IHT NRB and RNRB transfer

[J__Wood]

Just looking for some ballpark advice and appreciate I will need to speak to a professional.

My late (this year) mother was the life tenant of my late father’s Will Trust
On his death (June 1992) his share of the the family home and his chattels went to my mother and the rest of his estate into trust for myself and my sister.

I believe that the value of the trust's assets aggregates with her estate, and the trust and the estate would share her current nil-rate-band of £325,000?

Does this mean that we would be able to utilise our father's (I assume unused) nil rate band (again I believe £150k in 92 or current 325k?) the 'trust' bit confuses me?

Will we be able to transfer his unused RNRB (at current £175,000 as his estate was below £2m threshold)?

[FMOB]

Not 100% sure on this so consulting a professional is a good start as trusts can become complicated pretty quickly.

My Dad died intestate, this resulted in a trust being setup where every beneficiary was entitled to 25% of my Dad's estate held in trust. The surviving spouse (my Mum) had a 50% life interest in the 25% share the other 3 beneficiaries were entitled to plus her 25% so she had overall control of the house.

When she passed away and the trust was (eventually) dissolved, our solicitor managed to use my Dads IHT allowance as well as Mum's to keep the whole value of the estate out of IHT despite being above the single allowance.

As there is a trust, do you know who is administering the trust as they need to agree to it being dissolved, we got screwed for £3k to sign a bit of paper and him to verify his identity. Someone who I will never tire of wanting to punch in the face as many times as I have the energy (there were accusations by our solicitor of abuse of trust, extortion, etc because of his behaviour).

[J__Wood]

FMOB said:

Not 100% sure on this so consulting a professional is a good start as trusts can become complicated pretty quickly.


As there is a trust, do you know who is administering the trust as they need to agree to it being dissolved, we got screwed for £3k to sign a bit of paper and him to verify his identity. .

Thanks yes we are looking for a professional but I'm looking at making a payment to HMRC on time and would like to prevent us underpaying and owing HMRC 7.75% interest on 40% of 325k or worse 500k by diving in thinking wrongly we can transfer both...

Yes my Father tried to protect 'our inheritance'. If only he had a crystal ball to know my mother would not remarry in the 30 years after he died, a High Street Bank Co would have been slightly less rich.

[mike_e]

I'm no legal expert but I was thinking it would depend upon when the trust was setup, they type of trust, and whether your father survived 7 years after setting up said trust as to how to calculate the estate value. Some trusts exist to remove the asset(s) from IHT but you'd need proper legal advice. That said, I'd assume your mothers estate would benefit from transferring your fathers nil-rate band, doubling up the £325,000 allowance to £650,000.

I think the RNRB transfer is only valid after April 2017. So I'm assuming your Mum would qualify (adding £175,000 to the existing allowances) assuming she's left the property to you and your sister, but I don't think you could transfer your Fathers RNRB due to the date of his passing.

As mentioned ensure you get get proper legal advice, it can be a minefield to deal with.

[C69]

J__Wood said:

My late (this year) mother was the life tenant of my late father’s Will Trust
On his death (June 1992) his share of the the family home and his chattels went to my mother and the rest of his estate into trust for myself and my sister.

I'm not sure what you mean by 'life tenant' of the Will Trust, if your father's share of the family home passed to your mother?

My understanding is that if a WT was set up to fully utilise the Nil Rate Band at the time of the first spouse's death (£150k in June 1992), then there will be no unused NRB to pass on to the surviving spouse. In that case, the increase in the value of the NRB subsequent to your father's death won't matter, because HMRC's assessment is based on the percentage of the threshold that was unused at the time of the first death.

Conversely, if (for example) the WT was established in June 1992 with £75k, then only 50% of the NRB was used. Therefore, the unused 50% could be applied to today's NRB (£325k) and transferred to the surviving spouse. NB: This process isn't automatic, it has to be applied for.

Regarding transfer of RNRB, this is a useful guide: https://www.gov.uk/guidance/inheritance-tax-transf...

Obviously, seeking professional advice on this is a very good idea.