Discretionary Will Trust and RNRB

Trusts Discussion
1

I’m advising a client on making a Will. She is divorced and her estate is valued at approx £650k (including a property valued at £350k). She has 2 children; one of whom has a number of health conditions and who does not have capacity to look after his finances.

She would like to divide her estate, possibly in half, one half going direct to one child and the other half in trust. We are deliberating between a disabled trust and a discretionary trust. Client is favouring a discretionary trust principally because she is concerned as to what might happen if his benefits cease to be qualifying benefits for the disabled trust.

I am aware that RNRB would still be available if half the house passed into a disabled trust but not if it passed into a discretionary trust (I appreciate RNRB could apply if the property is appointed out of the trust to a direct descendant but that it not likely)

My question is how can I protect her RNRB? Should she leave her house to one son and the rest of her estate to a discretionary trust?

Thank you

2

Why not leave it all on discretionary trusts with clear wishes as to the split and protection for the disabled son. Much will have changed by the time she dies and a discretionary trust allows the trustees to deal with it in the most appropriate and tax efficient way.

It may be all cash will have gone and only the house is left, so leaving the house to one would not be appropriate. Also normally a discretionary trust is better than a disabled trust to allow more flexibility. A disabled trust can always be set up within 2 years if appropriate and likewise the house or part appointed out to use the RNRB.

Perhaps professional trustees would be sensible, to ensure protection for the disabled son.

Simon Northcott