Residence Nil Rate Band Claim

Husband died 4 years ago creating a NRBDT in his Will. The family deal themselves and just treated the surviving wife as the beneficiary and transferred the estate to her. They have now realised there was a trust in husband’s Will and have asked that I prepare the documentation to formally terminate the Trust to correct the position.

Leaving aside the taxation issues of terminating the husband’s NRBDT, I am slightly concerned about the IHT position in the longer term. Wife will benefit from her NRB and the RNRB but will her estate also benefit from her late husband’s RNRB?

Justin Wallace
Brewer Harding & Rowe

My understanding of the RNRB is, yes, she will be able to transfer her late husband’s RNRB, providing when she dies she meets the conditions.

Natalie Tonkin
Bailhache Solicitors

I agree with Natalie about the Transferable RNRB, but I am concerned about the Transferable NRB.

If H left his NRB to a DT, and it is now being wound up outside the two-year period for s.144 read-back, W’s estate will not become entitled to Transferable NRB - H’s NRB will be lost altogether.

It is stated that H’s will made a gift of the NRB to a DT, residue to W, but the whole estate was mistakenly transferred to W. If no other action was taken, that means that W owes the NRB to the DT (or holds it upon trust for the trustees of the DT, whichever way you choose to analyse it).

If that is what is now documented, the debt owed to the DT will reduce the value of W’s estate.

Michael Cutler
Colemans Solicitors LLP

1 Like

That was the position I had arrived at. In this case, wife’s own NRB and 2 x RNRB will cover her estate for IHT as things stand.

By bringing the trust to an end (outside the 2 year period), we are possibly not helping. The family could just do nothing and when wife dies reduce the value of her estate by the value of the NRB due back to husband’s Trust.

Would HMRC accept this as a valid liability?

If so, this begs the question in other cases, why we bother “setting up” the discretionary trust arrangement after the estate of the first to die.

Justin Wallace
Brewer Harding & Rowe

HMRC will accept a debt is due to the trust plus interest. If there is a trust, not bothering to set it up is a breach of trust.

Simon Northcott

Hi, I have a transferable residence nil rate band query related to this, albeit it based on different facts.

In my case, the deceased’s husband died in 2003. At that time, he left his share of the couple’s property to his children outright. The residence nil rate band was of course not available in 2003.

In this scenario, could the transferable residence nil rate band be available to set against the value of the QRI in wife’s estate, simply because the residence nil rate band could not be claimed on husband’s death pre-2017, notwithstanding the fact that his share of the property passed to his children (away from wife’s estate)? NB: The value of the husband’s estate was below £2m at the time of his death so tapering is not an issue here.

I can only find examples where the first spouse died pre-2017, but left their property to their surviving spouse. It’s clear in that case the TRNRB could be claimed, provided the relevant criteria are met on surviving spouse’s death.

Many thanks,
Rebecca

The RNRB legislation became effective wrt deaths or after 6 April 2017.Thus on a death before this date the RNRB can never have been used and hence it is available for carry forward for use by the surviving spouse on death.

Malcolm Finney

Thanks very much for your reply!