TQOTW: Interest In Possession & Resident Nil-Rate Band

If I leave my main residence to an interest in possession trust on my death for the benefit of my spouse as the life tenant and my children as the remaindermen, will I still benefit from the residential nil rate band?

You will not appear to benefit from the residence nil-rate band (RNRB) as the interest is not going to direct descendants, but initially into trust for your spouse. However, if you are not using your RNRB, it may be claimed as a transferrable RNRB in your spouse’s estate.

On the death of your spouse as the life tenant, as the main residence is deemed to be part of your spouse’s estate and is inherited by direct descendants of your spouse then the RNRB is available – both your spouse’s RNRB and your transferred RNRB subject to meeting other conditions.

For the purposes of the residence nil-rate band, s8J IHTA 1984 states that property within an Immediate Post-Death Interest settlement (which is broadly an Interest in Possession Trust created via a Will – see s49A IHTA 1984) is deemed to be part of the life tenant’s estate and so can be inherited by direct descendants – this will generally be determined by the trust deed.

The RNRB applies when a qualifying residential property interest is inherited by a direct descendant. S8K IHTA 1984 defines a direct descendant as the deceased person’s child, grandchild or other lineal descendant, a husband, wife or civil partner of a lineal descendant (including their widow, widower or surviving civil partner), a child who is, or was at any time, their step-child, their adopted child, a child who was fostered at any time by them, a child where they’re appointed as a guardian or special guardian when the child is under 18. This does not include nephews, nieces, siblings, and other relatives.

S8H (2) IHTA 1984 defines a ‘qualifying residential interest’ as an interest in a dwelling-house which has been that person’s residence at some time in their ownership.

Providing your spouse occupies the trust property as their residence, then the RNRB’s mentioned above should be available. The relief can be tapered or reduced to nothing depending on the size of your own and your spouse’s estate. Therefore a more detailed review of your particular circumstances would be required before a definitive answer could be provided.


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Tax Advice Consultant
0844 892 2470


Kiya previously worked in inheritance tax for a large accountancy firm where she dealt with accounts and various returns for trusts. She is AAT and ATT qualified and is currently studying ACCA. Kia also has experience of working in industry.

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