I am dealing with the estates of husband and wife. The problem is that husband died first leaving in his will a NRBDT then residue to spouse subject to 30 days survivorship. She only survived by 10 days so after the NRBDT the residue instead passes to the son. His estate is large and would result in IHT being payable.
Wife’s will is the same - another NRBDT (not made subject to husband surviving unfortunately) then as husband didn’t survive residue to son. Her estate is less than the nil rate band.
Combined estates include the house (that they lived in) as tenants in common worth 300k.
On basis of above can we vary the estate of the husband so that instead of having the survivorship clause in the residue passes to spouse so then goes through her will. This would reduce the IHT as can use the rest of her NRB. I assume that the executor/beneficiary of the wife’s estate can sign this if so in her place.
Other issue - can we claim RNRB on house with part of estate going into NRBDT? Can we simply say that the trustees allocate the house to the survivor as part of share of residue (if we can vary as above) and then directly to son on second death rather than as part of that trust? I suspect that the son will just want the discretionary trusts paid out anyway so they will be appointed out to him.
If possible can we do deed of variation before applying for probate to avoid the need to overpay the IHT and then have to claim back?
I see no reason why you can’t vary the will as you suggest, assuming the son is sui juris. That can be done before applying for probate.
As for RNRB on a discretionary trust, this sort of question has been debated on this forum quite a lot previously. From recollection, the answer is that the house will fall into residue if not specifically devised and it is not needed to fund pecuniary legacies.
Yes, I believe so. Husband’s NRBDT to be appointed to son. Then son to vary his entitlement in favour of mum. (The fact that mum is deceased should not cause a problem.) See Survivorship Clause problem
On the basis that the wife‘s entitlement to residue failed, so that the estate is subject to IHT, has the NRBDT survived? Often, in such circumstances, the NRB legacy will be reduced to nil, so that if recreated by deed of variation the son will be the settlor for CGT and income tax.
If the wife’s estate is increased by a variation, post her death, this does not change what was in her estate on her death and, as the estate is said to have been within her NRB, I anticipate the NRB legacy would sweep up her estate, other than to the extent that it is purportedly increased by the variation of her late husband’s estate (the variation creates a fiction for IHT purposes and does not really increase the value of the widow’s estate on her death).
If the proposal to remove the survivorship period is not rejected by HMRC as dealing only with an administrative aspect, then some interesting accounting will need to be applied in calculating the various beneficial entitlements.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals