NRB Discretionary Trust

A married couple made mirror Wills which included a NRB Discretionary Trust. H passed away in 2012 and the trust was wound up with everything passing to W. W passed away in 2015 and W had her own NRB available together with the transferrable NRB.

Below is an extract from the Will of W. Can anyone confirm whether it is only W’s NRB of £325,000 which goes into the trust or whether W’s own NRB goes into the trust together with the transferrable NRB (£650,000 in total)?

I give and bequeath free of Inheritance Tax and other fiscal impositions to my Trustees the nil rate sum upon trust to invest the same in any investments hereby authorised with power at their discretion to vary or transpose such investments for or into others of a like nature and to hold such investments and any money for the time being uninvested (hereinafter called “the Discretionary Fund”) and the income thereof upon the trusts and with and subject to the powers and provisions hereinafter declared

For the purposes of this Clause of this my will the following expressions shall have the following meanings:**

“nil rate sum” referred to in (a) above means the largest amount of cash which can be given on the trusts of this clause without any inheritance tax becoming payable in respect of the transfer of value which I am deemed to make immediately before my death"

Kerry Brookes
Lamb Brooks

Presumably residue passes to exempt beneficiaries.

If so then it will be the double NRB less the value of failed PETs, life interest trusts and legacies to non-exempt beneficiaries.

If not, then I suspect the legacy fails as there will always be a charge to IHT unless the total value of the chargeable transfer is less than the double NRB.

Graeme Lindop
Coles Miller Solicitors LLP

1 Like

The residue passes to the deceased’s children.

Kerry Brookes
Lamb Brooks

Graeme has identified a key issue with NRB gifts which is often
overlooked by draftsmen and can undermine the narrator’s intentions, as
well as creating significant difficulties in the administration of an

Where gifts of this nature are used, until the value of the estate has
been finally determined the executors may not know who the actual
beneficiaries are. If the value of the estate is close to the top of the
applicable nil rate band (including any available transferable nil rate
band), whether above or below, the discovery of an additional asset or
liability can be the difference between IHT being payable, thus
affecting the entitlement of the different beneficiary classes.

Unfortunately, not all draftsmen scrutinise their precedents for such

Paul Saunders

While I have seen this before (and in fact pointed out the same issue to a person about to distribute), I suspect that most wills containing a NRB legacy expressly limit it to circumstances where the testator is survived by their spouse. Even prior to the transferable nil rate band, there were few scenarios where it would be useful on the second death.

Andrew Goodman
Osborne Clarke LLP

It is useful on second death to insulate that value from IHT on the deaths of any of the beneficiaries for the remainder of the life-span of the trust. That remains true for a first-death gift of the NRB to a DT as well.

Michael Cutler
Colemans Solicitors LLP