Clients (married couple) are potentially taxable as are their parents.
Parents live with clients in the family home (owned by the clients who are their son and wife).
Clients wish to include LIT for parents to protect their right to remain in the property if both Clients predecease. This would of course lose the Clients RNRB. Is there any way to retain the RNRB in this situation?
They currently want Wills to include residue to each other, on 2nd death LIT for parents and residue to children (currently 12/13 years).
A discretionary trust may be the best solution. That way the trustees can respond to the situation as it then is, to try to satisfy the wishes and make the best of the IHT position. Perhaps professional trustees would be best.
I agree with Simon, a Discretionary Trust with a strongly worded and carefully drafted letter of wishes seems the best option. It may be worth bearing in mind that hopefully i.e. in the natural order of things, allowing right to occupy to parents is academic (as they would predecease).
My only concerns I think would be to consider any additional complexity or IHT possibly payable on parents estate as they will have an IPDI which would be aggregated with value of their estate for IHT purposes.
If using a discretionary trust, might the trust period be defined by reference to the lives of the parents, with a gift over to the testator’s children, thus ensuring preservation of the RNRB should the parents both die before the testators?
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals