Inclusion of a survivorship clause for a couple (civil partnership)

Trusts Discussion
1

I am sure this is a simple question and would appreciate clarification for clients of mine.

Situation: My clients want to leave everything to each other then their son, but if they all die together (or one partner dies soon after (within 28 days), they each want to make sure bank accounts and ISAs are passed to their own sister(s) with the remaining estate (including the home) is passed to both sets of sisters split equally. I have advised them that this would not be very tax efficient due to one owning more than the other, but for the purpose of my question, lets assume they have included a 28-day survivorship clause.

If the couple has different asset values and one has more than the NRB & RNRB whereas the other has less than the NRB, if they include the survivorship clause and they both die in quick succession or exactly at the same time, the person who has a higher estate value, can they claim their civil partners unused NRB and RNRB (if left to their son) or can they only claim it if they died second. For example:

A has £690K in their estate – A dies on 01.08.2023 she has a 30-day survivorship clause. House worth £749,500 and A owns £637,000 (85%) – A is older than B
B has £300K in their estate – B dies on 20.08.2023 she has a 30-day survivorship clause. House worth £749,500 and B owns £112,500 (15%) – B is younger than A

Can A’s executors claim part of B’s NRB i.e. 7.5% unused NRB and can they also claim all of the £175,000 RNRB from B, resulting in no IHT payable for either of them?

I presume if B dies first in the above situation then A can claim B’s unused NRB & RNRB?

Thanks in advance.

2

Hi Aleena,

Survivorship Clause Included A (estate above NRB and RNRB) Dies First

If A (who has assets above the NRB and TRNRB) dies first and there is a survivorship clause, his assets do not pass to B. They pass straight to the son. As A has died first, he cannot claim any TNRB or TRNRB as this can only be claimed by the spouse who dies second.

Survivorship Clause Included B (estate below NRB and RNRB) Dies First

If B dies first (the spouse with assets below the NRB and TRNRB) and there is a survivorship clause, A can claim B’s unused TNRB and TRNRB. Therefore, all of the NRB and RNRB and all of the TNRB and TRNRB are used to the maximum degree possible.

Removal of the Survivorship Clauses

Regardless of which spouse dies first, by removing the survivorship clause, the surviving spouse can claim their own NRB and RNRB, and the TNRB and TRNRB from their spouse.

Yours the ever faithful Legal Beagle