I am sure that this situation is not unique and my understanding is that the RNRB will not apply in these circumstances which appears to be inherently unfair.
I have an unmarried couple. He has children from his first marriage and they do not have children together.
If he dies first, he wishes for her to be able to remain living in the property and then on his death for his share to pass to his children.
If she dies first then of course his estate benefits from the relief but if she benefits from the right of occupation then the relief is lost.
Am I correct and, if so, is there anything that can be done?
I would also be interested in knowing the answer to this. Could he leave the children a share of the property absolutely (sufficient to use up the RNRB) and settle the other share on trust to give a right of occupation to the partner, making it tricky, at least, for the children to evict the partner after his death?
New Square Chambers
If they get married, no problem-but if not there is.
If there was a discretionary trust on the first death, it would at least give a breathing space, and if she dies within 2 years the position can be dealt with.
I wonder if it would work to set up IPDI in the property (or in a share big enough to take advantage of RNRB) for, say, 6 months for the children, and then passing it into a discretionary trust of which the partner is also among the class of beneficiaries, so that the trustees can then allow her to live there, or is there is a risk that this would be read back in the Will.
I am considering this same issue and read your comment regarding a Discretionary Trust.
If the DT Trustees allowed the Occupier/Cohabitee to occupy for say 12 months (which is what my client was hoping to achieve until I threw in the RNRB spanner in the works) and the Occupier/Cohabitee unfortunately died within that period might the DT be considered a ‘sham’, an IPDI created and the value of the property aggregated in the estate of the Occupier/Cohabitee?
Look forward to your response.
Wace Morgan Solicitors
Sian-does your client own the whole property, or just a share and the partner the other share?
My client owns the whole property and intends to continue to do so for the time being at least.
Wace Morgan Solicitors
Assuming the estate was still in the course of administration when the partner dies, then the trust would only have a chose in action rather than the property itself, so provided they do not grant a right of occupation,
and the executors do not grant any rights, it is hard to see how an IPDI could be argued.
If the occupier died after the estate administration was complete, then it gets more risky, but again if no rights of occupation-apart from perhaps a short term revocable licence/tenancy- are granted explicitly or implicitly,
I think hmrc would have an uphill job.
So care needs to be taken, but you cannot be any worse off taking this course, compared to granting an IPDI expressly in the Will-apart from cgt, as there is no read back for cgt on an appointment, and if the occupier
is not a beneficiary (see below) pprr will not apply.
If it was definitely intended that the occupier was only to be allowed to occupy short term under licence, she need not be a beneficiary, although if the trustees/executors did not charge a market rent that would put
them in an awkward position. so they could charge a rent, with the occupier being left a legacy to compensate.