NRB Trust on death of 1st spouse

piglet22

Hi

I don't know if anyone can advise me. My FIL passed away in Jan 2014 and apparently had a NRB trust fund in his will. My MIL has recently updated her will and the solicitor has asked whether this has been administered. It hasn't and it seems that it was completely overlooked and assumed that all assets automatically passed to her. Having read online that this should have been set up within two years of FIL passing, we are now concerned what the possible consequences may be. My understanding is that there would have been potential IHT relief should my MIL pass and HMRC may not consider this applicable. However, asides from this are there any other repercussions that we should be aware of.

Savvy_Sue

As your MIL has already approached a solicitor about updating her will, I'd suggest she asks them what to do about this, and what the consequences might be of not acting on the trust. If it has caused an issue with IHT, then MIL may be able to mitigate the costs, if she cares to.

getmore4less

What assets would have been in the trust?

piglet22

Hi thank you for your replies. The assets would have included FIL 50% share of the house and some shares. His estate on its own was not subject to IHT but it is likely MILs will be. Currently, the solicitor has advised that there may be an issue should my MIL choose to sell the house as the 50% would have been in the trust. However, I am assuming that this could be resolved by permission from the named trustees (one of whom would be MIL).

getmore4less

The trust exists the wording in the will will have set that up.

A key will be if there was a life interest.

Property is often relatively straightforward as the tax implications are simpler, other assets that create income can need closer attention.

The first thing to do is establish exactly what was created by the will.
who the trustees are.

Once you have that you can look at the tax implications for the transferable nil rate band and any ongoing trust taxes.


the solicitor getting involved with the new will should be able to help but might steer towards them doing more work than is needed, definitely an area to do more background research as it will all help when it comes to administration of other estates should you ever get involved.

Keep_pedalling

piglet22 wrote: »

Hi thank you for your replies. The assets would have included FIL 50% share of the house and some shares. His estate on its own was not subject to IHT but it is likely MILs will be. Currently, the solicitor has advised that there may be an issue should my MIL choose to sell the house as the 50% would have been in the trust. However, I am assuming that this could be resolved by permission from the named trustees (one of whom would be MIL).

If the trust is unwound within 2 years of death then it effectively rewrites the will, allowing the transfer on the first NRB to the survivor. Although it may be possible to wind up the trust now it would have serious consequences on the survivors estate as her executors would no longer have the ability to transfer that nil rate band, lumbering the estate with a hefty IHT bill.

Not sure what the consequences on the primary residence nil rate band are, but profession help is required here to sort the best way forward, and to sort out all the delayed tax returns the trust has failed to make so far.

getmore4less

Keep_pedalling wrote: »

Not sure what the consequences on the primary residence nil rate band are,

As it did not exist at the time it is available to transfer to the spouse for future use if they have sufficient property assets and a qualifying benerficiary.