Deceased left an estate c.£1m and was life tenant of property valued at c.£370K.
One of the reversionary beneficiaries of the trust is a direct descendant. The beneficiaries of the estate/trust are not the same people.
The solicitors acting on behalf of the estate have confirmed that they have appointed a life interest to surviving spouse in respect of the estate. I have asked if they will claim the deceased’s NRB and RNRB (the latter in proportion to value of direct descendant’s interest) so that the trust will not be liable to any IHT.
The solicitors have confirmed that they will not be claiming either as they wish to keep both allowances available so that they can be transferred when the surviving spouse passes to reduce that estate in the future. This will result in a substantial IHT liability for the trust.
Can the trustees make a claim for either/both the NRB/RNRB to prevent this tax liability if the executors do not make a claim within 2 years of the first death?
I suspect there may be a misunderstanding in this matter, as the deceased’s NRB will applied automatically to the extent that the transfer of value on his death (being the combined value of his “free” estate and the trust fund, less any exemptions) exceeds £0.
I am not aware that HMRC would assess IHT without taking into account any NRB to which a deceased was entitled on their death.
The position with RNRB is different, in that the executors are not bound to secure the benefit for the estate (especially if there is no qualifying residuary interest within the estate). However, if there is a QRI within a trust and it is “closely inherited” the trustees may claim the benefit of the RNRB (or at least the appropriate amount thereof), regardless of the executors ‘wishes. The trustees’ duty is to act in the best interests of the trust and to fail to secure the RNRB could result in a claim against them for the IHT payable out of the trust fund due to such failure.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Do you know whether the trustees would have to wait for 2 years before claiming the RNRB or can they claim this as soon as the IHT400 has been submitted (without a claim by the executors)?
I understand that the executors will be submitting the IHT400 and paying their calculation of what the estate owes in IHT at the end of May, the deceased having died at the end of November 2024.
I agree with Paul that the executors do not have a choice with regards the standard NRB - it will apply automatically and even if they have not shown this on the IHT400 I would hope that HMRC would apply it in an assessment. I assume that they have included the value of the trust on the IHT418 and IHT400 and it is a qualifying life interest.
The position on the RNRB is more interesting as i have seen comments before that it has to be claimed but my view is that it does not and it also acts automatically. The IHT435 is not a claim but a form which gives HMRC the information to show that it applies. (My interpretation of the wording of sch 8E). On that basis I cannot see that the executors can deny the use of the RNRB in this situation and form IHT435 should be submitted. I don’t see a problem with the trustees doing that and i dont see the need to wait 2 years. Am I wrong in this?
I agree. A claim is required for a brought forward allowance or a downsizing addition per s8L IHTA. There is a “permitted period” in subsection (2). The NRB does not need to be claimed but the TNRB does: s8A(3). The permitted period is in s8B.