I have a case whereby the clients have an estate valued at approx £1.8m. They wish to leave their estate into a Flexible Life Interest Trust on the first death for the surviving spouse’s benefit. Upon the second death the Wills will specify a gift of the RNRB sum to the children (in order to qualify for the relief).
Clients also wish to leave 10% share of the baseline value of estate (upon second death) to their Charitable Foundation (fully registered with the Charity Commission) in order to benefit from the reduced rate for IHT.
Will the estate qualify for the 36% reduced rate if the gift of the RNRB sum is made before the gift to charity!?
I welcome your thoughts on the matter. Thank you.
I think this is just a drafting issue. I’d have thought a legacy to charity according to a formula such that charities get 10% of the baseline amount, come what may, at the expense of residue, would guarantee the 36% rate in any case where residue came out greater than nil.
The RNRB is not taken into account when calculating the baseline amount for the 10% to charity (IHTM46001)
On another point you say there is a gift of a sum to the children to qualify for the relief. The question of whether a cash legacy can qualify for RNRB has been discussed on this forum before. My view is that if the legacy is akin to a cash legacy eg such sum as to use the RNRB it does not give the children a share of the property so no RNRB would be due. It is just cash legacy to be settled from the estate.
To qualify the gift to the children would have to be either a specific legacy of the property (or part) or a gift of a share of residue