Main Res NRB & Trusts

Hi, wondering if anyone has come across this yet.

Widow has an IHT liability.  On husbands death (1996) a Disc. Will Trust was set up and value of the house up to his NRB was put into it, spouse retained ownership of the rest.

In 2009, the Disc. Will Trust was altered to an IP Trust.

Would the surviving spouse be entitled to inherit the husband's RNRB?

I am finding conflicting views on this.  Some saying if the house left to Trust then spouse cannot inherit, some saying if left to a IP Trust then yes (albeit in this case the original Trust was discretionary which further muddies the waters), others saying transitional rules allow RNRB to be inherited no matter what happened on first death.

Confused!
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Comments

  • Legislation as drafted does allow for an inheritance via an IPDI beneficiary to make use of transferable RNRB on subsequent death, which is logical. If the trust is discretionary then transferable RNRB is NOT available.

    The obvious complication is the change from discretionary to IPDI in 2009; however, notes I have from Chris Whitehouse, Lincoln's Inn do say that property is inherited when settled (which would be when the IPDI created) and the recipient of the IPDI being the spouse is an acceptable descendant hen my view would be that the transferable RNRB will be available.

    Your difficulty is that unless HMRC provides more examples of how this will work you may find it difficult to get a definitive answer; HMRC will be the ultimate arbitrators! Clients may wish to get a definitive legal opinion - Chris Whitehouse would be a good place to start. (5 Stones Buildings , Lincoln's Inn 0207 242 6201). No idea what he would charge.
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