Death of Cash ISA holder

happybagger

Looked back a few pages but couldn't see this mentioned.

I'm currently dealing with the estates of two relatives and still awaiting probate for both.
I decided to leave the cash ISAs until the last so that they continue to earn what's a good rate tax free, having read that they can continue doing so as a "continuing ISA account" for up to 3 years and a day, or when an executor closes it or the estate is finalised.

https://www.gov.uk/individual-savings-accounts/if-you-die

However, when looking at Furness BS website terms for their ISA, which I was thinking of opening for myself, unrelated to the above, it states:

"Death of the investor

Interest earned on a Cash ISA after the date of death of the investor is not exempt from tax. However, there is no loss of exemption on interest arising before the date of death."

https://www.furnessbs.co.uk/savings/products/product-overview/3-year-isa

I presume Furness are incorrect then?

isasmurf

Sorry for your loss. 

It looks like Furness haven't updated their documentation from when the tax law was changed a few years ago. What they say is true only where the account holder died on or before 5 April 2018. 

Where an ISA holder dies after 5 April 2018, during the administration of their estate their ISA can continue to enjoy the tax exempt benefits as a 'continuing account of a deceased investor'. 

See HMRC ISA Managers Guidance Notes - Death of an Investor 

Keep_pedalling

As executor you have a responsibility to distribute the estate in reasonable time. Usually cash is the first to be dealt with as some may be needed to pay IHT, some will be required for the running costs of any property held in the estate and the rest can be distributed to the beneficiaries as interim payments.

Unless you are also the sole beneficiary you should make sure the beneficiaries receive their legacies ASAP especially anyone who has been left a set sum of money as you would be disadvantaging them in favour of the residual beneficiaries who would be the ones to get any interest earned.

happybagger

Thanks. I assume you have been looking at my posts given the response to my other question posted yesterday (this thread is 5 months old)

I didn't want to widen the discussion but I will now given this.

There is no "unreasonable delay" given when probate was granted on both persons. Besides, the wills do in fact contain specific provision for me to delay if necessary, Nobody has been left a set amount so there is nobody being disadvantaged. All beneficiaries will receive the same share of interest earned until closure of the accounts. And neither estate will give rise to an IHT liability.

As I mentioned in the other thread, all beneficiaries are aware of the issue and the possibility of an interim distribution will be considered again in the New Year.

Keep_pedalling

Thanks for the clarification. If the interest you are getting on the ISA is low then you only have a couple of options. Close the account and shift the money into a high interest non ISA account, or close the account and distribute it to the beneficiaries. The problem with the first option is that the estate does not get a personal allowance so all of the income is taxable so the beneficiaries could almost certainly achieve a better return in their own accounts. 

If the interest is a reasonable rate then just leave it where it is for simplicity.