Deceased purchased a property in the name of his son and remained in occupation until his death. His Will then leaves his estate 50% to son and 50% on a life interest trust to daughter-in-law with gift over to grandchildren on attaining 25.
Despite the fact the son already owns the property, it seems as though because the value is still included in the estate for IHT, the RNRB is still available. Furthermore the life interest trust in favour of the daughter in law is “closely inherited” at the date of death and a full RNRB claim can be made.
It feels as though this should be “too remote” but doesn’t appear to be.
Do forum members agree / have any views to the contrary?
Where a person gives away a residence in their lifetime but continues to retain a benefit from it (a
GROB) this can give rise to a unique situation where the RNRB will be available on their death. The
reason for this is that the property they had given away is still taxed as though it is part of their estate
under s102(3) of the Finance Act 1986.
If the recipient of the gift of the property was a direct descendant of the deceased’s then the RNRB will
be available.
Example: Mrs W gifted her property to her daughter and continued to occupy it for the remainder of
her life. On her death the property is taxed as though it was part of her estate and her executors may
claim the RNRB as the disposal of the property had been made to a descendant.
Before considering the RNRB aspect, I suggest it is necessary to review the instructions, etc. at the time the property was purchased in order to identify the capacity in which the son was to hold the legal title – nominee or beneficial owner.
If the father purchased the property in the name of his son, and has purported to gift the property by will despite the son’s ownership, this suggests the son holds merely as nominee and not as beneficial owner. In which case there is no doubt the devolution of the property is governed by the terms of the will.
If there was a true gift at the time of the purchase then the testamentary gift must fail, to be replaced by the application of the doctrine of election. Should that apply, the son should be put to his election either: to receive half of the estate under the will and to create the trust of a half share of the property in favour of his father’s daughter in law, in the terms set out under the will (taking under the will); or he keeps the entire property and the testamentary gift to him lapses (taking against the will). If the son elects to take under the will, he will be the settlor of the half share of the property, not his father. In this scenario, as there will be a GROB, RNRB can be claimed up to the full value of the property.