I act for a husband (H) & wife (W) in the preparation of their Wills and :
1 this is a 2nd marriage for both and they each have 2 children from first marriages (no children together) and they are widower/widow;
2 the matrimonial home (£500,000) is in H’s sole name and I am trying to draft a clause enabling W to remain in the property if H dies first;
3 obviously a life interest is the way forward but W has savings of around £300,000 (sale proceeds of her previous home) and I am concerned that on her death the then value of the current matrimonial home will be added to W’s estate giving rise to an IHT liability to the detriment of her 2 children.
4 questions:
4.1 is W entitled to 2XRNRB because of her previous property ownership………and can she carry forward her deceased 1st husband’s £325,000 allowance ?
4.2 is a right of occupation to be preferred bearing in mind that a right of occupation can be construed as a life interest ?
4.3 is it possible to grant a life interest determinable one day before W dies so that it doesn’t exist on her death ?
4.4 could H put the property into joint names as tenants-in-common with a Trust Deed whereby the parties acknowledge that the property is owned 99.99% by H and 0.01% by W ?
4.5 could W be granted a lease for her life now which gives her a right of occupation or H could in his Will direct that his executors must grant such a lease ?
Comments please.
John Edge (Retired Solicitor)

1 Like

This seems to be a perennial problem. Can I throw an additional idea into the mix for comment from those more expert in these matters.

What would happen if the wife were given a lease terminating on a fixed date coincident with her 105th birthday. It would immediately be worth less than the house itself and it would depreciate in value with time.

Clearly it is not a perfect solution . Much depends on how old she is now.

In all likelihood when the wife does die there would be the issue of what to do about the remaining years on the lease. If she survived she would probably be in residential care anyway and if not it seems unlikely that anyone would have the heart to kick her out.

Ian McKeever

Ian McKeever & Co Consulting Actuaries.

You have identified £800k worth of assets between these two. Ignoring that both could claim their former spouses NRBs with the use of a NRB + TNRB Trust (giving each a theoretical £650k allowance before they even consider the RNRB), I don’t see any reason why H couldn’t grant W a simple IIP, relying solely on their own combined allowances of £900K (£1m as long as survivor dies after April 2020).

An IPDI will probably be preferable as it is easier to administer, and anniversary charges might be an issue if H goes down the NRB + TNRB Trust route.

On a side note, if you terminated an IPDI one day before survivor’s death, it will be a PET from their estate, so this does not avoid IHT (although it does change where the burden falls, and not in the survivor’s favour!)

Alex Stanier
Allan Janes LLP

Ian……thanks……good suggestion but I suppose any workable loophole will eventually be closed. The ideal would be for the trust property to bear/pay the IHT that would have been paid had it not been spouse exempt on 1st death……then no need for aggregation on 2nd death.

John Edge
Legal Eagle Wills Ltd

Alex……….thanks for your comments but sorry that I forgot to add that H has further assets of £500,000+.

John Edge
Legal Eagle Wills Ltd