In respect of an estate comprising the marital home and some joint savings, the home being held on a joint tenancy, husband and wife executed standard NRB Will Trusts in 2004, husband dying in 2012 and wife dying in 2018. Wills left NRB to trustees (other spouse, 2 children and solicitor trustee). Residue to surviving spouse and gift over to the 2 children.
After first death no special steps were taken - the house passed to the wife by survivorship and joint accounts closed down and proceeds transferred to new account in surviving spouse wife's name.
The will trust was not unraveled, instead in 2012 after the husbands death a deed of appointment created a trust fund of 50% share in the marital home (the 'appointed fund') and gave power for another home to be purchased for provision of a home for the surviving spouse to be held subject to the 'foregoing trust' (badly worded' but I assume means also held subject to a trust of 50% share in the new home). Life interest created - the appointed fund income to go to the surviving spouse, who is given a right to occupy rent free any property comprised in the appointed fund. Quite insulting if we accept the fund de facto was to be created out of the marital assets which passed to the wife by survivorship and she then gets 'permission' to live in the house purchased out of the proceeds of sale! Gift over to the 2 children.
Marital home sold in 2012 for £350,000. Proceeds used as follows: £34,000 gift given to each of the 2 children, smaller home purchased for the surviving spouse to live in for £200,000 and balance proceeds distributed to the surviving spouse who dies in 2018.
The value of the surviving spouses estate with full value of the smaller home added and savings etc will be £388,000. A simple will and not a NRB will trust would have enabled a transfer of the first to dies unused portion of NRB (£325,000 - £68,000 - or less with tapering relief) and the aggregated NRBs would have resulted in no IHT charge.
Questions:
1. Am I right in thinking there is only one NRB and the surviving spouses estate cannot transfer the unused portion of the first to dies NRB because of the will trust?
2. Is the full value of the smaller home to be taken into account for IHT purposes, even though it was held on trust and registered in the name of all 4 trustees?
3. If so, this means to my simple thinking that the smaller home which is bought out of proceeds of sale of an asset held in trust under the husbands NRB trust has not benefitted from the NRB will trust has not reduced the amount of assets within the second to die spouses death estate despite the NRB will trust being created expressly for that purpose. Why is this so???
4. Am I right in thinking the upshot is that there will be a charge to IHT which would not have occurred but for the NRB Will Trusts and the deed of appointment?
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