spouse to spouse ISA transfer on death. Impossible

[Deleted User]

My husband and I each had a fixed term isa with BM, due to mature in a year and at 5%. He died in february this year. BM will not allow a transfer of his isa to my isa and have now put his isa in an account paying 0.05%. They say that they cannot transfer as my account is fixed rate over fixed term. The only thing I can do is write a letter to them so they can send me a cheque

This just does does not sound correct. They certainly had no clue about the new legislation re spouse to spouse isa transfer

Are they right re his isa?

itsgazza_2

I'm no expert on this but I am sure that the ISA product they have put your spouses ISA funds in is an instant access product.

You can arrange for a new provider to transfer these funds into a new ISA paying a better rate.

Whatever you do do not accept a cheque as I believe this will be counted as a withdrawal of funds and will result in you losing the ISA entitlement.

What they have suggested is very bad advice and if it was me I would make an executive complaint about it.

Archi_Bald

It is logical that the money cannot be added to a fixed term ISA as fixed term ISAs generally only allow limited deposits.

They should, however, be able to open another ISA in your name and put all the money from your husband's ISA into it - which is probably what they did, in accordance with the guidance they have been given by HMRC (e.g. "Managers can insist on a new ISA being opened")

Once the money is in the instant access ISA in your name, you are free to transfer it to whoever you like.

kidmugsy

kittie wrote: »

They certainly had no clue about the new legislation re spouse to spouse isa transfer

It's not the ISA that is transferred it's that you get the right to make an additional subscription to your ISA over and above your normal annual subscription limit.

After all, for all they know your husband left the ISA money to someone else, not to you.

UPDATE: http://www.ftadviser.com/2015/03/13/investments/savings-and-isas/hmrc-to-allow-deceased-spouse-isa-transfers-EDsIFr1ngzURsyaWQfgKzI/article.html

[Deleted User]

They rang me afterwards and told me that I would have to withdraw the money and I had to write to them with a request. I asked if that would attract tax and they said no, it is an isa. So I wrote and requested a cheque. Doh, this is so shocking. I will ring on monday and tell them to ignore my letter request. Luckily I have a name to deal with

They have my security details plus they have seen the death certificate

They didn`t open another isa for the money, just a holding account attracting a rate of 0.05%. Thanks for the link KM. It looks as though I will be liable to pay tax now, unless BM take note of my phone call on monday, which I doubt. I am shocked that a large bs has no idea what to do. I appreciate your help

I have just been on their site and they have a complaints telephone number for anything urgent, so today I will use that to make sure that my request for a cheque is ignored. There is also an address re complaints. I will ask for an isa to be set up specifically. Frustratingly, I put the letter in the village post box yesterday evening to be picked up today

anamenottaken

Don't ISAs include the condition that the tax-free status ends at the date of death? So does not the tax-free status end when someone dies? Were BM going to allow the ISA to run its tax-free course until the end of its term?

ETA
Just checked one of my ISA T&C documents and it includes,
"In the event of the investor's death, interest will be paid tax-free up until the date of death. From the date of death until this account is closed, interest will be subject to the deduction of tax."

jimjames

Those conditions would be based on the old rules, now it's different as above.

[Deleted User]

I am just waiting until 8am now, in order to ring up. I am so confused now. If I get a cheque, does that mean that I will not have to declare the interest up to his death and in that case I will just go ahead and close the account.

noh

jimjames wrote: »

Those conditions would be based on the old rules, now it's different as above.

Those conditions are still correct under the new rules. See the link provided by kidmugsy above.
It is the ISA value at date of death inherited as an additional ISA allowance not the ISA itself that is passed to the spouse.
The deceased ISA terminates at the date of death and becomes liable to tax on interest received after that date.

Mattygroves2

jimjames wrote: »

Those conditions would be based on the old rules, now it's different as above.

The tax status on death doesn't change and it will still be included in the IHT calculation. What happens now is the surviving spouse gets an extra ISA allowance equal to the amount held by the deceased not a direct transfer.

So no tax on interest to death but tax in the estate on the interest from death to the point it is transferred to the beneficiary.

[Deleted User]

yes I understand now, there is some decent explanation on the saga site, which repeats what was written above. I could either take out an additional isa for the value of his isa or I could take the cash plus the tax free advantage up to the date of his death. I will only lose pennies if I take the cash, so I will let the letter from me stand.

I don`t think I will ring them now as it is only stress-making for me (and there is enough of that just now)

To say that I am shocked by the lack of knowledge and staff training for BM staff is an understatement. I could hear them asking each other when they didn`t know the answers to my questions and even then they got the answers wrong