Residence nil rate band

Husband divorced 1st wife and has married 2nd wife - husband has 2 children by 1st marriage - 2nd wife has no children but Nieces - H&W now own their property as T in Common - value £750,000

Both want to leave their 50% of property in IIP trust for survivor and then W leaves her 50% to Nieces and H his 50% to sons - Wife and step sons do not get on and leaving H’s 50% to them on his death is not an option (at the moment)

Assuming H dies first

If the will is drafted as above then H’s RNRB is lost - not used because it goes to wife but can be carried forward but then she leaves it to nieces (on her death so no RNRB for her and sons inherit from the trust not from W’s estate) - so H’s RNRB unused and lost

If the wills are drafted as IIP then to sons and nieces together then when W dies she leaves 25% of property to her step-sons ie £187,500 which would be covered by her RNRB and H’s carried forward ie £200,000.

I now this is short by £12,500 but would this work and is there a way to utilise the whole £200,000 for the sons? W knows that she does not have any RNRB unless she leaves to step sons.

Michael Micklethwait
Beviss & Beckingsale

“Lineal descendants” includes step children so the half share passing to the sons on W’s death (via H’s Will) should qualify for the RNRB as H’s share of the property is deemed to be owned by W for IHT purposes.

Graeme Lindop
Coles Miller Solicitors LLP

I would think that the potential loss to the step-sons of her subsequently changing her will and cutting them out completely would make the RNRB less important? As the IHT would be borne by all the beneficiaries I would say the loss of it is bearable to ensure they get half the estate eventually.

I’m seeing this more and more when step-children are involved, promises made are easily broken if relationships are strained.

Kirsty Claridge
The Deans Legal Services