IHT and Residence Nil Rate Band (RNRB)

nyr

Hi.
My mother died in late January leaving behind a small sum of money in her bank account and her family house. The house, along with everything else, was jointly owned by both my parents and passed in full to my mother when my father died in 2006. My mother's will states that the house is to be sold within 6 months of her death and there are 20 beneficiaries who are all her direct descendants (15 of whom are grandchildren and can't receive their inheritance until they reach the age of 25). As one of the executors, I am trying to utilise the Residence Nil Rate Band (RNRB) allowance for my mother and father to wipe out the IHT due on the value of the house above  £650K.

My concern is that discussion of RNRB on the HMRC website and forms mentions the residence passing to direct descendants but in our case the house would be sold during the period of administration and the title never actually transferred to a direct descendants. Would we still be able to utilise the RNRB?

Will the fact that the grandchildren's shares have to be held in some sort of trust until each of them reaches the age of 25 mean that the RNRB is not available?

We are also considering the possibility of transferring the title to all beneficiaries (direct descendants) and hold it in a trust where only the executors can make decisons. Not being control freaks but just trying to prevent warring brothers sticking their oars in to score points over each other.  This leads to the question of how long we'd have to keep the house in order to utilise the RNRB and if it would still be available given that we would want to hold the house in a trust until it's sold?

Thanks for reading through all this.

Jeremy535897

Start with https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

Keep_pedalling

The fact that the money for some beneficiaries may need to go into trust because they are minors makes no difference to to being able to claim the RNRB, putting the house into a trust is not necessary. 

On a separate point what is the exact wording in the will regarding not receiving an inheritance until reaching 25? I ask because in many cases that is not legally enforceable, and in reality the beneficiaries will be able to receive their inheritance at 18 unless this is a Scottish estate when they can receive it at 16. 

nyr

It's an English estate and the clause in the will states:

To receive any gift (referring back to Personal Effects in a previous section) or property under ths will the following condition must be satisfied:
a. a beneficiary must attain the age of 25 years

Even if the 25 year age can't be enforced, just under half the grandchildren are under 18 so we'd have to look after their inheritance.

An idea being floated around is that if we need to transfer title and keep the house before sale then by having a trust we can avoid having a large number of beneficiaries arguing. If we can limit decision making to just the executors then it'll be easier to manage.

Keep_pedalling

nyr said:

It's an English estate and the clause in the will states:

To receive any gift (referring back to Personal Effects in a previous section) or property under ths will the following condition must be satisfied:
a. a beneficiary must attain the age of 25 years

Even if the 25 year age can't be enforced, just under half the grandchildren are under 18 so we'd have to look after their inheritance.

An idea being floated around is that if we need to transfer title and keep the house before sale then by having a trust we can avoid having a large number of beneficiaries arguing. If we can limit decision making to just the executors then it'll be easier to manage.

That does not sound like the sort of language a solicitor would use, is this a DIY will?

getmore4less

Beneficiaries under 18 is an issue because you can't just change the terms of the will for them

nyr

The will was drawn up by a solicitor with almost 20 years experience in commercial litigation, not wills. He is a family member and trusted by my late mother. Hence the mess up.

The executors will speak to a probate solicitor before going ahead with anything but want to know the possibilities, so that we know what we want advice on anything, including court approval for a possible Deed of Variation impacting under 18s.

Keep_pedalling

nyr said:

The will was drawn up by a solicitor with almost 20 years experience in commercial litigation, not wills. He is a family member and trusted by my late mother. Hence the mess up.

The executors will speak to a probate solicitor before going ahead with anything but want to know the possibilities, so that we know what we want advice on anything, including court approval for a possible Deed of Variation impacting under 18s.

I guess he knew nothing about trusts either. You certainly need professional advice, I would certainly not want to administer that estate without it.

Infrastructure

It might be simpler just to sell the house, distribute funds to the older beneficiaries and put the rest in a trust to be handed out to the other beneficiaries when they reach an age.