Residence nil-rate band

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Video looking at residence nil-rate band

In this recorded MasterClass from 2 November 2017, we’ll share our technical guidance on the residence nil-rate band. Using examples, our latest MasterClass covers off the key points with a particular focus on the following elements:

  • how tapering applies to high value estates
  • the transferable RNRB and its interaction with tapering
  • the ability to use RNRB with discretionary will trust planning.

 

  • Operator: Good day ladies and gentlemen and welcome to the Residence Nil-Rate Band MasterClass conference call. Today’s call is being recorded. At this time, I would now like to turn the conference over to Mr Paul Rutkowski. Please go-ahead sir.

    Paul Rutkowski: Thanks Clodagh. Good morning everybody and welcome to the latest Scottish Widow’s TechTalk MasterClass. As Clodagh says, my name is Paul Rutkowski and for those of you who don’t know me, I lead the financial planning team. I’m really pleased to introduce to you today our latest TechTalk class which is on the Residence nil-rate band. In a couple of minutes, Jeremy Branton and Bernadette Lewis from the financial planning team will take us through today’s presentation.

    The Residence Nil-Rate Band is a new piece of legislation that gives us an additional piece of allowance to deaths which occurred from the 6th of April this year. As it’s a new piece of legislation, with some relatively complex areas, we have seen a number of queries into our helpdesk on the subject, so to support and understand these day-to-day questions, we have decided on this MasterClass as the topic.

    Following the presentation, I will be letting you know where you can find out more information. The presentation is scheduled to last for about 30 to 45 minutes, following which time there will be time for any questions you might have.

    A recording of today’s presentation will also be made available on Scottish Widow’s adviser Extranet, should you wish to view the content again. It is also worth noting that CPD certificates will be issued after the MasterClass. Jeremy and Bernadette have packed loads of great content into this session. So, without further ado, I will hand over to Jeremy.

    Jeremy Branton: Thanks Paul and good morning everyone. In today’s session, we are going to run through the operation of the new additional inheritance tax allowance, the residence nil-rate band. As part of this, we will focus on a couple of the more complex areas, tapering and transferability and how they interact together. We will also look at will trust planning with the residence nil-rate band and it’s an area which hasn’t generally been picked up yet by industry commentators. As Paul mentioned, there will be time to answer questions at the end of the session and if we don’t manage to answer them all today, we will get back to you individually.

    So, by way of some context, the announcement of an additional inheritance tax nil-rate band in the summer budget of 2015, followed a Conservative Party pledge to increase the inheritance tax nil-rate band up to £1 million. This in turn was in response to rising property prices, dragging more families into the inheritance tax net. Although, as you will see later, it is going to take until tax year 2021 for a nil-rate band allowance of £1 million to be available.

    As Paul said the residence nil-rate band is available from the 6th of April 2017, when an individual dies, passing  qualifying  property to a direct descendant and we look at what constitutes qualifying property and who is or isn’t a direct descendant in a moment.

    The maximum additional allowance available with the residence nil-rate band is  £100 000 this year and it rises in £25 000 increments up to £175 000 by tax year 2021. And after that point it is going to be indexed by CPI, consumer price index. The residence nil-rate band itself is set against the taxable value of an individual’s estate, not  the property itself. The actual amount available is the lower of the value of the property passing to your direct descendants or the residence nil-rate band threshold in the year in which the individual dies.

    This new additional allowance operates alongside the standard nil-rate band but one difference is that is unaffected by failed lifetime transfers such as potentially exempt transfers. And this could present a very useful planning opportunity for those holding high value estates and particularly those in poor health, as it represents a deathbed planning opportunity and we’ll look at this later in the presentation.

    The residence nil-rate band is gradually restricted where an estate is valued above a taper threshold that currently stands at £2 million and we’ll also explain how this operates in a bit more detail.

    There are also some specific provisions applying where an individual has downsized their home or perhaps they  sold their home and no longer own a property when they die, and these provisions mean that the residence nil-rate band could still be available. Unfortunately, the rules are very complex, we don’t have the time available today to go into them, but they are covered in detail in the Revenue’s inheritance tax manual and we will provide a link to that later on.

    Just like the standard nil-rate band, any unused residence  nil-rate band can be transferred to a surviving spouse or civil partner. We’ve got an example showing how that operates.

    Finally, although the rules can appear restrictive in terms of will trust planning, HMRC has confirmed that leaving a home to a discretionary will trust and subsequently making an appointment within two years to a beneficiary who is also a direct descendant will enable a claim to be made for residence nil-rate band.

    Okay, so in this slide we have illustrated how the new additional allowance sits alongside a standard nil-rate band and you will see that it progressively rises in £25 000 increments until it gets to  £175 000 in tax year 2021 and added to the standard nil-rate band, you’ve got your £1/2 million allowance in that tax year or for a married couple, there’s £1 million. And as I said just now, you’ve got indexation applying from 2021-22, we’ve shown the effect of a 2% uplift, which is based on the government’s target for inflation.

    So, what is a qualifying property?  Well, as part of the conditions for the residence nil-rate band, the deceased must have owned an interest in a residential property in which they lived. It doesn’t have to be their main residence and there is no minimum period of occupation. In other words, it’s a property which at some time has been their home. This means of course that a buy-to-let property wouldn’t qualify unless the deceased had at some time lived in it.

    And if an individual has owned more than one home, their personal representatives can elect which property should qualify for the residence nil-rate band. A property held by a trust could also qualify if the deceased held what’s called a qualifying interest in possession in the trust and Bernadette will look at trust definitions a little bit later. But whether the residence nil-rate band would subsequently be available would depend on trust provisions.

    Moving on to direct descendants. So, just who is a direct descendant? Well, the rules relate to property being closely inherited, which means direct descendants are children, grandchildren, great grandchildren etc, plus usually fostered children, adopted and step children. Spouses and civil partners of direct descendants are also included, as are surviving spouses and civil partners where a direct descendant predeceased, that’s provided that they haven’t remarried or entered into a new civil partnership. But importantly, siblings, nieces, nephews and remoter relatives are excluded as are co-habitees.

    Okay, so we will just look at how this operates in practice. We’ve got Glenn, who dies in tax year 2017/18. He is divorced, so his estate will not qualify for any additional transferred residence nil-rate band or transferred standard nil-rate band. He’s got an estate valued at £500 000 and he is passing it to his grandchildren and that includes his home which is valued at £200 000. Tapering doesn’t apply, as his estate is valued below £2 million and he meets the  leaving the home to direct descendants’ condition, so residence nil-rate band will be available, but it is cut to  £100 000 as  his property is worth more than the  residence nil-rate band threshold.

    On the two tables, on the right, we have just shown the effects if the residential nil-rate band hadn’t been available, so you would’ve had an estate with a standard nil-rate band of £325,000 and inheritance tax due on £225,000. If the residence nil-rate band is available, as it is here, you apply the residence nil-rate band first, so reducing the estate by a £100 000, then you apply the standard nil-rate band and overall there is a tax saving of £40 000.

    Okay, what about if Glen had only passed part of the property to the direct descendant, so we have the same facts here, he died at this same point, the estate is worth the same, but this time only a quarter of the property goes to a direct descendant, a grandchild, with three-quarters going to nieces and nephews and in this case the additional allowance is restricted to a quarter of the value of the home, so just £50 000.

    Okay, I am now going to hand over to Bernadette to cover tapering and estate valuations.

    Bernadette Lewis:  Thank you very much, Jeremy. So, we start off with just a slide demonstrating how tapering will work for the current tax year when the nil-rate band is £100 000. As with most of the tapering provisions in tax legislation, the residence nil-rate band will go down by £1 for every £2 for the estate exceeds a tapering limit, which is £2 million up to 2021 and then planned to increase in line with CPI inflation.

    One of the things that is worth knowing is that there is a slightly different approach to working out  the value of your estate for the purpose of tapering and the way you will be familiar with for valuing your estate when it comes to working out how much inheritance tax might be due.    

    Because of the quirk in the way that works, it means there’s actually an unexpected opportunity to do some very last minute inheritance tax planning. Theoretically, even literally on your deathbed, you could do some inheritance tax planning that would help, although you probably wouldn’t want to leave it quite that late. And the complication that arises from tapering is that you have got a transferrable residence nil-rate band. Well, it means you have to look at the value of your estate on both first and second deaths to possibly apply tapering to work out your transferable nil-rate band and Jeremy has got an example of that later on.

    Now, we’ll actually have a look at how tapering works in practice and how you can value your estate in practice. We’ll take the example of Nick, who dies in the current tax year. To keep life simple, we’ve given him a situation where he can’t possibly have any transferable, ordinary or residence nil-rate bands. He’s left a will and he is leaving in that will £100 000 to charity, which would be an exempt transfer for inheritance tax purposes and everything else is going to his son. And it seems he has done  a little bit of lifetime inheritance tax planning, because his estate does include some AIM shares, which would qualify for 100% business tax property relief. But he hasn’t made any gifts in the previous seven years, so we don’t have any failed– PETs to worry about. We add up everything that’s in his estate, which is how you do it before working out your threshold for tapering. A snapshot of all his assets on death gives him an estate of £2.29 million and that’s in the top table, table one and explains that you have to include all of the assets that fall into the estate on death. Obviously, in his case, yes, it’s in his own name, but it could be his share of joint assets if the situation was different. And you’ve also got the situation where if you’ve got a qualifying  interest in position in a trust, so that could commonly be where somebody has been left an interest in the property via a life tenant trust, that goes into their estate. You deduct allowable exemptions – I said allowable, because there are some anti-avoidance provisions around deductions of liabilities – but a common one would be, for example, a mortgage against the property, that would be repayable from the estate.

    And if you have been doing any other forms of inheritance tax planning you have to remember that you ignore all of your reliefs, all of your exemptions, so that’s a negative. And also ignore any lifetime gifting, which is where some positives can come in, which you will see later.

    So, if we then compare that to how you would value Nick’s estate when you are working out the inheritance tax estate issue, you will see that you will come up with a different answer. And if you only did this valuation, you could end up misleading yourself and your client. If you value Nick’s estate on the usual basis that we are all familiar with, it only comes down to only £1.89 million that inheritance tax is going to be payable on. And that is because you now take all of his assets in his estate on death, you deduct the allowable liabilities but you also take account of exempt transfers, in this case the transfer to charity, or very often that will be a transfer to a spouse and you also deduct in his case, his 100% business property relief on his AIM shares. Once you do that, you can get the full standard nil-rate band and his estate is liable to inheritance tax of £626,000.

    If we change things just a little bit and say that Nick now has some time to do some inheritance tax planning before he dies, because instead of dying in an accident, he has a terminal illness diagnosis, and decides that he will try and do a bit of inheritance tax planning. And shortly before dying, he makes a gift of £300,000 out of his cash ISA to his son. His son is going to inherit anyway, so giving him some money in advance seems like a sensible thing to do. And because he’s using his cash ISA, we don’t have to worry about, are there going to be any CGT disposal implications? There’s not going to be any complicated planning involved, so no legal fees and no disposal costs. So that was an ideal gift for his to make.

    When it comes to working out the inheritance tax implications of that, because we said he hasn’t made any gifts at all in the previous seven years, we know he’s got his £3,000 annual exemption for the current tax year, plus the carry-forward from the previous tax year. So, although we know he’s going to have a failed PET when he dies, the gift is £300,000, but after you apply those automatically-available £6,000 total exemptions, that gets his failed PET down to £294,000.

    So why would he bother to do this? Well, if we look at the value of his estate now, when we’re doing that snapshot on death for valuing it for taper relief, he’s got his estate now down to £1.99 million because you ignore that lifetime gift. So he now gets the benefit of the £100,000 residence nil-rate band because we know he’s leaving a property worth more than that to his direct descendant; his son. That failed PET does have implications, of course, for his ordinary nil-rate band. It reduces it from the standard £325,000 down to £31,000. But in the final table on this slide, I’ve shown how, when you apply the value of his estate on death and deduct the two nil-rate bands that are now available, you reduce his inheritance tax bill to £583,600. So that in this very particular set of circumstances, looking at the possible planning options available, you can see that he has saved £42,400 in inheritance tax; or rather, since he won’t be around, his son has benefitted from an inheritance tax saving of £42,400.

    So I’ll now pass you over to Jeremy to carry on with the next section.

    Jeremy Branton: Thanks Bernadette. Okay, so the ability for an individual’s personal representatives to claim any unused percentage of a residence nil-rate band from the first spouse or civil partner to die, is available where the second spouse died after the 5th April 2017. And the rules are similar to the transferrable nil-rate band, including the ability to claim an unused residence nil-rate band from more than one spouse up to an additional 100%. So it’s capped, just like the standard nil-rate band. It doesn’t matter when the first spouse died, or if their estate included only qualifying property. But tapering does add some complications, as we will see.

    It’s also worth pointing out that while the transferable residence nil-rate band isn’t available to cohabitees, they could each benefit individually if they left qualifying property to a direct descendant on their death.

    Okay, so as I said, it doesn’t matter when the first spouse died. And if that was before these new rules were introduced, then you’d have an available percentage of the first spouse’s residence nil-rate band based on a deemed figure of £100,000. So that’s just the figure that came in when the rules were introduced.

    It’s possible that if the estate was large, so if it was worth more than £2 million, tapering could apply and that would affect the percentage which could be transferred. But, in most cases, that’s probably unlikely.

    Okay, so what about if the first spouse died since 6th April 2017?  So the available percentage of the first spouse’s residence nil-rate band is based on the threshold figure for the tax year in which they die. Again, tapering could restrict that figure if we’ve got a high-value estate. And it could also be restricted if on their death they’re leaving property or a share of qualifying property to direct descendants. And then on the position when the second spouse dies, they have their own residence nil-rate band based on the tax year in which they die, plus the carried-forward percentage from the first spouse which is based on the residence nil-rate band when the second spouse dies. It’s a bit convoluted but we’ll have a look at an example. Tapering again could reduce the residence nil-rate band and that would be both the amount available from the first spouse and the second spouse. And again, it could be restricted if the value of property passing to direct descendants is less than the available residence nil-rate band. But downsizing could actually offer some additional allowance.

    Okay, so we’ve got an example. June and Luke were married, and Luke died in tax year 2015/16. His estate was worth £1.1 million and it went entirely to his spouse June. Luke didn’t make any lifetime gifts in the seven years before he died. He didn’t make any use of his residence nil-rate band, simply because it wasn’t available at that point. And he didn’t make any use of his standard £325,000 nil-rate band because he left his entire estate to his spouse, so the inter-spouse exemption applied and, as we said, he didn’t make any gifts.

    June dies in tax year 2018/19. She’s got an estate valued at £2.2 million and hasn’t actually made any changes to her will since the residence nil-rate band was introduced. She leaves a property worth £420,000 to their child and two nephews in equal shares. She hasn’t made any use of downsizing provisions. So what do we do?  Well, the first step is to calculate June’s residence nil-rate band. So that’s simply £125,000 from the tax year in which she dies, plus the bit transferred from Luke, which is another 100% of that figure, giving a total of £250,000. But remember, June’s estate is above the £2 million taper threshold, so we have to reduce it on a £1 for every £2 excess. So that equates to a reduction of £100,000, and that brings her residence nil-rate band figure down to £150,000. That allowance is further restricted as just a third of her property is passing to direct descendants. So that’s down to £140,000. So overall, June gets a standard nil-rate band including 100% from Luke of £650,000, two lots of £325,000. She also gets residence nil-rate band of £140,000. So overall, total nil-rate band figure: £790,000 to use against her estate. 

    It’s slightly more complicated if tapering applies on first death, or indeed if it applies on first and second death. So a second example, we’re looking at Moira and Lydia; civil partners. Moira dies in tax year 2018/19 with an estate valued at £2.2 million which all goes to Lydia. So Moira hasn’t made any use of the standard or residence nil-rate band. And the residence nil-rate band is £125,000 in the tax year she dies, 2018/19, so we apply tapering. Again, the estate is above the threshold, and again, it’s a reduction of £100,000, taking the residence nil-rate band down to just £25,000. And then what we do is apply that against the threshold for the year; £25,000 over £125,000, giving a figure of 20% which will be available for Lydia’s personal representatives to claim on her subsequent death.

    Okay, so we move it forward. Lydia dies in 2019/20 tax year. She’s got an estate worth £2.3 million including a £1.6 million property. That passes to their children. Residence nil-rate band is £150,000 in that tax year. So we calculate the transferrable residence nil-rate band at £150,000 plus the transferred bit, 20% of £150,000, giving a total of £180,000. That then gets tapered as again, the estate is above the threshold. This time it’s £300,000 divided by two, giving a reduction of £150,000 and a residence nil-rate band of £30,000. And then combined with standard nil-rate band gives a total of £680,000.

    Okay, I’m now just going to pass to Bernadette to cover the final section covering Will Trust planning.

    Bernadette Lewis: Thank you Jeremy. Just looking at the screen  Okay, so, when people make wills, the two things they are considering are: the tax efficiency of that will, and very often much more than that – who they want to inherit, and dealing with their possibly complicated family situations. The way they often combine those two considerations is by some form of will trust. So, the residence nil-rate band legislation specifically refers to four types of trust, which it says you can definitely use with the residence nil-rate band, if the beneficiary of one of these trusts is your direct descendant and you are leaving the property in that particular trust. There is also a possibility, where sometimes people use various forms of bare trust, which is where you appoint trustees, but the beneficiary becomes immediately and absolutely entitled to the trust property. In convoluted trust language, these are not settlements, because the beneficiaries are treated as inheriting directly. And it’s perfectly okay to use those with the residence nil-rate band.

    We have seen commentary saying that it’s not possible to take advantage of the residence nil-rate band if you’re using a discretionary trust. Probably not surprising because that kind of implication, direction, is in the basic guidance and not so basic guidance that HMRC has issued. But if you dig deeper into the inheritance tax manual and inheritance tax legislation. There are ways that you can definitely use discretionary trusts and take advantage of the residence nil-rate band. And I will explain that a bit later.

    So, as the legislation mentions some specific types of trusts - I thought it would be useful to explain roughly what those are. The first three of the trusts that it mentions aren’t commonly used at all. They are a disabled persons trust; the beneficiary has to be a disabled person as defined by the legislation and the trust provisions have to meet the criteria as defined in the legislation. So, simply the fact that someone is a disabled person is not enough in itself. A section 71a, ‘bereaved minor’s’ trust, can often be established by intestacy, also in a will, the child must become absolutely entitled by age 18. There are other conditions. And a section 71d, ‘18 to 25 trust’, is kind of the post 2006 version of an accumulation and maintenance trust. Various conditions apply, but it has got to be created by a will and the beneficiary has to absolutely inherit by no later than age 25.

    The next sort of trust that the legislation mentions is much more commonly used, and that is immediate post death interest trust, and the residence nil-rate band is available here where the qualifying interest in possession beneficiary inherits under the terms of that trust. And, in reality, these trusts are much more commonly used where the first beneficiary is the surviving spouse of the deceased. 

    These trusts can only be created on somebody’s death, so, immediate post death interest trusts can be created by a will or intestacy. They give at least one beneficiary a qualifying interest in possession, and they are often used because they get special inheritance tax treatment – i.e. you don’t have to worry about inheritance tax period and exit charges, unlike fully discretionary trusts. They tend to fall, these days, into two main categories, although there is a lot of overlap. There’s the classic life tenant trust, where you give someone the right to either live in the trust property or receive a trust income for life. The trust fund therefore falls into their inheritance tax estate. On their death, a bunch of remainder men inherit, and in Scotland those are life rent trusts with fiars who inherits on the life rent’s death. 

    These kinds of trusts have developed into much more flexible options these days, where you create an actual qualifying interest in possession by giving at least one beneficiary an immediate right to live in the trust property, or receive a trust income, but that right is revocable, because you also have potential beneficiaries of that trust, and the trustees have the discretionary power to appoint that trust fund to anybody in the discretionary beneficiary class. But because you’ve got a qualifying interest in possession beneficiary, the trust fund falls into their inheritance tax estate. And with both of these main categories, there is a lot of variation and overlap possible.

    So, how can you use a discretionary will trust and take advantage of the residence nil-rate band?  You look at the wider inheritance tax legislation in Inheritance Tax 1984, which the residence nil-rate band has added to. And in the Inheritance Tax Act, Section 144 says that if the trustees of a discretionary will trust make an appointment out of that trust within two years of death that is treated as if it was one of the original will provisions. That two year time limit might sound familiar and that is because it is kind of a parallel to Section 142, which is the rule about making deeds of variation and having them treated as if they were one of the original will trust provisions. 

    So, this can offer maximum flexibility. You can leave your property to a discretionary will trust. You can choose your potential beneficiaries, which will obviously give your trustees an idea of who you want to benefit. You can do a letter of wishes, which you can rewrite as many times as you like; it’s non-binding but mostly trustees will take strong notice of it. And you can indicate the balance in there, between who you want to inherit and how much residence nil-rate band planning matters to you. On your death, your executors or trustees can take account of the actual circumstances at that time and decide what’s appropriate to do. And because some of the HMRC inheritance tax guidance seems to imply that you can’t use discretionary will trusts, we’ve included a reference to the inheritance tax manual, which does confirm that it is perfectly possible and does work.

    So, if we look at how this could work in practice: somebody leaves their qualifying property to a discretionary will trust, the trustees look at the circumstances on death and say, ‘okay, yes, it would be possible to benefit from the residence nil-rate band’, and decide that the thing to do is to make an appointment of that property outright to the deceased’s direct descendant. They’d get that done within two years of death; that appointment is now treated as if it had been in the original will itself, so the residence nil-rate band is now available to the estate. You might have to make a reclaim for some overpaid inheritance tax, and to sort everything out. And this is a very simple example of how you can use a discretionary will trust. And if you are discussing this with legal advisers, they will be able to cover a range of possible planning opportunities that can work.

    So, I think one of the things that has probably come across in today’s session is that the residence nil-rate band does give you some opportunities, but, boy, does it give you some inheritance tax planning complications. We’ve now got to consider four different nil-rate band categories, all of which have their own effects on your planning opportunities. Ordinary nil-rate bands have been around forever, or so it seems. It’s available for lifetime gifting, you can use it on death, but it’s affected by lifetime gifts that you have made within seven years of death. Transferrable nil-rate band – I think we’ve now kind of got used to this, but it’s available on second death, depending on how much was unused on first death, and it’s available for spouses and civil partners. 

    Residence nil-rate band has come into effect for anybody who’s died from 6th April this year. Lots of conditions; as we’ve said, you’ve got to be leaving a qualifying property to direct descendants, there’s the tapering provisions, and – yes, we haven’t covered the downsizing provisions, because they are particularly horrible and everybody just goes, ‘Yeah, they’re horrible.’  We’ve been to conferences with solicitors and tax advisors who go white at the thought of the downsizing rules. On top of that, you’ve then got the transferability provisions where, as we’ve seen, in some cases you’re going to have a complicated interaction with the tapering rules as well.

    So, I suppose one of the things to think about when you’re working with clients is: how relevant is the residence nil-rate band to their situation? We will still have a lot of people where the ordinary nil-rate band plus transferable nil-rate band will be more than enough to cover their estate on death. With wealthier clients, you might be looking at their estate and just going, yeah, their estate is so large there’s no point even worrying about this. Or you might be doing some planning to try and get their estate down below £2 million, and solicitors will be talking about how to avoid transferring property from one spouse to another, so that the estate on second death is over £2 million. They’re referring to it as ‘bunching’ of estates and it means that the very old-fashioned nil-rate band trust on first death is coming back into fashion for some clients.

    It certainly gives pause for thought for cohabitees. Their inheritance tax position is definitely made worse by the introduction of the residence nil-rate band, because there are lots of situations where they’re not going to be able to benefit from it. If you’re leaving the property to the survivor on the first death, remember that that’s not an exempt transfer, so it’s going to use up your ordinary nil-rate band, and you can’t take advantage of the residence nil-rate band. You can’t transfer any unused residence nil-rate band or ordinary nil-rate band from the first person to die to the second person to die, so you might need to think about, do we leave property to children on first death, and if we do, what impact does that have on the survivor?

    Complications bring opportunities to work with other professional connections, and in this case we can see that there can be two-way benefits. You as advisors might well need help in understanding the will provisions and how that will affect the residence nil-rate band planning. But solicitors in conferences we’ve been to have been acknowledging that the financial implications of working out the value of someone’s estate, keeping records of when they disposed of properties etc., means that they’re going to have to get to grips with financial fact-finding and record-keeping. And of course that’s something where financial advisors have the expertise, because you’ve been doing that forever.

    Before we hand over to deal with some questions, just going to hand over to Paul to talk you through the further resources which we will make available to you.

    Paul Rutkowski: Great, thanks Bernadette, and thanks Jeremy. As Bernadette says, I’m going to talk through these resources just very briefly, but we will have questions straight after that. So, if there is anything you want to ask, please start typing your questions in now, and we can pick them up to the webcast and answer them afterwards. I can see we’ve already got quite a few questions in, so great that we’ve got engagement for this topic.

    We’ve listed here a bunch of resources that are going to help with this particular residence nil-rate band topic, so please do make use of those. As ever, we’ve got our other resources which are on our Extranet; our TechTalk flagship publication November edition is coming out shortly, so look out for that; and you can obviously still download the old versions of that, and old versions of the MasterClasses from the Extranet.

    One other thing is that we’re doing our very best to try and support advisors in the best way we can, and I want to just call out that we’re putting a lot of stuff out through Twitter and LinkedIn at the moment, and I think there could be some really great content for you to use. So, if you do have a Twitter or a LinkedIn account, do follow us and please do make use of the material, and give us feedback because we want to make it relevant to you and useful to you.

    Okay, so as I said, just a quick canter through the resources there, and I’ll hand over to Jeremy and Bernadette to start picking up the questions and answering them. Thanks very much.

    Jeremy Branton: Okay, thanks Paul. So, just to start, we had a question about the normal nil-rate band uplifting at 2021. Just to confirm that it’s actually – the standard nil-rate band is frozen until tax year 2021, after which it’s planned to rise in line with CPI, as the residence nil-rate band will and also as the taper threshold will, so all of those measures will be uplifted at the same time.

    Bernadette Lewis: We’ve had a question about whether step-grandchildren count as direct descendants. We believe they do; the problem with some of the definitions of ‘direct descendants’ in the legislation is that they seem to us to be a bit new and a bit loose and woolly, whereas there are longstanding definitions of who counts as a child, and they have been sorted out in court cases and in legislation. It will probably be one to ask your legal advisor who counts as a direct descendant in their view, to make absolutely certain. I think about my own family situation, my father remarried when I was young, but I don’t know whether his second wife now counts as my step-mother for the residence nil-rate band or not, because she had no involvement in my upbringing. So, it’s an interesting one; we think they will count, but check with your legal advisor.

    Jeremy Branton: Okay, we had another question just giving an example where a first spouse died in 2014, and a second spouse died in 2018; would the residence nil-rate band be available? Yes; it doesn’t matter when the first spouse died, and the second spouse, as long as they pass qualifying property to direct descendants, then up to two residence nil-rate bands would be available.

    Bernadette Lewis: One final question, and we will get back to some of the other questions we’ve had via email, because some of them are a little bit complicated to handle over the phone. One last question was: if you used a discretionary will trust, can you make an appointment outside of two years and benefit from the residence nil-rate band? And no, you can’t; it is a very strict time limit that the appointment does have to be made within two years of the death for it to be written back into the original will. And certainly, at the last tax conference we went to, the legal expert there was saying that some people are thinking of doing a two-year discretionary trust in their will, so that there is an automatic appointment to a direct descendant on the second anniversary of the date of death. So, if you’ve got trustees who are faffing around, to put it politely, then you will be able to benefit from the residence nil-rate band, but there is the opportunity to take a look at the situation during that two years to see what’s the best solution.

    And that’s it from us in relation to questions, so I’ll hand you back to Paul for a final –

    Paul Rutkowski: Great, thanks Bernadette. Thanks, everyone, for all the questions. As I said, we really do welcome them and it’s great to see people engaged. Thanks to Jeremy and Bernadette for taking us through today’s topic and answering all the questions. As Bernadette says, we will get back to you for the ones we didn’t have time for today.

    It’s clear that the residence nil-rate band is an important topic, so please do make use of all the available material from the financial planning team which I highlighted earlier. And if you need any more help, or any additional material, please do speak to your Scottish Widows contact about how the Scottish Widows proposition can help you with the ideas that Jeremy and Bernadette have covered today.

    It would also be great to get your feedback on what topics you’d like to see covered in future MasterClasses. At the end of today’s presentation, you’ll see a pop-up box on the screen in which we will ask you a question about future subject matter. And if you could take the time to respond to that, we’d be really, really grateful as it is great to get your feedback and input.

    As a reminder, and people asked about this on the questions, a recording of today’s session will be placed on the Scottish Widows advisor Extranet for future review, and indeed, if you wish to view any of the other recordings from previous MasterClasses which I highlighted earlier. So, that’s the slides and also the transcript you’ll get there.

    As a reminder, you will get CPD certificates issued to you after today. And finally, my thanks again to Jeremy and Bernadette for taking us through the slides today. Thank you all very much for joining, and that concludes today’s presentation. Thanks very much.

    Operator: Ladies and gentlemen, this concludes the Residence Nil-Rate Band MasterClass conference call. Thank you all for your participation today, you may now disconnect.

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