Good morning everyone! Another lovely morning here - I hope everyone is managing OK.
I advised a client yesterday who has been living with his unmarried partner for 14 years. He has two children and she has one, all from previous marriages which ended in divorce.
He and his partner co-own the property 75% :25% him:her.
He showed me a cohabitation agreement they have which states that on the death of one the other is able to stay in the home for a period of two years from date of death. Very sensible of course but I suggested this should be repeated in their Wills but then I’m thinking how does this affect the availability of the residence nil rate band? Once the two years up they want to pass their respective share in the property to their children. What is the position please?
As they are not married, nor in civil partnership, the RNRB will only be available if the family residence passes to qualifying beneficiaries.
The surviving partner is not a qualifying beneficiary.
As it stands, RNRB would appear to be available only on the death of the survivor, and then only in relation to the share of the home passing to the survivor’s child(ren).
I do not believe the transferable RNRB is available to the estate of the survivor in these circumstances, either.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Perhaps consider reducing the two year period to 18 months, and have a full discretionary trust Will. The property could then be appointed to the children and read back accordingly. (Tax may need to be paid and then reclaimed.) Alternatively, I am sure there is some complex arrangement that could be put in place whereby the children agree to the 18 month/2 year occupancy, but I would probably steer clear of that.
I Will Solicitors Ltd
Thank you Paul
So probably best for my client to remain silent in the Will about the two years. He could simply make his wishes known to his children that they should delay selling for two years.
What about the cohabitation agreement they signed though - is this enforceable post death of one of the parties I wonder?
For the RNRB to apply, inter alia, requires that the relevant child(ren) inherit from their parent not from a co-habitee of their parent. A transfer of any unused RNRB cannot be effected from one co-habitee to the other.
Would either or both of the following be feasible?
A two year IPDI in favour of surviving co-habitee. Surviving co-habitee just prior to end of two year period executes a DoV in favour of deceased co-habitee’s child(ren). RNRB applies.
Alternatively, discretionary trust set up and an appointment out after just prior to two years to child(ren). Reading back under s144 automatic so child(ren) acquire (ie inherit) interest in property from deceased ie RNRB as child(ren) lineal descendant.