Hoping someone can help please…
Husband (H) and Wife (W) own property as tenants in common.
H dies leaving his share of the property in life interest for the benefit of W as life tenant.
Remainder in two discretionary trusts to their two children and grandchildren.
Residue- H to W on first death and into DT’s on 2nd death.
My question here relates to the RNRB…
I am assuming that the RNRB would be lost on first death.
A variation under s142 is not possible here as we have minor grandchildren in the class of remainder beneficiaries.
However, could capital be appointed out under s144 during the life tenants lifetime and within the appropriate time periods to enable the RNRB to be captured?
I would greatly appreciate your thoughts on this.
The RNRB is not lost on first death it is unused and therefore available to carry forward.
If W’s half share of the property is worth at least £350,000 then you don’t have a problem - on her death the trustees of her estate would be able to exercise their powers, with the benefit of ‘reading back’ under s 144 to appoint a sufficient share of the property either outright, or on IPDI trusts, to enable the RNRB to be fully used.
Otherwise, H’s trustees should either (a) appoint H’s half share of the property (or a sufficient share of it) to W so that W’s property interest is worth at least £350,000 or (b) appoint H’s half share of the property (or a sufficient share of it) to H’s children absolutely, to take effect on W’s death.
Clarke Willmott LLP
Whilst I agree that the RNRB cannot be used on the first death, if H has already died, and with the allowance escalating, I am not sure why it would be beneficial to secure the amount as at the date of H’s death. It may also compromise H’s intentions when he signed his will.
If W’s interest in the property is likely to exceed the double RNRB at the time of her death, might it be preferable for her to change her will to devise it to qualifying beneficiaries. This would seem to me to allow maximum flexibility.
As there is an intervening life interest, s144 cannot apply. Steps will be needed to ensure RNRB can be claimed in full on the second death.
Simon, Paul D and Paul S, thank you for your replies.
In my reading of the HMRC manual, it was my understanding that as Simon has outlined, because a life interest subsists, s144 cannot apply.
Simon, perhaps you could expand on what steps might be available to secure the full RNRB on second death?
Thanks in advance.
Paul D’s reply covers this.