RNRB and property will trust

IndiaMae

Hi, please could someone confirm if RNRB is available if my husband and I change to tenants in common and have property will trust so our son inherits 50% of property held in trust on first death and then 100% on second death. Property worth around £450k at the moment. Initial recommendation was living trust but as we would lose £350K (£175,000 each) RNRB potential to save £140k IHT savings I am having serious reservations on that one as over time surely property may go above £650k NRB so I would pay 40% tax on any savings etc. Hope this makes sense thanks 

getmore4less

Read up on IPDI trust where there is a life interest for the surviving spouse.

Both RNRB available to life tenant.

Not looked at living trusts to be able to comment.

Keep_pedalling

IndiaMae said:

Hi, please could someone confirm if RNRB is available if my husband and I change to tenants in common and have property will trust so our son inherits 50% of property held in trust on first death and then 100% on second death. Property worth around £450k at the moment. Initial recommendation was living trust but as we would lose £350K (£175,000 each) RNRB potential to save £140k IHT savings I am having serious reservations on that one as over time surely property may go above £650k NRB so I would pay 40% tax on any savings etc. Hope this makes sense thanks 

Who is advising you? An IPDI will not lose either RNRB, but neither will it save any IHT. Unless your joint assets exceed £1M, IHT is a non issue, if you have significant savings that take you into that bracket, then it would be better to look at ways of protecting your liquid assets rather than your home.

Marcon

IndiaMae said:

Hi, please could someone confirm if RNRB is available if my husband and I change to tenants in common and have property will trust so our son inherits 50% of property held in trust on first death and then 100% on second death. Property worth around £450k at the moment. Initial recommendation was living trust but as we would lose £350K (£175,000 each) RNRB potential to save £140k IHT savings I am having serious reservations on that one as over time surely property may go above £650k NRB so I would pay 40% tax on any savings etc. Hope this makes sense thanks 

You seem to be complicating things for no obvious benefit. Given the value of the property, it's hard to see why you need to take any such action unless you are concerned about you and your husband divorcing (and there's no suggestion in your post that is the case).

Is this supposed to be a way to avoid care home fees? 

mrschaucer

Marcon said:

IndiaMae said:

Hi, please could someone confirm if RNRB is available if my husband and I change to tenants in common and have property will trust so our son inherits 50% of property held in trust on first death and then 100% on second death. Property worth around £450k at the moment. Initial recommendation was living trust but as we would lose £350K (£175,000 each) RNRB potential to save £140k IHT savings I am having serious reservations on that one as over time surely property may go above £650k NRB so I would pay 40% tax on any savings etc. Hope this makes sense thanks 

Is this supposed to be a way to avoid care home fees? 

Why so judgemental?  The first deceased is perfectly entitled to leave his/her own share of the house to whomsoever (he) wants.  The cats' home perhaps.  No avoidance of fees.  The remaining spouse is able to use (her) own £225k share of the house to fund (her) own care if necessary.  No avoidance of fees. 

IndiaMae

Many thanks for responses - I was wanting to protect part of estate in the event of one of us remarrying on the death of either of us and our son then possibly losing part of inheritance and I thought the property trust would also protect part 50% of estate from nursing homes fees. 

IndiaMae

Our estate is below 1 million 

doodling

Hi,

IndiaMae said:

Many thanks for responses - I was wanting to protect part of estate in the event of one of us remarrying on the death of either of us and our son then possibly losing part of inheritance and I thought the property trust would also protect part 50% of estate from nursing homes fees. 

Why do you think that a simple IPDI trust is not appropriate?

You'll need to change the property to be held as tenants in common but I don't see the need for anything more complex than bequeathing your portion to your son whilst giving your husband a life interest.

doodling

Hi,

Just to add, an IPDI trust wouldn't protect the whole of your joint assets, just your share - is that the problem?

IndiaMae

I am happy to protected 50% of property for my son in the event I die and then husband remarries. I appreciate that husband’s  50% is not protected and could pass to his new wife or her family. I am only looking at what could  happen in the future if one of us dies and the survivor remarries. No plans to pop my
clogs Or husband to remarry just looking at worst scenario for my son. 

Marcon

mrschaucer said:

Marcon said:

IndiaMae said:

Hi, please could someone confirm if RNRB is available if my husband and I change to tenants in common and have property will trust so our son inherits 50% of property held in trust on first death and then 100% on second death. Property worth around £450k at the moment. Initial recommendation was living trust but as we would lose £350K (£175,000 each) RNRB potential to save £140k IHT savings I am having serious reservations on that one as over time surely property may go above £650k NRB so I would pay 40% tax on any savings etc. Hope this makes sense thanks 

Is this supposed to be a way to avoid care home fees? 

Why so judgemental?  The first deceased is perfectly entitled to leave his/her own share of the house to whomsoever (he) wants.  The cats' home perhaps.  No avoidance of fees.  The remaining spouse is able to use (her) own £225k share of the house to fund (her) own care if necessary.  No avoidance of fees. 

Nothing judgemental about it - I was asking a question. Switching from joint ownership to tenants in common is often put forward as a way to avoid care home fees but the snag is it doesn't work. Try reading this and you'll understand why I asked (and possibly be better informed in case you are ever faced with a similar decision): https://www.saga.co.uk/magazine/money/personal-finance/care/paul-lewis-the-care-home-fee-trap