What happens to my ISA if I die?When you pass away, your ISA can be passed on to any beneficiaries named in your will, or if you don’t have a will, through the laws of intestacy. If there is not a will in place, and no one claims the inheritance tax allowance, your ISA provider will close your account 3 years and 1 day after you die. Either way, your ISA investments will be administered to your estate and be liable for Inheritance Tax.
What is an inheritance ISA allowance?Inheritance ISA allowance, otherwise known as an Additional Permitted Subscription (APS), is an addition to the annual ISA allowance you already receive. It means that you can benefit from paying less tax on your savings. This allowance doesn’t mean you will automatically inherit the sum of money in your partner’s ISA, but you will inherit an additional, one off extra ISA allowance. The amount of the extra allowance will depend on, and be equal to, the value of your partner’s ISA. Example: if your partner has £10,000 saved in an ISA, and they pass away, you will be automatically entitled to save an additional £10,000 on top of your £20,000 ISA allowance.
How is inheritance ISA calculated?Inheritance ISA is calculated by the amount that your partner has stored in their ISA(s). Any ISA in your partner’s name – be that cash ISAs or stocks and shares ISAs – will count towards the sum of your inheritance ISA allowance. If you choose to close the ISA upon your spouse’s death, you can inherit an ISA allowance equal to the value of their account at the date of closer. However, as of 5th April 2018, you have the option to let your spouse’s ISA remain open as a ‘continuing ISA’, whereby the account can continue earning interest. You can then inherit an ISA allowance at the value of your spouse’s ISA once you decide to close it.
What is a continuing ISA?If an ISA investor passes away, and the account is reclassified as a continuing ISA by a spouse, it will continue to benefit from tax advantages. No money can be paid into the ISA after the time of death, but any money already present will remain tax-free.
What information is required to receive an inheritance ISA allowance?Before you can benefit from an inheritance ISA allowance, you must provide the following information to your bank, building society, or ISA provider within 3 years of your spouse’s death:
- Officially recognised evidence of marriage of civil partnership
- Your partner’s date of birth
- Your partner’s death certificate
- Proof of your spouse’s address at the time they passed away
- Both yours and your partner’s National Insurance number