Would a legacy in favour of children which is charged on a qualifying residential interest be sufficient for the RNRB to apply to that legacy? How are other’s dealing with this scenario in terms of carving out this interest without the gifted interest losing out on PPR for CGT in the future (or tax free uplift for CGT etc) and without endangering surviving spouse security of tenure etc.
From what I have seen of examples from HMRC, the charging of a property with cash legacies, even to qualifying beneficiaries, does not give them an interest in the charged property for RNRB purposes.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Many thanks Paul. I was thinking of a gift of the Qualifying Residential Interest (rather than a cash legacy) that was satisfied by a charge on the property. There is some discussion on SFE forum that talks of a ‘disconnect’ in the legislation whereby a gift of the QRI will qualify, irrespective of how it is satisfied?
Assuming it is correctly drafted, a gift of a share of a QRI sufficient to use up the RNRB, to children outright or an IPDI, will be a gift of a share of a property. Executors cannot then substitute cash or a charge.
What could happen is that the children or trustees sell back the share to W, perhaps with all or part of the proceeds left outstanding by way of charge. SDLT would be payable.
I am dealing with a similar situation at the moment and had intended to make a gift of the share in the property (not a cash legacy) to the value of the RNRB. Has anyone seen any wording to do this?
If not, I will probably leave a proportion of the property to the descendant.
I believe James Kessler has included a draft in his Drafting Trusts and Will Trusts book.