Inheriting an ISA from your spouse

StevieD54

Following my Dads death in January, as his spouse my Mum can inherit an ISA allowance equivalent to the value of his holdings a.t.o.d.  It’s a nice problem to have, but putting the whole allowance in one account will greatly exceed the £85k per bank safety net.  Do we know if this spousal inheritance ISA allowance can be split into more than one account, i.e. with different banks?

masonic

The additional permitted subscriptions must be used with a single provider. However, once used, the ISA can then be divided up via partial transfers. This might require an initial transfer to an easy access ISA that will support partial transfers.

Keep_pedalling

If we are talking about putting it a S&S ISA with a main provider I would not worry about going over £85k as even if the provider goes bust you investments are not lost.

StevieD54

The government webpage on this doesn’t exactly make it clear what the rules are when the deceased held multiple ISA’s, as my father did. He held 4 x ISA’s that totalled £180k, and my Mum has inherited cash funds of £140k, so in theory could put all of that into one ISA.  As far as I can gather, I think the whole allowance take-up has to be a one-off event, transferred into one ISA with one provider, correct?  But I’m unsure about this, e.g. could Mum have 4 x ‘inherited’ ISA’s?  I don’t think so.

If it is just one provider, the first issue is finding a provider who will accept that whole £140k allowance, rather than be limited to the value of the ISA that Dad held with them.  For instance, he had an ISA with the Nationwide, but a glance at their rules suggest they will only accept an inheritance ISA equal to the value of the ISA he held with them. 

However, we would really want to spread that £140k around to avoid breaching the £85k safety net by such a large margin.  So as masonic points out, I guess the question then is: which provider will allow partial transfers out after the inheritance ISA has been created?

I asked in my local YBS branch and the girl didn’t think the ISA, once created, could be transferred out at all, either wholly or partially.  Surely that is wrong though, otherwise it would be stuck in there forever!  I asked: if we put the £140k into your Easy Access Cash ISA say, can we then transfer it out in chunks? (e.g. to other providers offering better interest rates). She was dubious and thought not, which is what is puzzling me.

There’s a few questions here I know, different banks have different rules it seems, but to say it’s a grey area is an understatement!

Newly_retired

Bank staff do not always know the rules!
My late husband's ISA was a small one. The Bereavement Team told me I could open a new ISA with them or another bank to transfer his to, in my name, even if I don't end up being entitled to the whole amount. I could do this myself online, and I transfered the ISA over, but they told me I needed to go into a branch to sign forms to ensure its status. When I did this, the guy I spoke to had not heard of the APS ( Additional Personal Subscription, I think ) but went into the back to find out. He brought me the form and helped me with it, ( after an argument with the door staff about not having brought my debit card ) When we got to the end, he thanked me for helping him to learn something new!

Sorry I haven't answwered your question.
It seems to me if it is all in one ISA, you need to transfer it in one go to an easy access ISA, then split it and transfer in smaller chunks to other banks to stay under the £85K limit. 

Albermarle

There’s a few questions here I know, different banks have different rules it seems, but to say it’s a grey area is an understatement!

Be aware that junior bank and call centre staff can have low knowledge of anything that is not mainstream, and even then they still are sometimes misinformed.

masonic

StevieD54 said:

The government webpage on this doesn’t exactly make it clear what the rules are when the deceased held multiple ISA’s, as my father did. He held 4 x ISA’s that totalled £180k, and my Mum has inherited cash funds of £140k, so in theory could put all of that into one ISA.  As far as I can gather, I think the whole allowance take-up has to be a one-off event, transferred into one ISA with one provider, correct?  But I’m unsure about this, e.g. could Mum have 4 x ‘inherited’ ISA’s?  I don’t think so.

If the APS is already split between several providers, I don't believe there is any requirement to bring them together. What you cannot do is start using an APS with one provider and then transfer the unused allowance to another. Only a completely unused APS can be transferred.

If you are lucky, all four providers will offer an APS ISA with themselves, and each allowance will be less than £85k. More likely, some providers will not accept APS subscriptions and your mother will be forced to move the allowance elsewhere Skipton BS is an example of an ISA provider that will allow you to use an APS from another provider: https://www.skipton.co.uk/savings/savings-hub/additional-permitted-subscriptions as does Santander: https://www.santander.co.uk/personal/savings-and-investments/isas/inheritance-isa and the West Brom: https://www.westbrom.co.uk/savings/isas/additional-permitted-subscriptions-isa so that should give you enough to cover all four.

Once an APS has been used, an ISA manager cannot prevent you from transferring it elsewhere. They must in the ISA rules permit this. Partial transfers can be refused, but there are enough places to which you can transfer the full ISA that would allow onward partial transfers for it to be a non-issue.

RobinhoodSavings

An easy way to get around other providers not accepting APS ISA funds is to move the funds into an ordinary ISA account like an instant access ISA with the same provider. Then request the transfer from the instant access ISA to the new provider. 

xylophone

https://www.which.co.uk/money/savings-and-isas/isas/cash-isas/can-you-inherit-an-isa-aytHW5W6vWrK