Residence Nil Rate Band (again)

Trusts Discussion
#1

Sorry, another question seeking clarification on RNRB

Scenario:-
Married couple, husband owns family home in his sole name and wife owns a plot of land in her sole name - there is no building on the land.

Question 1.
In wife’s Will, she is leaving everything to husband. if wife dies first, would husband’s estate be able to claim wife’s transferable RNRB when he dies?

Question 2.
Husband is leaving his entire estate in life interest trust for wife, then to his three children.
If husband dies first, I assume wife’s PRs will be able to claim husband’s TRNRB, but will wife now have her own RNRB to apply to her estate?

Thank you for your comments.

Gill Collins
Warwick & Barker

#2

Question 1 - yes, unless W’s estate exceeds RNRB threshold.
Question 2 - yes. Essentially, on H’s death he has not used his RNRB. Therefore, when W dies she is entitled to both her RNRB and H’s unused RNRB provided her estate (including what was held in the life interest trust) consists of a qualifying residence, passes to her lineal descendants and does not exceed the RNRB taper threshold.

Both the TNRB and TRNRB must be claimed within two years of W’s death.

Ihsan Ali
I Will Solicitors Ltd

#3

Question 1: Yes. Wife did not possess a “qualifying residential interest” and hence is unable to claim a RNRB on her death; no dwelling house.

Question 2: On husband’s death his estate does not use his own RNRB as residence not left to lineal descendants. Wife has an IPDI and on her death the residence passes to presumably HER children and an RNRB applies (if husband’s children but not her’s then no RNRB). Her PRs can then transfer husband’s unused RNRB.

Malcolm Finney

#4

Q1-if on H’s death the necessary RNRB conditions are met, his executors will be able to claim W’s TRNRB.

Q2-I assume the children are children of H and W? If not they will still qualify as step children of W, but does she have children of her own?

Assuming the children are children of H and W, and they take absolutely under the life interest on W’s death, and there are no overriding powers of appointment, then on W’s death-if the appropriate conditions are met and the house in the trust has enough value to cover both RNRBs-then the RNRB and the TRNRB will be available, reducing the overall iht bill for both the free estate and the trust, proportionately. Neither “attaches” to one or the other fund.

Simon Northcott

#5

My post above stated:

Of course, even if H’s children are not those of W they are (as H and W are married) W’s step-children and hence lineal descendants, hence RNRB applies, as Simon points out. Apologies Gill.

Malcolm Finney

#6

Thank you for all your responses.

I understand that if husband died first leaving the life intt on wife’s death the PRs could claim both husband and wife’s RNRB.

However, my main concern was the loss of the transferable RNRB for husband’s PR if wife died first without a “qualifying residential interest” - is this correct?

Gill Collins
Warwick & Barker

#7

The lack on the part of W possessing a qualifying residential interest on death does not preclude H (his PRs) from claiming W’s RNRB as a transferable nil rate band.This assumes H (his PRs) on his death is able to claim his own RNRB (which appears to be the case).

Malcolm Finney

#8

Even if wife died first without a qualifying residential interest, H’s estate will still benefit from the transferable RNRB, if at the time of his death the conditions are met. (W’s estate will simply be regarded as not having used any RNRB, so available to transfer.) I believe it is only if W’s estate exceeds the RNRB taper threshold of £2,700,000 will there be no TRNRB available.

Ihsan Ali
I Will Solicitors Ltd

#9

It does not matter if W had not owned a residence if she died first

Simon Northcott

#10

Thanks everybody. That’s cleared things up.

Gill Collins
Warwick & Barker