MSE News: New rules mean your ISA won't die with you (if you have a spouse): Autumn S

noh

The way Hargreaves Lansdown interpret it indicates there will not be in-specie transfers, although they don't specifically say.
I still think we need to wait for the details.

http://www.hl.co.uk/news/articles/autumn-statement-changes-to-isas-pensions-and-annuities

VT82

Information that HMRC has given to the Building Societies Association clears a few things up:



HMRC have given the following additional information on the transfers of ISA balances on death, which will apply to deaths from 3 December 2014.

HMRC will issue a Bulletin tomorrow (4 Dec) but this will mainly be a reminder that managers cannot accept anything under the proposed change until 6 April.

Industry discussions are planned for next week to confirm details, but current thinking is:

· the limit will be the value of the ISA at date of death

· the survivor can access the limit even if they don't inherit the ISA (ie they can pay in cash from other savings)

· the surviving spouse/civil partner will need to prove their status

· reinstatement must be with the former manager ( so they can police sums being paid in) - but transfers can be made thereafter

· there will be a time limit for making payments

· [for discussion] piece meal sums can be paid subject to the overall limit (so manager has to keep a tally) - as opposed to a single lump sum.

kidmugsy

DiggerUK wrote: »

Not bad news for Digger Mansions, but not great news either.
Why not extend the principle to National Savings as well? That would make us happier.
..._

It already applies, in part; Index-Linked Savings Certificates can be inherited by a widow, keeping their terms and conditions intact. That's even better than the new ISA rules.

What other products do you have in mind?

kidmugsy

VT82 wrote: »

Information that HMRC has given to the Building Societies Association clears a few things up:




HMRC will issue a Bulletin tomorrow (4 Dec) but this will mainly be a reminder that managers cannot accept anything under the proposed change until 6 April.

Industry discussions are planned for next week to confirm details, but current thinking is:

· the limit will be the value of the ISA at date of death

· the survivor can access the limit even if they don't inherit the ISA (ie they can pay in cash from other savings)

Good grief, that's remarkable. Can they really mean that I can leave my ISA money to a Trust, while my widow can borrow from family and bung the money into ISAs?

VT82 wrote: »

· reinstatement must be with the former manager ( so they can police sums being paid in) - but transfers can be made thereafter

And that would be true for each of my managers, then? I hope the permitted time is long enough to allow the grief-stricken to clear their minds and deal with this stuff - though that's true of all financial business after a death. Still, it's all very interesting. This, added to the repeal of death tax for pensions, makes me suspect that there's little chance of a dramatic increase in Inheritance Tax thresholds: these piecemeal reforms will be, I'm guessing, a substitute (just as Brown's Transferable Nil Rate Band was). Personally I'd be inclined to reduce the threshold, close lots of the loopholes, but also substantially reduce the tax rate e.g. let the IHT threshold be equal to the income tax higher rate threshold, but let the IHT rate be 10% rather than 40%. Since no politician ever suggests such a policy, it may have merit.

Afterthought: since she can still generate tax-free income from the money, perhaps that would encourage the widow to hang on to it rather than gift it to younger generations, so leading eventually to higher Inheritance Tax payments. And similarly, it would be available to pay for "care".

Archi_Bald

kidmugsy wrote: »

Good grief, that's remarkable. Can they really mean that I can leave my ISA money to a Trust, while my widow can borrow from family and bung the money into ISAs?

the rules need to allow for people who do not wish to pass some or all of their estate to their legal spouse, even if this does not apply in your case.

kidmugsy wrote: »

And that would be true for each of my managers, then? I hope the permitted time is long enough to allow the grief-stricken to clear their minds and deal with this stuff - though that's true of all financial business after a death. Still, it's all very interesting. This, added to the repeal of death tax for pensions, makes me suspect that there's little chance of a dramatic increase in Inheritance Tax thresholds: these piecemeal reforms will be, I'm guessing, a substitute (just as Brown's Transferable Nil Rate Band was). Personally I'd be inclined to reduce the threshold, close lots of the loopholes, but also substantially reduce the tax rate e.g. let the IHT threshold be equal to the income tax higher rate threshold, but let the IHT rate be 10% rather than 40%. Since no politician ever suggests such a policy, it may have merit.

Afterthought: since she can still generate tax-free income from the money, perhaps that would encourage the widow to hang on to it rather than gift it to younger generations, so leading eventually to higher Inheritance Tax payments. And similarly, it would be available to pay for "care".

Brighten up - things for many surviving spouses are already better than they were yesterday. You could work yourself into an early grave if you can't see any upsides. Mind you, seems you are already planning to depart before your wife as you make it sound the benefits would only be for widows.

badger09

VT82 wrote: »

Information that HMRC has given to the Building Societies Association clears a few things up:



HMRC have given the following additional information on the transfers of ISA balances on death, which will apply to deaths from 3 December 2014.

HMRC will issue a Bulletin tomorrow (4 Dec) but this will mainly be a reminder that managers cannot accept anything under the proposed change until 6 April.

Industry discussions are planned for next week to confirm details, but current thinking is:

· the limit will be the value of the ISA at date of death

· the survivor can access the limit even if they don't inherit the ISA (ie they can pay in cash from other savings)

· the surviving spouse/civil partner will need to prove their status

· reinstatement must be with the former manager ( so they can police sums being paid in) - but transfers can be made thereafter

· there will be a time limit for making payments

· [for discussion] piece meal sums can be paid subject to the overall limit (so manager has to keep a tally) - as opposed to a single lump sum.

Well that is very good news for my husband and me

Archi_Bald wrote: »

the rules need to allow for people who do not wish to pass some or all of their estate to their legal spouse, even if this does not apply in your case.

Indeed, though I hadn't expected it.

Before people jump in with suggestions that we can't be committed to our marriage if we don't share all our finances...

It is 2nd marriage for both of us and we each have a son who will inherit from their respective parent. It works for us

le_loup

No.
It would be far easier for the bereaved if the investment continued in the survivors name. This plan seems fine for cash ISAs but for S&S, it means that the survivor has to learn about and understand investments in their year of grief!
As if ISAs for the non-OCDs amongst us were not complicated enough.
Not what I was hoping for at all.

Archi_Bald

le_loup wrote: »

This plan seems fine for cash ISAs but for S&S, it means that the survivor has to learn about and understand investments in their year of grief!

Errrrrm.....no, you do not have to wait until your partner dies to learn and understand about investments.

le_loup

Don't be crass man.
I fully understand ... my wife is a different person who has no interest in investments and would be as lost as some of the other posters on this site.
You may have a young wife with a PHD and a fascination with this arcane art, I don't!

Archi_Bald

le_loup wrote: »

Don't be crass man.
I fully understand ... my wife is a different person who has no interest in investments and would be as lost as some of the other posters on this site.
You may have a young wife with a PHD and a fascination with this arcane art, I don't!

I do understand that many people - male as well as females, old as well as young, poor as well as rich etc etc - don't understand, or do mis-understand, investments. And that they for their own reasons never want to make an effort to understand them.

But I am sorry, you have lost me entirely with your suggestions that it would take a certain sort of female to understand what you call an arcane art (not that I understand the arcane art bit).

Any able-minded male/female/old/young person can understand it if they want to, at any time in their life. And they should get themselves informed about savings and investments, not least as all males and females should expect to get old at some stage and to need an income during their retirement, which for many of us these days joyfully lasts for decades and none of us want to keep working forever (even if there were jobs for all forever). It seems quite silly not to get informed before some serious emotional turmoil, such as the loss of a life partner, happens.

If somebody doesn't want to get into all the details themselves, they can buy professional help from IFAs. As before, people don't have to wait until their partner dies before they consult with an IFA if they feel they need the support of an expert.

I can see just about no reason at all to criticise the new ISA inheritance rules as they are an improvement to many surviving spouses. And I can see no reason why it needed these new ISA rules for people of all ages and genders to get themselves informed about investments in general, and ISAs in particular.

le_loup wrote: »

As if ISAs for the non-OCDs amongst us were not complicated enough.

ISAs are only complicated if you make them so.