Discretionary trusts of residue in Wills

Mrs A and Mr B died two months apart (Mrs A first). First estate not yet administered. Both Wills contain 2 year discretionary Wills of the entire residue with spouse and 3 adult children as discretionary beneficiaries. Wills were made in 2003.

Each estate is worth around £360,000.

As far as I can see as there is no outright gift to spouse on first death we can’t roll her nil rate band over so Mrs A’s estate will be taxable (as over £325K) and Mr B’s will also be taxable as will only have his nil rate band.

I don’t think we can claim Mrs A’s RNRB on second death as we can’t claim it for Mr B as he left his estate to a discretionary trust, so we be using the IHT435 (and therefore can’t use the IHT4367 to claim his wife’s unused 436).

Am I missing anything?

Any thoughts would be appreciated. Many thanks

Anne Duguid

Partner

LGP Solicitors

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Assuming the rest of the conditions are present, which appear to be so, then I believe the RNRB can be used (in both estates) as if the home is appointed to the children within two years of death, these are automatically read back for IHT purposes under s144. (Any unused RNRB is also transferable to the surviving spouse.)

Ihsan Ali
I Will Solicitors Ltd

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As each estate is said to be of similar value, was the matrimonial home held as tenant’s in common?

Provided that an estate is appointed out to qualifying beneficiaries (i.e. closely inherited) within 2 years of the testator’s death, triggering s.144 IHTA 1984, RNRB can be available.

If each estate included a share of the matrimonial home, an appointment of the property out of the estate to the appropriate beneficiary(s) within the 2 year period will enable RNRB to be claimed in each estate.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

Thank you.

Assuming I could do Deeds of Appointment of the whole estate now to the 3 children for both estates (if they are ts in c) before submitting any IHT forms to HMRC and send the copy Deeds to HMRC with all the forms including the IHT435s?

Yes, that is correct.

Kind regards

Ihsan Ali
I Will Solicitors Ltd

Can I appoint the entire estate out or should it be a specific appointment of the share of property only?

RNRB should be secured by either appointing the whole of residue, or the deceased’s share of the property (or a sufficient proportion of the property to capture enough RNRB to cover the potential amount of the estate on which IHT would otherwise be payable), so long as the appointment means the property interest is “closely inherited”.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals