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Where Taxpayers and Advisers Meet

Residence Nil Rate Band

al91
Posts:6
Joined:Sun Jul 29, 2018 10:35 am
Residence Nil Rate Band

Postby al91 » Mon Sep 25, 2023 7:05 pm

Hello,

I hope someone can help here

My mother and father are happily married and live in the same house. The house is in my father's name only. However, my mother does have a third of a share in a property that is considered as an investment between her and two other unrelated people. Both my parents want 'will' their respective estates to their two grandchildren.

What sort of will do they need to have in order to capitalize on the RNRB of £175k?

If they simply 'willed' their respective estates to their grandchildren, would my mother miss out on the £175k RNRB allowance as her name is not on their home title deed?

Should my mother be added to the home title deed so that half that home becomes hers and she then can claim the £175k allowance?

Thanks in advance

AGoodman
Posts:1723
Joined:Fri May 16, 2014 3:47 pm

Re: Residence Nil Rate Band

Postby AGoodman » Tue Sep 26, 2023 10:04 am

Your parents need to see a proper solicitor to draw up wills as there are numerous things that can go wrong here.

First, are you confident that your parent's plans will not incur inheritance tax on the first death? If they leave everything to the grandchildren, everything will be potentially subject to IHT (subject to nil rate bands).

Secondly, if your father died first, leaving the family home to the grandchildren, your mother is at their mercy. They could sell by choice or because they are forced to sell to pay debts or on divorce. If the grandchildren are minors, the trustee holding it for them would have to charge mother rent or be in breach of trust. Your mother would have no security of tenure in her own home.

It would make sense to transfer the property into joint names. This is to ensure you can claim both residential nil rate bands - the problem is not your mother dying first without a property interest (because her RNRB would be used by your father when he died) but your father dying first as he could only use his own and your mother would not qualify. There would still be a property risk as a grandchild could be forced to sell their share.

Grandchildren have to receive an absolute interest or interest in possession (right to income/occupation) to qualify for the residential nil rate band.

Finally, if your grandparents are not super wealthy, and this is a play to avoid care home costs, you should bear in mind that if they did need a care home, they may now have insufficient funds to pay for somewhere nice and be left with whatever the Council can provide with minimal funding. Care fees are very expensive but that may be worth it versus the free alternative.

al91
Posts:6
Joined:Sun Jul 29, 2018 10:35 am

Re: Residence Nil Rate Band

Postby al91 » Tue Sep 26, 2023 4:40 pm

Thanks for the reply...much appreciated.

They are going to see a solicitor but I was trying to get a handle on this RNRB. HMRC's website has a few examples but as is always the case, each person's case is different.

On their website it also states:

"You apply the residence nil rate band to the whole taxable estate, not just to the value of the home, so the whole estate shares the benefit of the tax-free residence allowance." (except for when the home is worth less than the maximum available RNRB)

Does this mean that in some circumstances, the RNRB can be applied to assets other than their home?

Thanks

AGoodman
Posts:1723
Joined:Fri May 16, 2014 3:47 pm

Re: Residence Nil Rate Band

Postby AGoodman » Wed Sep 27, 2023 9:46 am

Yes. As it says, the band is applied to the estate generally. However, you still have to qualify so still need a qualifying property interest of the value you are claiming to pass to children or grandchildren.


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