The deceased Mother left in her will a property trust fund that enables her husband as a beneficiary (stepfather to her son) to live there until his death. At his death the property (her house) will go to her son. Can the executors dealing with her estate at this time claim any RNRB at all? Thank you in advance.
No.
On mother’s death her husband acquires an IPDI in the property. Husband is not, of course, a lineal descendant of mother. Hence mother’s estate not entitled to a RNRB.
On husband’s death his stepson will inherit the property and his (ie husband’s) estate will be entitled to a RNRB plus a transfer of mother’s RNRB.
Malcolm Finney
No, but RNRB will be available on the death of the husband.
“Closely inherited” includes qualifying residential property passing to step-children (s.8K(3) IHTA 1984)
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thanks for your answer. Much appreciated. So as the husband is benefiting does that mean there won’t be any tax to pay on the amount of the house which is under the 325000 threshold btw? AsI see if a spouse passes on property to a spouse there is no IHT as it’s not added to the value of the estate.
Quote: Passing on a home
You can pass a home to your husband, wife or civil partner when you die. There’s no Inheritance Tax to pay if you do this.
If you leave the home to another person in your will, it counts towards the value of the estate.
If you own your home (or a share in it) your tax-free threshold can increase to £500,000 if:
- you leave it to your children (including adopted, foster or stepchildren) or grandchildren
- your estate is worth less than £2 million
On mother’s death the creation of an IPDI for the surviving husband in the property means that the property is treated as an inter-spouse transfer on death and hence exempt from IHT irrespective of its value.
Malcolm Finney
Just to be a pain and clarify please, so the house is held by trustees in the will to hold the house for him until his death and then the son inherits it, so the beneficiary of house at the moment is the husband, and therefore as he’s the spouse no IHT on the value of the house? Thanks in advance
On the death of the mother she, under her will, left her property on trust under which her husband can live in the property for life. On his death the house passes absolutely to mother’s son.
As she settled her property on trust for her husband this is treated for IHT as an inter-spouse gift. This in turn means that in calculating the IHT on her death estate the property is not subject to IHT.
Malcolm Finney
Thanks very much for your help regarding this matter. Much appreciated indeed.
Perhaps it should be noted that the value of the property will of course aggregate with the estate of the husband upon his subsequent death.
The husband will be able to claim his own RNRB and a further carry forward RNRB against the QRI passing, but this needs to be considered along with the estate of the husband upon his death and the NRB’s available to the trust and estate to assess any IHT due and proportion from the estate and the life interest trust.
Bob Massey