ISA Transfer to Spouse on Death

Shylock_249

I found this on a web site regarding ISAs

 

“Given that the money left in the account of a deceased partner will cease to earn interest from the date of the partner's death, it's great to be aware that you can move it into your account immediately. You do not have to wait for probate to come though. You do not need to lose out on your tax-free allowance”

 

Could someone please advise me if this is true?

 

I’ve phoned two financial institutions, one a building society, the other Aegon the S&Ss people and both said they would need probate for the ISAs. This contradicts the quote above. Any advice please?

 

Where me and my wife had separate bank accounts in our own name we’ve started contacting banks/building societies to have them placed in joint names, that way if one of us dies the other wouldn’t need probate to access the account.  One or the other of us would just need to show the death certificate.  Any advice on this please?

Thanks

xylophone

ISAs are sole accounts.

It is up to the individual institution as to whether they will release funds in any  kind of sole account without a Grant of Probate.

The funds in joint accounts fall under the control of the surviving owner.

However, were probate being sought for the deceased, his share of the joint account would need to be declared on the relevant forms.

With regard to spouse inheritance of ISA allowance (rather than necessarily the  funds in the ISA) , see
https://www.gov.uk/individual-savings-accounts/inheriting-an-isa-from-your-spouse-civil-partner

Shylock_249

xylophone said:

ISAs are sole accounts.

It is up to the individual institution as to whether they will release funds in any  kind of sole account without a Grant of Probate.

The funds in joint accounts fall under the control of the surviving owner.

However, were probate being sought for the deceased, his share of the joint account would need to be declared on the relevant forms.

With regard to spouse inheritance of ISA allowance (rather than necessarily the  funds in the ISA) , see
https://www.gov.uk/individual-savings-accounts/inheriting-an-isa-from-your-spouse-civil-partner

Thank you, very helpful.  It might be a silly question but I assume "If your spouse or civil partner dies you can inherit their ISA allowance" includes ISAs taken out in previous years and are still in the ISA wrapper?  Currently we have 4 each in separate building societies and one each in S&S ISAs.
Thanks again.

Linton

Shylock_249 said:

xylophone said:

ISAs are sole accounts.

It is up to the individual institution as to whether they will release funds in any  kind of sole account without a Grant of Probate.

The funds in joint accounts fall under the control of the surviving owner.

However, were probate being sought for the deceased, his share of the joint account would need to be declared on the relevant forms.

With regard to spouse inheritance of ISA allowance (rather than necessarily the  funds in the ISA) , see
https://www.gov.uk/individual-savings-accounts/inheriting-an-isa-from-your-spouse-civil-partner

Thank you, very helpful.  It might be a silly question but I assume "If your spouse or civil partner dies you can inherit their ISA allowance" includes ISAs taken out in previous years and are still in the ISA wrapper?  Currently we have 4 each in separate building societies and one each in S&S ISAs.
Thanks again.

Yes, all old ISAs retain their ISA status when inherited by a spouse.

TW1234

Technically, the surviving spouse is given an additional ISA allowance equal to the value of the relevant ISAs that they are acquiring, and this enables them to be established in the spouse's name whilst retaining the ISA wrapper benefits.

TW1234

NB  the ISA set up using the special ISA allowance does not have to be with the same provider as the original provider, There may be an opportunity to consolidate several to obtain the best interest rate.

Shylock_249

TW1234 said:

NB  the ISA set up using the special ISA allowance does not have to be with the same provider as the original provider, There may be an opportunity to consolidate several to obtain the best interest rate.

Thank you.  In practical terms how would I achieve this?

TW1234

The info given in your OP is not quite correct, as in the case of ISAs, although the value of the ISA for IHT purposes is that at death, the ISA does earn interest and this  is accumulated tax free until the account is closed by the executor.(NB the interest rate might not be the same as the original rate)The executor needs to take care that that interest is not taxed within the estate administration tax calculations and should keep a clear record.

The ISA provider should be asked to provide a certificate showing the position (ie Value of ISA at death, interest added tax free and the total subsequently paid to the estate.) This is the amount that is counted as the special additional ISA allowance.

HMRC should be notified of the value of the available additional ISA allowance.
The total allowance can be calculated by addition from all the deceased's ISAs.

Within 3 years, the distributed payments from the estate to the surviving spouse can be invested in one or more ISAs up to the value of the calculated allowance.
The new ISA provider will need to be advised of the special allowance; (as this is not a common transaction, the staff may need to receive some prompting,training or advice!)
Thus the spouse could receive "cash" from the ISAs outside of an ISA wrapper and then chose a suitable time to place it into a new ISA.

NB The additional allowance is additional to the spouse's normal ISA allowance for the year, so offering an opportunity to place significant amounts into an ISA wrap.

crikaus

It would depend on the institution and the value of the ISA, generally speaking if it's over 50K then yes you will need probate to transfer the ISA into the surviving spouses name, though it varies from institution, if it's an ISA than the new account will also be an ISA in the surviving persons name and therefore no tax to pay, you can also do the same with a stocks and shares ISA, you can transfer the shares/funds in specie (or cash) upto the value of the APS

I should add this is the case if the ISA is left to the surviving spouse, if it is not then the surviving spouse can use their own cash to open an ISA upto the value of the deceased's APS

Shylock_249

TW1234 said:

The executor needs to take care that that interest is not taxed within the estate administration tax calculations and should keep a clear record.

Thank you.  Sorry I'm a bit of a thick-oh. Is this scenario correct (I'm the spouse, executor and sole beneficiary): I report the death to the ISA Provider, they give me the value of the ISA at death figure A and the account still accrues interest figure B. I apply for probate, I'm given an HMRC form to declare value of the estate, I fill out and return it declaring figure A. HMRC (hopefully) state there is no IHT to pay because I'm the spouse.  I inform the probate office of HMRC's decision, probate office send me probate certificates, I send one to each ISA provider, contact the provider stating I either want to withdraw the money, keep it invested etc?

Have I read your (kindly) advice correctly, that I could ask to have the money transferred to a non ISA bank account (current account) with a different provider and then I could choose a different provider

TW1234 said:

HMRC should be notified of the value of the available additional ISA allowance.
The total allowance can be calculated by addition from all the deceased's ISAs.

Would I just send them the certificates provided by the ISA providers?  Would they put a marker on my HMRC account to that effect?

Would the easiest course be to just ask the ISA providers to keep the ISA within their bank and transfer it to the surviving spouse in an immediate access ISA and then worry about finding the best resting place at a later date?

When I spoke to Aegon regarding S&S ISA, they stated they would need probate and when it was received they could transfer (not sure if that was the correct terminology) accounts to the spouse.

If one has both cash and S&Ss ISAs and the spouse decided to "cash-in" the S&Ss ISA and place the money in a current account would this be classed as Additional ISA Allowance for cash purposes or would the money have to be used to purchase another S&Ss ISA?
Thank you

Shylock_249

crikaus said:

It would depend on the institution and the value of the ISA, generally speaking if it's over 50K then yes you will need probate to transfer the ISA into the surviving spouses name, though it varies from institution, if it's an ISA than the new account will also be an ISA in the surviving persons name and therefore no tax to pay, you can also do the same with a stocks and shares ISA, you can transfer the shares/funds in specie (or cash) upto the value of the APS

I should add this is the case if the ISA is left to the surviving spouse, if it is not then the surviving spouse can use their own cash to open an ISA upto the value of the deceased's APS

Thank you.  On death is it  possible to transfer the S&Ss ISA to a cash ISA?