Q&As

How can a testator ensure that the residence nil rate band will apply where a property is to be left on trust for the testator’s minor children?

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Published on LexisPSL on 04/04/2017

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • How can a testator ensure that the residence nil rate band will apply where a property is to be left on trust for the testator’s minor children?

How can a testator ensure that the residence nil rate band will apply where a property is to be left on trust for the testator’s minor children?

This Q&A is limited to cover the application of the rules for the new residence nil rate band (RNRB) and how they will apply to situations where the inheritance is made subject to an age contingency. This Q&A is provided in the context of a testamentary trust arrangement rather than a trust created during the settlor’s lifetime.

The RNRB is a relief from inheritance tax (IHT) that will apply, broadly speaking, where a deceased person’s home is inherited by one or more direct descendants. The RNRB is transferable between spouses and civil partners, in a similar way to the basic nil rate band. It will apply to estates where the deceased died on or after 6 April 2017.

The rules are inserted into sections 8D–8M of the Inheritance Tax Act 1984 (IHTA 1984) by section 9 of the Finance (No 2) Act 2015 (F(No 2)A 2015). This response does not consider the various points of detail other than the specific issue of including an age contingency. For more information, see Practice Note: IHT—residence nil rate band.

IHTA 1984, s 8E applies the RNRB where an interest ‘is closely inherited’. The modifier ‘closely’ is defined in IHTA 1984, s 8K. It is

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