IHT - Residence Nil Rate Band (RNRB) not applied

TJ666

I think I know the answer to this, but I'm just checking my solicitor is on the ball.

Both of my parents died within a month of each other, mother first then dad. Both had simple symmetrical wills: estate left to spouse then to 3 children.

The solicitor has applied the £325k Nil rate band to mothers's estate and the unused portion is used to offset dad's estate. However, mother's £175k Residence Nil Rate Band (RNRB) has not been applied for. It turns out the house was solely in my dads name, is that the reason the Residence Nil Rate Band (RNRB) can't be applied to my mothers estate (and she died first) ?

Thanks for clarifying.

Keep_pedalling

No it can’t be applied to her estate for two reasons, the first is that she was not an owner and secondarily her estate was inherited by her spouse so it was an exempt estate so none of her available exemptions were needed.

However those unused exemptions can be transferred to your father’s estate so nothing is lost. One possible complication did your mother’s will have a survivorship clause in it? This will usually state something like the spouse does not inherit is they die within 30 days of their spouse dying.

What is the value of your father’s estate?

TJ666

Fathers estate will be over 500k

poseidon1

Unless the joint value of parents estate exceeded £650k ( 2 x £325k), there is no necessity to claim the residential nil rate band at all.

If the size of the joint estate justifies claiming both RNRBs, I cannot see why a claim would be made in respect of your mother's estate since you say she died first and her estate would ordinarily pass IHT free to your father, where his estate would then go on to claim both NRBs and RNRBs.

However, if the wills had a 30 day survival clause, this can complicate matters with regard to the RNRB especially if your parents did not own the property as tenants in common.

Such a survival clause would require the estate of the first spouse to die to go direct to the children. If father was sole owner of the property that might explain why only his RNRB came into play, your mother had no residence in her estate which under a survival clause would have bypassed your father and deemed directly inherited by the children.

Therefore was there a 30 day survival clause?

TJ666

Joint estate will be around 900k. There was a one calendar month survival clause, but the solicitor has considered this and has passed on the mothers unused NRB to fathers estate. Mother's unused RNRB has not been applied for to use against fathers estate, though.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/81998293#Comment_81998293

I would have thought the survivorship clause would only impact the NRB (if her estate exceded £325k there would be IHT to pay and no transferable NRB available, which is why these survivorship clauses can lead to increased IHT being paid). Her RNRB was never used so should be transferable. This is the case even if the first to die died decades ago and never owned a property.

poseidon1

On examining IHT form 436 ( claim to transfer residence nil rate band), I can see no obvious barrier to a claim via father's estate notwithstanding the survival clause.

The mother's estate could not claim it in her estate, but the relief does not require her to have ever owned a residence for her unused relief to be claimed by the surviving spouse via the IHT436.

Suggest you ask the solicitor upon what statutory or case law basis they believe an IHT 436 transferable relief claim via father's estate is not in point.

fuzzzzy

https://forums.moneysavingexpert.com/discussion/comment/81998332#Comment_81998332

Just curious. Why would you get a RNRB if you have never owned a property?

Edit: Just seen poseidon1 has answered this while I was posting.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81998293#Comment_81998293

I am not sure about this but let's say your mother's estate was £100k and because of the survivorship clause all of that passed to her three children. That would use up £100k of her NRB leaving £225k to be passed to her husband. She can't use the RNRB because she doesn't own the house but it doesn't matter because her estate is under the NRB.

Her husband's estate is say £800k including the house. He has his own NRB of £325k, her transferred NRB of £225k and his own RNRB of £175k so that is £725k of estate charged at nil rate tax. That leaves only £75k that could benefit from her transferred RNRB. Still worth transferring it though but is that your question? Have the solicitors applied for your mother's RNRB to be transferred to your father's estate?

I think the house value may be relevant but it seems unlikely it would be worth less than £175k.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81998293#Comment_81998293

Both of my parents died within a month of each other, mother first then dad. Both had simple symmetrical wills: estate left to spouse then to 3 children.

Fathers estate will be over 500k

How is that possible, if he died last ? Surely his estate was £900K ?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81998894#Comment_81998894

Its operation of the 30 day survival clause.

It provides that the estate of the 1st spouse to die, bypasses the 2nd spouse and goes direct to the substituted beneficiaries ( the children). Presumably, mother's estate was less than £325k, allowing her remaining balance to accrue to father's estate. In theory the entirety of her unused RNRB should similarly be available for transfer, depending on the property value.