A’s main residence was transferred to a discretionary trust. The potential beneficiaries are A’s two elderly children. It was assumed A will not pay inheritance tax (IHT) on their death as the property is in the trust. This is not the case as it will fall under the gift with reservation of benefit rules as A is still staying in the property without paying market rent. When calculating IHT on death, can the executors claim the residence nil rate band (RNRB) on A’s residence even though the main residence is owned by the trust?
I think not.
“A” has made a gift with reservation but the trust contains no qualified interest in possession; it is a discretionary trust.
For the RNRB to apply on A’s death requires that the gift made by A is to a lineal descendant of A.
Malcolm Finney
I agree with Malcolm.
Generally discretionary Trusts, even with a GWROB, won’t be able to claim RNRB. If my memory serves correctly.