Q&As

A nil rate band discretionary trust was constituted following the testator’s death using an equitable charge over the testator’s half share of the matrimonial home. The half share of the home was then assented to their surviving spouse, subject to the charge. What is the position as regards the trust and the charge if the surviving spouse wishes to sell the property and purchase a replacement property?

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Produced in partnership with Paul Davies of Clarke Willmott
Published on LexisPSL on 17/05/2019

The following Private Client Q&A Produced in partnership with Paul Davies of Clarke Willmott provides comprehensive and up to date legal information covering:

  • A nil rate band discretionary trust was constituted following the testator’s death using an equitable charge over the testator’s half share of the matrimonial home. The half share of the home was then assented to their surviving spouse, subject to the charge. What is the position as regards the trust and the charge if the surviving spouse wishes to sell the property and purchase a replacement property?

Until 2008, it was standard practice for married couples to include in their Wills a discretionary trust of the nil rate band (NRB) to avoid it being wasted where the estate would otherwise pass to the surviving spouse with the benefit of the spouse exemption (and perhaps any children were too young to inherit outright). This is less common since 2008 because of the facility to transfer any unused NRB to a surviving spouse’s estate. There are still many such trusts in existence that were created prior to 2008 and which will need to remain in place until the death of the surviving spouse if they are to achieve the inheritance tax (IHT) saving that was intended.

A common problem when creating the NRB discretionary trust was to find appropriate assets out of which to fund it. Often the only asset of sufficient value would be the matrimonial home. There were technical tax issues that might arise if the half share of the matrimonial home itself were used to fund the trust. For this reason, it was common for the Will to include special provisions specifically authorising the executors to fund the trust using either a debt (an

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