Mrs A is married to Mr A and she has three children from her previous marriage. Mr A has no direct descendants other than his stepchildren i.e. Mrs A’s children.
Mrs A’s Will creates an IPDI containing her 50% share of the marital home, with Mr A as the life tenant and the 3 children as absolutely entitled on Mr A’s death. The remainder of her estate passes to the children on her death, using her NRB in full.
On his death, Mr A’s assets pass to his relatives outside the bloodline i.e. not his step children.
My query is:
If Mrs A pre-deceases Mr A, what amount of RNRB can be used by the beneficiaries of the IPDI on Mr A’s subsequent death?
I’m confused, because he will be leaving his share of the marital home to people who are not direct descendants. I’m not sure if this means the IPDI can take 200% of the standard RNRB on Mr A’s death (up to 100% of the value of the share of the marital home in the IPDI).
Thanks for any assistance.
On Mr A’s death the 50% ownership in the matrimonial home is left to his relatives (ie not lineal descendants) and hence no RNRB.
However, under the terms of the IPDI trust the 50% interest in the matrimonial home is comprised in Mr A’s estate on death and under the trust terms on his death passes to his step-children who are his lineal descendants for RNRB purposes.
Therefore an RNRB is available for offset against Mr A’s estate on death.
As Mrs A (presumably) didn’t utilise her RNRB on her death (her 50% passing to spouse re the IPDI) then this may be transferable for offset for Mr A.
Thus, up to £350,000 RNRB is available to Mr A capped at the value at date of death of the property in which his IPDI subsisted.
Thank you Malcolm.
So if the only asset of the IPDI is the home and this is, say £175,000, do the IPDI trustees pay no IHT?
Or is it the case that the IPDI still bears a proportionate share of the IHT on the entire of Mr A’s estate?
The RNRB is not offset only against any property in the estate. It is an offset against the whole estate, Thus, the trustees may in your figures still have an IHT liability.