Rights when ISA holder dies

in.need.of.help...please

Hi all...never posted on here before, but have found it useful to read in the past, so hoping someone out there can help me!

Basically, following the death of my Dad in 2011, my Mum became sole beneficiary to all of his assets, which included an ISA, at the time held with Nationwide. Following all the normal protocol this was then transferred into my Mum's name still as an ISA.

After realising the interest was next to nothing we then opted to transfer this to Halifax for a better deal, which we were told would not constitute a new subscription - as it was already an ISA, so a straight forward transfer.

Later in the same tax year, once we'd got more settled we opened another ISA in my Mum's name - this time with Nationwide (no other ISA transactions occurred in the same tax yr).

Anyway she has just received a letter from HMRC stating that her ISA allowance was exceeded for that tax year, and quoting the two ISA's above - we immediately returned to Halifax thinking this was simply an admin error - who confirmed it was a transfer of an existing ISA, not a new one, but HMRC are having none of it - stating that the ISA dies when the person does, and it then becomes a new subscription.

So they've told Nationwide to void the second ISA, we're awaiting there response.

I'm very confused, seem to be getting conflicting messages from both N'wide / Halifax and HMRC, and now I don't know what my Mum's rights are over this.

So things I need to know
1) Is this right about it being a new subscription, when a person dies and asset is transferred?
2) If the second ISA is voided, will my Mum loose interest / face penalties etc - if so is there anything we can argue, as we acted on the advice given at the time?

Sorry this is so wordy, any help is much appreciated!

innovate

in.need.of.help...please wrote: »

1) Is this right about it being a new subscription, when a person dies and asset is transferred?
2) If the second ISA is voided, will my Mum loose interest / face penalties etc - if so is there anything we can argue, as we acted on the advice given at the time?

ISAs are individual and end with a person's death. The money goes into the estate. http://www.hmrc.gov.uk/isa/faqs.htm#13

Your mum does have an ISA if I understand correctly, so she is getting what she legally has a right to.

Not sure you can ask for any compensation from the bank but you can try if he can prove she got wrong advice. Difficult to do unless she has something in writing.

le_loup

The transfer of your fathers ISA would have been done as a new ISA in your mothers name. Look at the paperwork. ISAs cannot be transferred to another person.

Goldenyears

This is a strange one. I have closed my father's Nationwide ISA after he died. Following production of death certificate etc at a branch a cheque was posted to me about 2 weeks later with the appropriate tax deducted. There was no way I could have effected any "transfer" in branch.

david78

The ISA wrapper will have been removed and the Savings account transferred to your mum. Have you asked Nationwide to explain what they have done. They are generally very helpful.