Mother wishes to leave share of property on life interest trust to unmarried partner for life then to children (where partner is not father).
- Does this qualify for RNRB?
- If it qualifies because it is an IPDI presumably the estate is taxed (for IHT) immediately upon mother’s death utilising the RNRB?
- Is it then taxed again for IHT at death of life tenant aggregated to his estate?
- Does anyone have any alternative solutions to achieve the objective that partner is looked after but children inherit eventually?
It does not qualify for rnrb on either death and tax will be payable on both deaths. They had better get married.
RNRB not being available and there being no inclination to marry then then
as you have presumably surmised the sensible course of action appears to be
a discretionary Will trust in respect of the property with letter of wishes.
That way the partner can occupy the property, whilst a 40% IHT charge will
arise on death of the mother there will not be a 40% IHT charge charge on
death of partner, CGT private residence relief should be available for
period partner occupies property as only residence (or subject to claim as
main residence) and 18 months thereafter with children eventually
receiving proceeds of sale (unless for their own IHT planning purposes they
wish to keep trust in existence to benefit their issue ) with a 6% maximum
IHT distribution charge.
If partner is likely to outlive mother by 10 years then thought will need
to be given to 10 year anniversary charges - life policy written in trust
could be considered.
How property maintenance is funded and any resulting tax consequences will
also need consideration.
Andrew M Mortimer
I am preparing a will for a client in similar circumstances but the children are minors and the client wants her partner to live in her house with her children during their minority.
I have come across the following precedent for a trust of the house:
If any of my children are under  years of age at the date of my death then I give free of tax my property known as [describe property] or such other property which I may own as my principal residence at the date of my death (the Property) together with all my furniture, soft furnishings and articles of domestic, household or garden use or ornament in it (the Contents) to my Trustees to hold in trust for such of my children living at my death as reach the age of  years 3 and if more than one in equal shares and I declare that:
1 my Trustees may permit any of my children who are under the age of  years for the time being to reside in the Property or any house representing it and to use the Contents free of charge;
2 my Trustees may allow such other persons as they think fit to reside in the Property free of charge with any of my children who are for the time being residing there;
3 until the Property and Contents are sold my Trustees shall keep them in good repair and insured comprehensively and to their full value and ensure that the outgoings are paid and the money required to discharge these obligations shall be found out of the income (or if that is insufficient out of the capital) of the share or shares in the residue of my estate in which the children have for the time being a vested or contingent interest
The commentary to the precedent suggests that this is an 18-25 trust and therefore should qualify for the RNRB.
Does the discretion of the trustees to allow the partner to occupy under clause 2 have any effect on the availability of the RNRB ?
Disken & Co.