RNRB downsizing - discretionary trust of residue

Trusts Discussion
1

Good morning.

I should be grateful for your thoughts on a scenario where the deceased downsized from their residence to move into care but their will contains a discretionary trust of residue. There are direct descendants in the class of beneficiaries.

I am comfortable that if there is a residence that qualifies for the RNRB that an appointment out of the trust within 2 years of death works to claim the RNRB against the estate - in fact have submitted a fair few of these without issue.

However, I am not sure, in practical terms, how an appointment out would be effective if there is no “property” in the estate, ie to claim downsizing allowance. Has anybody had any experience of this or is it just not possible?

Thank you
Sharon
B P Collins

2

Where a testator dies without at the date of death owning a qualifying residential interest (as here due to earlier sale) a downsizing allowance may still be available where assets in the deceased’s estate are closely inherited.

Under IHTA 1984 s 144 the trustees could therefore appoint out sufficient assets to one or more lineal descendant beneficiaries or appoint such property on IPDI(s).

I don’t see any difference between appointing out an actual residence left on DT to lineal descendants and simply appointing out other trust assets under s 144.

In the absence of any material residue the amount of RNRB may be minimal or nil.

Malcolm Finney

3

Thank you Malcolm - appreciate your quick response