Hi All,
I currently have a client who is intent on leaving pecuniary legacies to his children (totalling about £450k) some other smaller pecuniary legacies (totalling about £60k), a right of occupation over a rental property for a friend, subject to payment of rent (property worth about £119k) Rent paid accrues to Residue. On end of life interest, the rental property passes to residue. Residue passes equally to a number of charities. The client has a home but this isn’t subject to a specific gift as of yet.
Client has his own NRB and transferrable NRB from his deceased wife.
My assumption is that, as the right of occupation is there, HMRC would treat the rental property as passing to the friend despite this ultimately being held for an exempt beneficiary (If I’m incorrect on that, the issues below would likely fall away as the gifts to non-exempt beneficiaries would then be below the NRB and TNRB).
The estate on a whole is in the £2-3million mark so there is a likelihood we’d loose all of the RNRB anyway if on the higher end of that. If however the RNRB is not tapered away fully, and the other gifts are above the NRB and TNRB, I am trying to think of the best way to ensure the RNRB can be claimed.
The client is determined to provide cash gifts only to the children in the amounts specified. We couldn’t just give his home to them as this will likely exceed the amounts he wants to give them.
I wonder if anyone has had any experience with using a demonstrative legacy in such cases, so that the legacies to the children must be satisfied from the home, with any remainder due being satisfied from the general estate? If so, whether HMRC has accepted the view that the home would be ‘inherited’ by the children per s.8J IHTA 1984 in such circumstances?
Any help/thoughts always appreciated!
Thanks