NRB Discretionary Will Trust


H died in 2016 and his will set up a NRB Discretionary Trust, which contained the following provision “my Trustees may accept in place of all or any part of the available nil rate band sum a binding promise of payment made personally by my wife…”

He died with assets in his sole name of £358,927 (including half share of the property he held as TICs with W, conveniently worth £325,000).

W still lives in the property and closed down the account and encashed the premium bonds and paid herself the £33,927.

I have been instructed to do what I can to ensure that W can transfer H’s NRB and RNRB. W has a taxable estate. As H died over 2 years ago they cannot do a deed of appointment giving everything to W and get the benefit of s.144. I was thinking that W could do an IOU for the NRB so that, on her death, there is a deductible liability of £325k due back to the Discretionary Trust, which effectively preserves H’s NRB (even though not technically but the effect is the same i.e. W’s estate is reduced by £325k). Is there anything I can do to preserve the RNRB? If an IOU is given by W then surely the only asset of the Trust is the debt which will be collected when W dies. H’s half share of the property is therefore not technically in the Trust. Does that mean then that H’s RNRB will be transferrable to W’s estate? Would it be a good idea to put the house in W’s sole name?

Any help would be greatly appreciated.

Natalie Tonkin
Bailhache Solicitors

That sounds fine to me.
H could not have used his RNRB anyway as he died before its introduction. It will always be available to W provided she meets the conditions.
If taking the IOU route, you should of course complete the administration of H’s estate and transfer his half of the property to W.

Andrew Goodman
Osborne Clarke

This is also my understanding. RNRB, similar to NRB will be available to W, subject to the required conditions.

Liora Torn-Hibler
Berlad Graham LLP

Thank you for your reply. Do you think by doing this, W will be able to transfer H’s RNRB on death?

Natalie Tonkin
Bailhache Solicitors

As H died over 2 years ago, and no action has been taken to appoint any part of the discretionary trust to an exempt beneficiary within that 2 year period, H’s NRB has been fully utilised and is no longer available to W.

Care should be taken when following the IOU rote to ensure that the debt is appropriately satisfied after W’s death, to avoid the liability being ignored for IHT purposes (s.175A IHTA 1984).

Consideration might also be given to whether the IOU should include interest on the unpaid legacy from the expiry of the “executor’s year” to the date of the IOU, or beyond.

Paul Saunders

It was always transferable as H could not use it.
If W’s half share is worth £325,000, she could use hers and most of the transferred RNRB using that alone. If H’s half of the property is transferred to her, she should be able to use both fully.

Andrew Goodman
Osborne Clarke LLP

If you use the IOU route, all the house will belong to W and H’s RNRB can be claimed on W’s death. However:

  1. the debt may be disallowed if W has made substantial gifts to H; and

  2. SDLT will be payable

If the charge scheme is used, no SDLT and no problem with 1, but the charge will reduce the value of the house for the purposes of the RNRB. On the figures, it does not sound as if that will be a problem, as W’s share of the house is worth more than double
the RNRB at the moment, and may well continue to do so.

Simon Northcott

1 Like

Thank you, Andrew that’s so helpful. I find this RNRB stuff so confusing!

I am dealing with another estate where the deceased’s Wife set up a NRB DT which hasn’t been dealt with. H has now died and he has a taxable estate. The house was held as TICs and W’s half share (£275,000) and cash of £50,000 go into her NRBDT, which will need to be administered. Because W couldn’t use her RNRB when she dies, is that now available to transfer to H’s estate?

Apologies in advance if I am going around in circles!

Natalie Tonkin
Bailhache Solicitors