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Where Taxpayers and Advisers Meet

Inheritance Tax & new RNRB Rules

kumar9
Posts: 50
Joined: Wed Aug 06, 2008 4:00 pm

Inheritance Tax & new RNRB Rules

Postby kumar9 » Tue May 30, 2017 2:06 pm

My parents owned our family home as Tenants in common & on 20 July 2010(notarization date) , they transferred 60 % of the home to my wife & myself (30% each) as also tenants in common. Value £ 900,000 at that time

My parents have made a mirror will & after the death of both , my wife & me inherit their estate.

Due to Docs being misplaced & subsequent clearance of queries, the docs were only registered with the Land registry in December 2011.

My wife & me have always lived with my parents ,they are very old & we take care of them.

We also share all the expenses related to the house 50 / 50 , like water , electricity , gas , rates etc

Will the 7 yrs survival period after giving us the house arrive on 21st of July 2017 ? Is the 7th year strictly over only after 20 th of July 2017 ?

How will the new RNRB rules affect us from April 2017 ?

Value of the house to day is about £ 1.4-1.5 million
Thank you
Kumar9

maths
Posts: 7405
Joined: Wed Aug 06, 2008 3:25 pm

Re: Inheritance Tax & new RNRB Rules

Postby maths » Tue May 30, 2017 3:29 pm

The transfer of 60% in aggregate is presumably made up of each parent transferring a 15% interest to each of you and your wife. These gifts are PETs.

Under the seven year rule no IHT liability arises (ie gifts become exempt) if both parents are alive immediately before the 7th anniversary of the date of the gift, namely, they need to be alive on 19 July 2017. Dying on 20th July 2017 would make the gift exempt.

This assumes that the beneficial interests were correctly transferred in 2010.

Although the gifts are PETs they may in principle give rise to a reservation of benefit on the part of each parent. Assuming parents do not benefit in any way after the gifts then no reservation arises (eg due to co-ownership splitting expenses between the four of you avoids a reservation; you may need advice in particular on this point).

The RNRB will only be in point when the surviving spouse leaves their 40% to the children. It may be preferable for each parent on their death to leave their 20% interest to the children directly, not to the other spouse.

Given the figures involved specific advice would seem appropriate.

kumar9
Posts: 50
Joined: Wed Aug 06, 2008 4:00 pm

Re: Inheritance Tax & new RNRB Rules

Postby kumar9 » Tue May 30, 2017 11:58 pm

Thanks Maths.

'' The RNRB will only be in point when the surviving spouse leaves their 40% to the children. It may be preferable for each parent on their death to leave their 20% interest to the children directly, not to the other spouse. ''
You mean on the first death of a parent , instead of leaving his/her share to the spouse , leave it to the children ( in my case to my wife & myself 10 % each) ; I guess at the second death it should also come to my wife & myself (10 % each) ??

That would imply changes in the Will s of my parents AFTER July 20 Th as per above ?

Thanks

Kumar9

maths
Posts: 7405
Joined: Wed Aug 06, 2008 3:25 pm

Re: Inheritance Tax & new RNRB Rules

Postby maths » Thu Jun 01, 2017 12:31 am

You mean on the first death of a parent , instead of leaving his/her share to the spouse , leave it to the children ( in my case to my wife & myself 10 % each) ; I guess at the second death it should also come to my wife & myself (10 % each) ??
Correct.
That would imply changes in the Will s of my parents AFTER July 20 Th as per above ?
Changes in the will. Can be done at any time.

kumar9
Posts: 50
Joined: Wed Aug 06, 2008 4:00 pm

Re: Inheritance Tax & new RNRB Rules

Postby kumar9 » Mon Jun 05, 2017 3:27 pm

Thank you so much Maths .

kumar9
Posts: 50
Joined: Wed Aug 06, 2008 4:00 pm

Re: Inheritance Tax & new RNRB Rules

Postby kumar9 » Wed Jul 04, 2018 11:12 am

Dear Math ,
The 7 year survival period will be passed on July 20 ( my wife & myself were given 30 % each by each of my parents) ; Can they give us the remaining 40 % of the house while they still continue to live in it ? Remaining 40 % would be just under their renewed joint NBR of £ 650,000 . Does the additions in NBR ( spread over until 2020) have any role to play ?
Thanks
Kumar

AnthonyR
Posts: 204
Joined: Wed Feb 08, 2017 2:33 pm

Re: Inheritance Tax & new RNRB Rules

Postby AnthonyR » Tue Jul 10, 2018 12:48 pm

There's two issues with your parents giving you the share today.

Firstly, if they give away their share and continue to live there rent free, HMRC will treat it as a gift with reservation and it will remain in their estate subject to IHT.

Secondly if they have given away their interest in their home they will not be able to leave it to you in their Wills (they don't own it to give away, despite HMRC pretending they do). Consequently unless there is another residence they are leaving to you then they will not benefit from the additional residence nil rate band.

Strangely giving away their property could make their IHT position considerably worse (depending on other assets).
Anthony Rogers CTA
Fusion Partners LLP
anthony@fusionpartners.co.uk

maths
Posts: 7405
Joined: Wed Aug 06, 2008 3:25 pm

Re: Inheritance Tax & new RNRB Rules

Postby maths » Tue Jul 10, 2018 9:30 pm

Following the gift of the original 60% with the donors remaining in the property no gift with reservation arises as you appear to have ensured that expenses are split 50/50 ie donors then not deemed to have reserved any benefit.

HMRC appear to be a bit touchy if the % transferred exceeds 50% (although not sure as to their justification) although 60% probably OK.

However, any additional % transfer may upset your current non-reservation benefit status and the RNRB may be lost.

Probably best to leave the balance to be left by will.

kumar9
Posts: 50
Joined: Wed Aug 06, 2008 4:00 pm

Re: Inheritance Tax & new RNRB Rules

Postby kumar9 » Wed Jul 11, 2018 2:30 pm

Thank you Anthony , Thank you Maths

Wills are already in place as per your suggestions but will double check exactly.


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