Kessler precedents re RNRB gift

Morning All

I’m not sure if I’m not thinking myself in circles. I’m drafting a Will for a married couple and I need to keep the estate of the surviving spouse under £2m on the second death. My preferred Will would be:
a) carve out a gift of the GNRB into a DT,
b) carve out a gift of the RNRB for spouse then on to issue
c) remainder to spouse on a FLIT
d) converting to a DT on the second death

and to mirror this in both Wills so that we can be certain as to where each allowance (a and b) goes on each death regardless of which spouse dies first.

However, most of Kessler’s precedents set out:
a) IPDI for spouse on first death
b) gift of testator’s RNRB after death of spouse (making use of spouse’s ‘spare’ RNRB)
c) DT residue

and a straightforward DT of residue if testator survives spouse (ie on second death).

I appreciate this precedent isnt drafted to bring an estate down under £2m but the part that is confusing me is the gift of the second spouse’s ‘spare’ RNRB, as if the testator may have the right to gift that under their Will on the first death…How can a testator make use of an allowance that the surviving spouse is free to continue to make use of during their lifetime?

It appears to me the gift of the spare RNRB is trying to make use of something the testator doesnt have any right to claim if they do not survive the second spouse to inherit it? If that makes sense?

Im sure the penny will drop once I see some replies! Much appreciated

Jennifer Howell
Swayne Johnson Solicitors

I don’t have the precedents in front of me but I expect that the intention is that, since the RNRB gift contained in the Will of the first to die does not take effect until the second death (it is triggered by the death of the life tenant) then at that time there may well be a double-RNRB available and it may prove helpful to have a provision in the first Will dealing with this to ensure it is fully used.

Tobias Gleed-Owen
Hewitsons LLP

Is there anyone who does not think the RNRB legislation is probably the most poorly drafted tax legislation in recent memory (certainly in so far as private client work is involved)? Is this not something that STEP and other powers that be can lobby about?

Leaving the politics aside, we have also been looking at solutions to capturing RNRB on second death. One option being a full DT on first death and reliance on reading back provisions. Another is IPDI terminating to children/descendants in so far as RNRB is concerned and DT for the remainder.

How are others dealing with this point. (Sorry @ Jennifer as I have not replied directly, but it is a similar point.)

Haroon Rashid
I Will Solicitors Ltd

Carve out a RNRB trust with lineal descendants (not spouse) as IIP beneficiaries at outset then revoke that interest after a short period to leave a DT.

Paul Storrie
Storrie & Company

What I suggest is a NRB trust on the first death, to reduce the estate of the survivor, and then a life interest in the remainder of the estate, with overriding powers.

A discretionary trust in the form of the overriding powers, will continue on the death of the surviving spouse, except in relation to a sub-fund of the trust.

The sub-fund on the second death will be on terms that, to the extent the RNRB and TRNRB are not used up by the free estate of the surviving spouse, so much of the qualifying residential interest as is in the trust, and such additional sum (the downsizing allowance) as is in the trust, as is necessary to use up the balance of the RNRB and TRNRB, will on the second death be held in trust absolutely for the children/issue, with no age contingency or trust applying.

There should be a condition that the overriding powers can, in relation to the sub-fund, only be exercised during the lifetime of the surviving spouse.

Simon Northcott

Hey Paul, at least somebody gets it. I really do not understand why there is so much confusion regarding the RNRB. Agreed it took a little time to get your head around it, but the solution is simple and has been for the last three years. Flexi Qualifying IIP for Direct Descendant(s) and claim this on first death where possible, especially now it has reached the full £175k.

Bob Massey
Countrywide Tax and Trust Corp

Thank you for your replies everyone. It seems we all do a similar thing one way or another.

Bob my question wasn’t so much the RNRB but the wording of the precedent within the James Kessler text where the deceased spouse aims to make use of an allowance they haven’t survived to inherit! Seems to be there are more tax efficient guarantees available.

Thanks again all

Jennifer Howell
Swayne Johnson Solicitors

So you claim the allowance to take a share of the house out of the first estate, put it into the estate of children and then trigger a chargeable lifetime transfer by each of them, placing it into a discretionary trust which might long term trigger another charge when it comes out and back to the children again-assuming changes are on the way to raise more taxes.

This seems unnecessarily complex and potentially tax inefficient, as well as running the risk of GAAR applying, if it is all a predetermined plan.

Simon Northcott

@simonnorthcott I don’t suspect this is in response to my suggestion but could you just clarify?


Jennifer Howell
Swayne Johnson Solicitors

Hi, I believe the gift of assets qualifying for RNRB on the death of spouse is there to mop up any remaining RNRB should the surviving spouses estate not be sufficient to use it all.

So it is acting like what you thought to do in the first place but within the IPDI rather than being carved out. The formula in the RNRB clause essentially calculates the total RNRB available on 2nd death less the amount the surviving spouses estate utilises. Any remaining RNRB can be gifted by the clause in the IPDI of the first spouse to pass away to lineal descendants. But without seeing the actual clause I cannot be sure.

Ben Schofield
Co-op Legal Services

It is in response to the suggestion of a flexible life interest to children which is then revoked to create a discretionary trust, which will then be appointed out on spouse’s death

Simon Northcott

I think there are two distinct issues here.

Cap on transferrable NRBs
The first issue concerns the cap on the transferrable NRBs (general and residential NRBs). This arises in the case of a second marriage, ie where H1 dies, and W1 then marries H2. So it does not affect everyone, but it is not uncommon.

This issue is set out in my book Drafting Trusts & Will Trusts 14th Ed para 18.11 (Untransferable NRB problem). The draft wills in the book offer precedents which use the untransferrable NRB on the death of the first to die of W1 and H2. They transfer the part which will not be wasted to the survivor of W1 and H2.

£2m cap
The second problem is a different one. It concerns the £2m cap on the RNRB. This arises (in short) where the estate of the survivor of H and W is worth between £2m and £2.7m. You want to reduce the gift from H to W on the death of H (assume H dies first) so W’s estate is below £2m, or at least, below £2.7m, on her death.

The starting point is to have a discretionary GNRB gift which takes effect on the first death of H and W, thus reducing the estate of the survivor by £325k.

That may not be enough. The point made in this thread, which is a good point, is that you can go a bit further with a provision in the will of the first to die, using the RNRB to make a gift to a trust for the children. This is not covered in my book, but I will review it in the next edition. However it is a niche issue: it does not concern those whose joint estate is below £2m, or those whose joint estate is so large nothing much can be done to reduce the estate of the survivor below £2.7m. It basically concerns married couples, with children, whose joint estate is in the range £2.325m - £2.7m, or thereabouts. That is a small proportion of the whole, but not a wholly insignificant number, I guess. It is complicated, but I think possible.

Another possible solution to consider is lifetime gifts by the survivor of H and W. The donor does not have to survive 7 years to get the RNRB benefit because any gift (assuming no reservation of benefit) will reduce the value of the estate on death.

The complexity of the residence NRB rules is scandalous – and unnecessary – but forum users will know that already.

James Kessler

15 Old Square
Lincoln’s Inn


I have recently redrafted my Will precedent to take all this into account these issues, First of all, the problem with a life interest is that it can only be varied under S142 IHTA with the consent of the surviving spouse, who may not mentally be be able to do so. To address this and possible reduction of the estate, my draft provides first a GNRB discretionary trust, followed by a 23 month discretionary trust of the RNRB interest with the spouse and lineal decedents as beneficiaries, (with a gift of this interest into residue in default of appointment) and then the residue is then subject to a life interest and subject thereto on discretionary trusts for the family
This gives flexibility under S144 IHTA for the family to decide the best arrangement on the first death, including, if the combined estate would otherwise be over £2 mill, and it offers the opportunity to take up the first RNRB on the first death and which might otherwise be lost and secondly to ‘reduce‘ the joint estate by up to £500,000
Michael Jepson
M J Consultants

Hi, I understand the clause in question but I find the definition of the ‘top up sum’ a bit confusing. What do the other contributors think?

David Hastings
Equity & Trusts

Thank you everyone for your in depth responses and to @JamesKessler taking the time to reply. I hadn’t expected a reply from you direct but that clears it up in my mind and yes the Discretionary GNRB gift should work in my estate (which falls between £2m and £2.7 after the nomination of certain policies to life trusts).

I really hope they reconsider the RNRB soon. I’m sure we all agree a simply £1m overall allowance would have worked far better!

Jennifer Howell
Swayne Johnson Solicitors