RNRB and Right of Occupation

I think I know the answer but am looking for clarification as to whether some of the RNRB can be claimed in an estate where the deceased’s residence is subject to a right of residence for 12 months to the husband of the deceased (who is a new husband and not father of the children). Subject to this the whole estate is being divided between the deceased’s children, grandchildren (all adult), and husband. Does the right of occupation mean the RNRB is unavailable. We are already over 6 months post-death. Would a DoV removing the Right of Occupation work?

Victoria Armour
VP Legal Solicitors

Hazel Jones

In answer to Victoria‘a question, I understanding is that as the deceased spouse had a right of occupation which gave him an interest in possession in the property, on the cessation of that interest in possession he is deemed to have made A potentially exempt transfer to the children and grandchildren who were of course step children and grandchildren of his. There would therefore be no immediate charge to IHT but should he die Within seven years, the residence nil rate band and the transferable residence nil rate band would be available.
As regards Hazel’s question, The same principle whereby the cohabited at the end of his occupation will be deemed to have made a potentially exempt transfer
To the children of the deceased But if he dies within seven years, there would be no residence nil rate band available as he is not the father or stepfather. The RNRB Will not be available on the deceased’s death as the property is not passing absolutely to her children and grandchildren. I take no responsibility should either of these answers be incorrect But perhaps others might correct me if I am wrong.

Patrick Moroney

Yes it would, but the proportion going to the husband would not be available, unless you leave the residence on a specific legacy to the others, to be brought into account on the division of the residue, if the figures allow it.

Simon Northcott

My understanding is that a right of residence (just like a life interest) means that there has been no direct inheritance for the purposes of RNRB. In my mind this is in line with the requirement that the beneficiary has to become absolutely entitled/under an IPDI/BMT/18-25 or Disabled Person trust.

R Simpson
Thomas Simpson Solicitors

I have a Will with the following clause:
“I GIVE my share (“my Share”) of the house known as [address] (“the House”) to my Trustees on trust for sale on the following terms:
(b) My Trustees shall permit my wife [name] (“my Wife”) to live in the House without payment to them so long as she wishes and so long as she keeps the House in repair insures it and pays all outgoings relating to it
(c) While my Wife is living in the House my Trustees shall not sell the House without her consent
(d) When my Wife has ceased to live in the House my Trustees shall hold my Share UPON TRUST for my daughter [name]”
My query is in relation to the RNRB. Is the right of occupation (which is not time limited so the wife could occupy until her death) treated in the same way as a life interest for RNRB purposes? If so does that mean:
(a) There will be no RNRB used on husband’s death as his share in the house passes to wife and the spouse exemption applies.
(b) Husband’s RNRB will be available for transfer on wife’s death
Any guidance would be appreciated

(a) Correct
(b) Correct. For it to be applicable (ie in addition to wife’s own RNRB) under the terms of the trust on the wife’s death the property would need to pass to one or more lineal descendants of the wife.

Malcolm Finney

Thank you Malcolm.
The facts of this case are that H & W own the house as tenants in common in equal shares. The Will Trust clause deals with H’s half share in the house. The intention is that after H dies wife will occupy the house for just a few more years and then the house will be sold. On the sale of the house half of the sale proceeds (H’s half) will pass to H’s daughter (W’s step-daughter) by virtue of clause (d) of the Will Trust as W will have ceased to live in the house. The other half of the proceeds of sale go to W. W will then buy another house with her own money which she will live in. That house will be then be inherited by W’s daughters by W’s Will.
As H’s RNRB was not used when he died will it be available for W’s estate when W dies so that two RNRB (W’s and H’s) will be deducted when W’s estate is administered?
Thank you.

On H’s death his 50% interest, which was a qualifying residential interest, was not left to a lineal descendant of his as it was left on an IPDI for W. As a consequence, on W’s subsequent death W’s own RNRB at the date of her death may be doubled due to the transferability of H’s totally unused RNRB. W is entitled to her own RNRB on her death as she is living her interest to a lineal descendant ie her step-daughter.

If at the date of W’s death the market value of her 100% interest in her new home which she purchased is less than the market value of her 50% interest in the former matrimonial home (valued at the date of sale) then “downsizing relief” would be available to W’s estate.

Malcolm Finney

Thank you for confirming that Malcolm.

Just one final point. If H dies and after 2 years W ceases to occupy the property is she deemed to have made a PET for the value of H’s half share in the house valued at the date W ceased to occupy the property?

W is given the right to reside only in the house identified and thus on its sale and/or where W ceases to occupy, W’s interest in possession terminates inter vivos as does the trust.

W makes a PET. IHT is chargeable on the value of the property in which W’s interest subsisted at the time it ceased.

Malcolm Finney

Thank you for your confirmation - much appreciated.