BR Guide FINAL 20 Feb

63 CASE STUDIES If the £800,000 had not been in trust, even if it was BR qualifying and not liable to IHT, it would have been considered as part of the estate, taking the estate value to £2.8 million. As a result, the full £350,000 RNRB would have been lost. In addition, the couple hadn’t used any of their respective NRBs and their estate benefits from a further allowance of £650,000 on their estate. So, the NRB and the RNRB (£175,000 each) total £1 million and can be set against the house. The estate value does not exceed £2 million (£1 RNRB lost for every £2 of estate value over £2m) Full £350,000 RNRB available No RNRB is tapered away Item Value PROPERTY £1,000,000 OTHER ASSETS £2,000,000 TOTAL ESTATE £3,000,000 BR ESTATE PLANNING SERVICE (QUALIFYING AFTER TWO YEARS) £800,000 AFTER BR QUALIFIED, THE BR ASSETS ARE GIFTED INTO TRUST £800,000 20% IMMEDIATE CLT CHARGE ON TRANSFER AMOUNT IN EXCESS OF NRB Not applicable as assets settled into trust are 100% BR exempt ONGOING EXPENSES SPENT (MONEY SET ASIDE) £200,000 The couple passes away in 2020 (in the 2020/2021 tax year), the following charges apply: ESTATE VALUE house and non-BR investment* £2,000,000 RESIDENCE NIL RATE BAND £350,000 NIL RATE BAND £650,000 TOTAL IHT FREE ALLOWANCE £1,000,000 IHT FREE ASSETS £1,800,000 TAXABLE ESTATE £1,000,000 REMAINING IHT PAYABLE £400,000 RESIDUAL ESTATE £2,400,000 SUMMARY OF IHT PLANNING *(No RNRB taper applies as estate value does not exceed £2,000,000) £1m HOME (No IHT as it is offset by NRB and RNRB) £1m taxable to IHT at 40%, totalling £400,000 RESULTING ESTATE VALUE: £2 MILLION SCENARIO: A married couple in their 80s, who have not yet done any estate planning, places £800,000 into a BR product, having an estate valued at £3 million, including a house worth £1 million. DISCRETIONARY TRUSTS BR investment gifted into discretionary trust to reduce estate value for purposes of RNRB taper threshold CASE STUDY 5 BR Qualifying saving £160,000 as BR qualification means there is 0% CLT + no exit or periodic charges The couple dies in 2020 £800,000 BR PRODUCT INVESTMENT £200,000 TO COVER ANY ONGOING EXPENSES HOME OTHER ASSETS TOTAL ESTATE VALUE: £3 MILLION £1m £2m HOME OTHER ASSETS £1m £1m TOTAL ESTATE VALUE AT DEATH: £2 MILLION £800,000 INVESTMENT PUT INTO TRUST £800,000 HELD IN TRUST (OUTSIDE ESTATE)