro £200k. She is widowed and we have a TNRB available for use.

Her priorities are simplicity, to ensure that as much as possible can pass to her only son free of IHT and that overall there is no IHT to pay. She has spoken with her IFA and told me that she would like to make a gift to her son of the IHT allowances. The rest of her estate is to pass to charities.

I am considering the suitability of this option, as well as other ways in which her aims can be achieved (e.g. Disc Trust and sort it out later).

If she is keen to press ahead with the gifting of the allowances, I am unsure what RNRB + TNRB may be available to us, putting aside the value of the property for a moment.

As he is the only non-exempt beneficiary, will he be able to use the maximum amount of RNRB + TNRB or will the RNRBs be apportioned and all beneficiaries treated as owning a share of the property? I am leaning towards the former but have not come across express guidance yet.

I would be grateful for any thoughts and any precedents for such a clause that anyone has come across!

Gemma Hambright
Hansells

2

For simplicity, and to provide certainty to the client at this time, might it be appropriate to (i) make a specific devise of the property to the son, thereby securing the RNRB and any TRNRB, and (ii) create a balance of nil rate band gift, to include the values of both the TNRB and any unused RNRB of her or her late husband, so as to take advantage of the downsizing provisions should she move home. Provided sufficient of the NRB gift vests absolutely in the son, whether on death or under the trustees discretion (using s.144 IHTA 1984) the RNRB benefit shoudkl be maximised.

Paul Saunders