RNRB and un married partner

Clients are unmarried and both have children from previous relationships. They own their home jointly as Tenants in Common.

Clients ideally want an IIP on 1st death but accept the limitations of the RNRB as the ultimate beneficiaries on the 2nd death wouldn’t be direct descendants of the deceased (i.e. not officially step-children).

Leaving the 1/2 share of the property to the children with an option to purchase for partner wouldn’t work as the children wouldn’t be receiving the qualifying interest in the property.

I’m thinking that a cash legacy into an IIP for partner may be an option, with a letter of wishes stating that the trustees should buy the 1/2 share of the property from the children(and how the share should be valued). If everyone is happy to rely on the non binding nature of the arrangement I think it could work and the children would end up with both the 1/2 share of the property and the cash.

The clients are aware that there will be IHT to pay on both deaths on the value of the IIP and SDLT would be payable on the purchase.

Any views would be appreciated on how forum members are dealing with this situation.

michelle collins
Cozens Hardy LLP

An IPDI for the children in half the house on the first death, with overriding powers of appointment is a possibility. They get the RNRB on the first death, with the trustees having a rod to beat them with if they do not allow the spouse to live there, but still CGT on a future sale after the second death as no tax free uplift-but no iht to pay.

Simon Northcott