Can we claim RNRB by a DOV?

Trusts Discussion
1

We are assisting with an estate where the testator did no lifetime tax planning and a death bed will. He was divorced but had lived with his current partner for over 20 years in a property which he owned. In total his estate is worth over £1million and is subject to inheritance tax.

As the Will stands, the testator has left his property to his partner absolutely. He was made aware of the IHT implications that this would have but wanted to ensure that she could continue to live in their home.

Following his death, his son who is the residuary legatee is looking to the partner to relinquish her interest in the property and gift it to him by way of a Deed of Variation. He then believes that we can claim the RNRB. The partner will still be living in the property and we have advised him that we still wouldn’t be able to claim the RNRB. I believe this is correct.

The son has suggested that if she gives up her interest in the property (by Deed of Variation) and then he has in place a rental agreement with her that this would then enable us to claim the RNRB-is this correct?

I am not sure why the partner would give up the house, to then have to pay rent.

Does anyone have any other suggestions at how we may be able to claim the RNRB?

2

I would have thought an absolute gift to the son by DoV would allow RNRB to be claimed (and potentially the TRNRB if the deceased was a widow).
However, if the son has promised/agreed with the partner that he will give her a tenancy on a beneficial rent, that would negate the DoV itself as per s.142(3). Any suggestion of a lease for life could also give her a lease for life, preventing RNRB applying on grounds that the son is not inheriting.

It should be acceptable for them to agree that she receives another part of the estate (e.g. liquid assets) in return for the property as s.142(3) would not apply.

Whether that would be acceptable to the partner is, of course, another matter. I agree it does not sound like a great deal for her.