Residence nil rate band

cherry76

House owned tenants in common in a will trust incorporating life interest. On first death half share of the dead spouse goes in a trust for the benefits of two adult children. Does anybody know whether residence nil rate band applies to this type of trust? Thanks

Keep_pedalling

Is half the house worth more than £325K?

cherry76

Keep_pedalling wrote: »

Is half the house worth more than £325K?

No at the moment house is worth 300k.

Keep_pedalling

So the RNRB would be passed entirely to the surviving spouse for use when they die, and 46% of the main nil rate band will be used up by passing £150k into the trust.

Yorkshireman99

Keep_pedalling wrote: »

So the RNRB would be passed entirely to the surviving spouse for use when they die, and 46% of the main nil rate band will be used up by passing £150k into the trust.

Agreed but the OP should get this confirmed by a professional.

getmore4less

cherry76 wrote: »

House owned tenants in common in a will trust incorporating life interest. On first death half share of the dead spouse goes in a trust for the benefits of two adult children. Does anybody know whether residence nil rate band applies to this type of trust? Thanks

With this type of trust(immediate post death interest in possession) for tax purposes the house remains as if it belonged to the spouse.

It gets the full spouse exemption and stays as part of the survivors estate for IHT purposes.

both nil rate bands become transferable, subject to the usual reductions is part used.

google IPDI trust

getmore4less

Keep_pedalling wrote: »

So the RNRB would be passed entirely to the surviving spouse for use when they die, and 46% of the main nil rate band will be used up by passing £150k into the trust.

that's not how these trust work

SevenOfNine

cherry76 wrote: »

House owned tenants in common in a will trust incorporating life interest. On first death half share of the dead spouse goes in a trust for the benefits of two adult children. Does anybody know whether residence nil rate band applies to this type of trust? Thanks

Good question, this might help https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band scroll down to the heading Inheriting The Home.

We've been considering updating our Wills to the scenario you describe, but extremely mindful of setting up such a 'trust'. Over the IHT limit as individuals due to the mind boggling ridiculousness of rise in our house value already & don't want to lose the use of the RNRB because of a trust (or the wrong type of trust).

To be frank, this is something that although it may be appropriate to ask here & read up on the subject, the safest option is probably to cough up & see a STEP member solicitor. Just to be absolutely sure if it's a workable Will now, but you must keep your eye on the ball constantly. House value & finances change.

cherry76

I have done some research and my uncderstanding is this type of trust do qualify as long as the house is passed to a direct descendant. I might be wrong.

Yorkshireman99

That is why you need professional advice. The wording of the truat is crucial.