Inheriting an Isa

Mtb60-72

I'm having problems understanding the new rules regarding inheriting an ISA. Sadly my mum passed away recently and dad and I are trying to sort out the finances. From reading the small amount of info on the Gov. Websites I thought that dad would get a one-off extra allowance to the value of mum's ISAs. So say mums left £50k in ISAs - dad would be able to invest £65,250 during 2015/16. The original ISAs that were in mums name would be cashed and the money re-invested by dad into ISAs in his name (dad being the only beneficiary). However I've just been looking at the Coventry BS website and they are offering 'Additional Allowance ISAs' but it seems to be saying that the deceased spouse had to have held ISAs with them and that they can't be moved to another provider? Does this mean that mums ISAs have to remain with the bank they were with when she died (Nationwide and C & G)? Interestingly when we spoke to Lloyds re the C & G ISA they told us it had to be cashed and put in a savings account. I asked them to leave it for the time being as I didn't want dad to lose the ISA wrapping and was told they didn't actually know how the new rule worked! We expect probate to be granted any day so have to start making decisions. Has anyone had any experience of this or can advise me, Many Thanks,

talexuser

rules explained here
http://moneyfacts.co.uk/news/isas/inheriting-isas--the-new-rules/

colsten

Mtb60-72 wrote: »

However I've just been looking at the Coventry BS website and they are offering 'Additional Allowance ISAs' but it seems to be saying that the deceased spouse had to have held ISAs with them and that they can't be moved to another provider? Does this mean that mums ISAs have to remain with the bank they were with when she died (Nationwide and C & G)?

Easiest (and may be only possible option) would be to transfer your mum's ISAs to your dad at the same ISA provider. He may have to open new ISAs with these providers for this purpose. Once the ISAs are in your dad's name, he can transfers them to wherever he likes, subject to the receiving ISA provider allowing transfers in.

Mtb60-72

Thanks for the link -
I read this and thought I had it sorted until I started looking at the best rates for cash ISAs and found that Coventry BS are offering 2.4% for a fixed term but Additonal Allowance ISA (inherited) only pay 2.1% and have this Note -
"After you've opened an Additional Allowance ISA and made your first deposit, you can transfer your savings to another provider but you can't transfer your allowance - so if you close this ISA after the cancellation period (see note 7 in the Account summary), you can't re-open another ISA for your Coventry additional allowance".
What do they mean by "you can transfer your savings.. But you can't transfer your allowance"
Why should they pay a lower interest rate just because the ISA was inherited?
I'm prob not reading it right but it seems at odds with the Moneyfacts info?

colsten

Mtb60-72 wrote: »

What do they mean by "you can transfer your savings.. But you can't transfer your allowance"

totally baffled by that - best if you ask them what they mean by it. I think they might be saying that you cannot transfer the ISA elsewhere before it has been put into your name, which would make sense.

Mtb60-72 wrote: »

Why should they pay a lower interest rate just because the ISA was inherited?

because they can, and it probably makes financial sense for them. There is no law that says inherited ISAs must receive the best interest rate. Remember, once the funds are in an ISA in your name, you can transfer it to wherever you like, subject of course to the transfer terms

susansday

The guide is very helpful and much clearer than anything i could find on HMRC website. My husband has a large holding in ISAs but a big percentage will be left to his daughter. Does this mean I can only claim the additional allowance if I am the named beneficiary?

xylophone

The guide is very helpful and much clearer than anything i could find on HMRC website. My husband has a large holding in ISAs but a big percentage will be left to his daughter. Does this mean I can only claim the additional allowance if I am the named beneficiary?

See http://www.which.co.uk/money/savings-and-investments/guides/what-happens-to-my-isa-savings-when-i-die/


"How are Isa allowances inherited?

Anyone whose spouse or civil partner died on or after 3rd December 2014 is eligible for a one-off additional Isa allowance equivalent to the value of the deceased person's Isa at the time of death.

This is referred to as an 'additional permitted subscription,' or APS allowance.

Say, for example, that you'd saved up £50,000 in your Isa when you die. Your spouse will be able to make an additional contribution to their Isa of up to £50,000, in addition to their own Isa allowance for the year (£15,240 in the 2015/16 tax year).

This allowance is regardless of what's in your will. Which means that even if the money is left for someone else to inherit, such as your son or daughter, your partner is still entitled to an increased allowance equivalent to the value of your Isa assets on the day of death.

So if you left £50,000 worth of Isa assets to your child, your partner would still be entitled to an increased Isa allowance of £50,000, although they would be using their own money to fund it."