To benefit from the residence nil rate band you must leave your main residence to a direct descendant. For the purpose of this threshold, the direct descendant of someone is a 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.
It must be left to them in the will of the person that has died, under the rules of intestacy or by some other legal means but does not have to be specifically mentioned in the person’s will.
The legislation states that it also must be a ‘qualifying residential interest’ – IHTA 1984 s8H (2) and there would only ever be one ‘qualifying interest’ in an estate even if there is more than one property in the individual’s estate.
If the property is in a trust when the individual dies, the only way they would still qualify is if it becomes part of the direct descendant’s estate after the person dies. If the property is left in a discretionary trust it would not form part of the direct descendant’s estate, therefore it would not qualify for the additional nil rate band, so if the individual wishes to use a trust, they should take caution when deciding what type trust to use.
The direct descendant is not restricted on what they do with the property once they have inherited it.
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