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Find out more'Do my son and daughter-in-law count as direct descendants?'
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I understand that there is an extra inheritance tax allowance if I leave my property to my direct descendants.
Can I include both my son and my daughter-in-law in this category?
Chris from Newcastle-under-Lyme
'How HMRC defines family can make a big difference'
Mike Croxford, Which? Money expert, says...
Yes, your son and daughter-in-law both fit the requirements for the residence nil-rate band (RNRB) – the extra allowance to which you refer.
This increases the value of your estate that can be inherited tax-free by £175,000 if the family home is inherited by a direct descendant.
Combined with the £325,000 nil-rate band, it means that a couple can pass on an estate worth up to £1m free of tax.
Stepchildren and foster children are also treated as direct descendants
The term ‘direct descendant’ covers not only children and grandchildren, but also the spouse or civil partner of a lineal descendant of the person who has died.
If the lineal descendant has died, their surviving spouse or civil partner will still be considered a direct descendant as long as they haven’t re-married or entered into a new civil partnership.
Stepchildren and foster children are also treated as direct descendants.
HMRC’s rules make clear that even if a marriage that resulted in stepchildren were to end in divorce, those children will remain direct descendants and can benefit from the RNRB in the future.
Finally, a word of warning: HMRC gives no status to unmarried couples. Only a marriage or civil partnership is recognised when it decides who counts as direct descendants.
- Find out more: Inheritance tax on property
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