NOTE: This article was published in December 2018 and reflects the law as it stands on the date of publication and not at any later date. 

The paper can be downloaded as a PDF here.

4.1. Tapering

The deceased’s default allowance, i.e. the aggregate of his residential allowance and brought-forward allowance, is liable to be reduced if and to the extent that the value of the deceased’s estate exceeds the taper threshold (£2m until 2020/21, increasing thereafter in line with the CPI). For every £2 that the estate exceeds the taper threshold, there is a reduction of £1. The reduced default allowance is referred to as the adjusted allowance (IHTA 1984, s. 8D(4)(g)).

NOTE: This article was published in December 2018 and reflects the law as it stands on the date of publication and not at any later date. 

The paper can be downloaded as a PDF here.

5.1. Introduction

In addition to the “residential enhancement”, the estate of a person (P) dying on or after 6 April 2017, may be entitled to a “brought-forward allowance” if and to the extent that the residential enhancement of a “related person” (R) was not used on R’s death. A “related person” means a person other than P where the other person dies before P, and immediately before that other person dies, P is the other person’s spouse or civil partner (IHTA 1984, s. 8G(2)). That part of the RNRB, not used on R’s death, can, therefore, be brought-forward, to be utilised on P’s death.

NOTE: This article was published in December 2018 and reflects the law as it stands on the date of publication and not at any later date. 

The paper can be downloaded as a PDF here.

6.1. Relief

The general principle is that the deceased’s estate must include a QRI on death which is closely inherited by direct descendants. The consequence is that the RNRB would not be available in the not-uncommon case where an elderly person has sold their residence, and moved into rented accommodation or a nursing home, or down.sized to a less valuable residence which does not make full use of the RNRB.

NOTE: This article was published in December 2018 and reflects the law as it stands on the date of publication and not at any later date. 

The paper can be downloaded as a PDF here.

7.1. Maximum RNRA

The maximum RNRA is £200,000 in 2017-18 (£100,000 residential enhancement, and £100,000 brought-forward allowance) and £350,000 in 2020-21 (£175,000 residential enhancement, and £175,000 brought-forward allowance): see 1.7 above.

NOTE: This article was published in December 2018 and reflects the law as it stands on the date of publication and not at any later date. 

The paper can be downloaded as a PDF here.

8.1. When RNRB gift not appropriate

In many cases, there will be no need for a specific gift of a QRI to direct descendants absolutely, or on IPDI trusts, with a view to making full use of the RNRB. This will be the case where:

NOTE: This article was published in December 2018 and reflects the law as it stands on the date of publication and not at any later date. 

The paper can be downloaded as a PDF here.

8A.1. IPDI trust of residue for surviving spouse

It is common practice for a testator to settle his or her residuary estate on IPDI trusts for the surviving spouse, rather than making an absolute gift, particularly where the testator has children by a previous marriage or relationship. The testator has a mea.sure of control over the ultimate destination of the trust assets.

NOTE: This article was published in December 2018 and reflects the law as it stands on the date of publication and not at any later date. 

The paper can be downloaded as a PDF here.

8B.1. Advantages of 2-year discretionary trust

A gift of a QRI and/or of the downsizing addition to a discretionary trust will not qualify for the RNRB, since it will not be closely inherited. However, in circumstances where a RNRB gift might be advisable, advantage could be taken of IHTA 1984, s. 144 so as to obtain the benefit of the RNRB if, within 2 years of death, it is appropriate for the whole or part of the QRI and/or downsizing addition to be appointed to direct descendants absolutely, or on trusts which attract the RNRB.

NOTE: This article was published in December 2018 and reflects the law as it stands on the date of publication and not at any later date. 

The paper can be downloaded as a PDF here.

9.1. Gifts to reduce estate below £2m

Tapering will begin to reduce the RNRB in an estate worth more than £2m (see 4 above). Lifetime, and even deathbed, gifts could, therefore, be made to reduce the estate to or below £2m.

Constance is a widow who in 2020/21 is diagnosed with cancer and has a few months to live. She has an estate of £2.7m, and would on her death be entitled to a RNRB of £350,000, including a brought-forward allowance. She has adult children.