RNRB and unmarried couples

Forgive me if this has been posed before but I cannot find such a thread.

Scenario as follows:

M is a widower. Has estate approx. £800K, including property in his sole name Co-habits with partner (F). F has v. small estate. M has children of his own.

Is the RNRB available if M leaves his whole estate (or just the property) on Life Interest for F with his children as remaindermen? Or would IHT be payable above £650K? Then possibly again when F dies as she was a Life Tenant.

If so, what are the options to achieve protection for F in a tax efficient way? Or is the only way passing house straight to his children and hope they allow F to live there? (would lose CGT uplift).

Thanks in advance

Karl Taylor
Parker Rhodes Hickmotts

There is no RNRB for a gift on IPDI trust for a person who is not a lineal descendant of the deceased, even if the when the trust ends the children will inherit.

Nor any RNRB when the trust ends because the children are not children of F.

If there were an IPDI trust for the children for 1 year, following which it terminates and the property passes into a life interest trust for F, the RNRB will apply on the death of M. The termination of the IPDI interests
would be chargeable transfers by each child but expected to be in the nil band. The CGT exemption could apply for most of the gain in the trust.

The trust would be a relevant property trust after the IPDI interests subject to 10 year charges but at least not part of F’s estate. It should also be noted however that t he termination
of the IPDIs is a gift for the purposes of the reservation of benefit provisions (FA 1986 s102ZA).

Malcolm Gunn

M B Gunn & Co Ltd

Thanks Malcolm. What you say re: there being no RNRB if IPDI for F is what I thought. As for your next point, if I’ve understood correctly, M could, in his Will, leave the property as an IPDI for his children for the period of one year, so qualifies for the RNRB (and his widow’s TRNRB), but then his Will provides that after the year, it is then held on life interest for F, albeit it is regarded as a PET from Ms children. Possibility of CGT dependant on the gain and Trustees exemption.

Understood re the Relevant Property Trust.

In respect of s102 FA, the property would still form part of the children’s estates as a GWR.


Karl Taylor
Parker Rhodes Hickmotts

I should explain that there is no particular timeframe for the IPDI. I suggested 1 year but it could be 6 months or even 3 months, it depends on how much you want to get on HMRC’s nerves.

When the IPDI interests end there are chargeable transfers, not PETS, but expected to be in the nil band. There is no CGT event at that stage as the legislation does deem any disposal on a change income entitlements in

The chargeable transfers by the children are treated as gifts of their shares in the asset in the settlement for reservation of benefit purposes (FA 1986 Sch 20 Para 4A).

Malcolm Gunn

M B Gunn & Co Ltd

You say there is no RNRB when the trust ends because the children are not children of F. What I am not clear on is when would M’s children be F’s stepchildren, in which case RNRB would apply. Is there any age requirement, in other words could adult children become a new partner’s stepchildren?

Richard Mugford
Mugford & Co Wills (Fareham) Ltd

It’s a good point you raise re: adult children. In this case, the father of the children died in 1983. The children would have been in their late 20s/early 30s. The widow began co-habiting, in her matrimonial home, with her partner (never married) in the late 1980s. Can it be argued they are step-children? It seems to me it may be worth a try.

Karl Taylor
Parker Rhodes Hickmotts

My understanding, which is based on dictionary definitions rather than any authority that I’ve found, is that there is no age factor but that a stepchild only becomes so by marriage of the parent to the non-parent.

Carol Haworth

Thomson Reuters Practical Law

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