Despite being introduced on 6 April 2017, new research recently revealed 70% of people still know nothing about the new Residence Nil Rate Band (RNRB) for Inheritance Tax.
One particularly complicated area is the use of Trusts, particularly Will Trusts, and how their use may impact on RNRB.
In order to benefit from the RNRB there are certain qualification criteria that need to be met. For example, there needs to be a qualifying residential interest (basically an interest in a property that has been lived in at some point during the deceased’s lifetime), or assets representing it under ‘downsizing provisions’.
This interest needs to be left to lineal descendants (children, grandchildren etc) in a way that meets the definition of being closely inherited. One potential issue is that many wills for married couples and civil partners were drafted with Nil Rate Band (NRB) Discretionary Trusts, especially if they were done pre-2008 when the rules changed to allow the transfer of the NRB if it had not been used on first death.
The issue though, is that if the interest in a qualifying residence is left into a Discretionary Trust, the RNRB cannot be claimed as the interest will not be deemed to be closely inherited.
The need for advice in Inheritance Tax planning has never been greater. If you would like more information centred on your personal circumstances, please contact us >>