Downsizing Addition and Lifetime Gifts

We currently have an estate where the deceased sold his home a few years ago, gifting all of the proceeds (£750k) to his children. That constituted the vast majority of his estate, and his death estate contains approx. £50k.

The deceased was widowed and inherited the entirety of his wife’s estate (no other lifetime gifts from either etc) so full TNRB and TRNRB available if needed; In the case of his RNRB as a downsizing addition in light of the sale.

Am I right in thinking that we can only offset the NRB and TNRB against the lifetime gift, leaving £100k taxable and that the downsizing addition can only be used to offset the funds in the death estate? If so, there would be no point in claiming the TRNRB as his single downsizing addition covers the funds in the death estate.

This is our reading of the legislation, although it does produce the odd situation where the recipient now has to pay IHT when if he’d simply not made the gift there would be no liability.

Be grateful for confirmation on this!

That is my understanding. The RNRB can only act on the value of the death estate so it is entirely possible for someone to put themselves in to IHT when they would not have been before by making gifts above the NRB’s

Thanks Nigel, much appreciated

Agree. The RNRB (and TRNRB) is only available to reduce IHT arising on the death estate [IHTA 1984 s 8D] ie cannot be used against failed PETs and CLTs.

Malcolm Finney

Many thanks Malcolm.