I would appreciate views on the inheritance tax treatment of a property held under a right of occupation/life interest arrangement.
The situation is as follows:
- An unmarried couple owned a property.
- The first partner died and their will gave the surviving partner a right to occupy the property for life (subject to the usual conditions), with the property ultimately passing to beneficiaries of the first partner’s estate. He was the sole owner of the property.
- The trustees of that property trust are separate from the executors of the surviving partner’s estate.
- The surviving partner has now died.
- The property is worth approximately £350,000 and the surviving partner’s other estate assets are approximately £270,000.
- 16% of the residue is left to charity, so the reduced IHT rate of 36% appears to apply.
My understanding is that the value of the property is included in the surviving partner’s estate for IHT purposes because of her right of occupation/life interest. The main question I have relates to the payment of the IHT.
How is the IHT apportioned between the trust property and the surviving partner’s personal assets? Who is then responsible for the payment of the IHT and is this both the deceased partner’s Trustees and the surviving partners estate.