ISAs after death

PaulW63

I currently have around £110k in cash ISAs increasing every month with compounding interest. 

I have no plans to dip into this money until I retire in around 3 years time. I also intend to max out each yearly ISA allowance up until then, so I should have in the region of £180k-£190k in tax free ISA savings (if Rachel Reeves doesn’t scupper it for us ISA cash savers!)

What happens to this money / tax wrapper, if I was to die?

I understand that my wife will get ‘the money’, but will she also “inherit” the tax free advantages that I’ve built up with this money pot over the years, or does she just get the money and all the ongoing tax implications that goes with a larger sum of cash. 

Thank you for any replies!

Mark_d

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

PaulW63

Mark_d said:

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

Thank you….
Just so I understand then, it says;

If you die

Your ISA will end when either:

• your executor closes it
• the administration of your estate is completed

Otherwise, your ISA provider will close your ISA 3 years and 1 day after you die.

There will be no Income Tax or Capital Gains Tax to pay up to that date, but ISA investments will form part of your estate for Inheritance Tax purposes.

So where it says “your ISA provider will close the ISA 3 years and 1 day after you die”…. Would my wife receive the interest tax free on the full amount for 3 years after I die?

Runner_Duck

You need to scroll to the next section of the page provided above.  The ISA has to be declared and any IHT paid but a spouse can inherit your ISA

Inheriting an ISA from your spouse or civil partner

If your spouse or civil partner dies you can inherit their ISA allowance.

As well as your normal ISA allowance you can add a tax-free amount up to either:

• the value they held in their ISA when they died
• the value of their ISA when it’s closed

Contact your ISA provider or the provider of your spouse or civil partner’s ISA for details.

PaulW63

Runner_Duck said:

You need to scroll to the next section of the page provided above.  The ISA has to be declared and any IHT paid but a spouse can inherit your ISA

Inheriting an ISA from your spouse or civil partner

If your spouse or civil partner dies you can inherit their ISA allowance.

As well as your normal ISA allowance you can add a tax-free amount up to either:

• the value they held in their ISA when they died
• the value of their ISA when it’s closed

Contact your ISA provider or the provider of your spouse or civil partner’s ISA for details.

Fabulous. Thank you 👍👍👍

Newly_retired

A spouse inherits the Additional Permitted Subscription allowance, but not necessarily the money, if s/he is not entitled to it from the estate or intestacy rules.
So if for example the estate was left to wife, brother , sister, in equal shares, and if the wife's share did not amount to the full total in the ISA, she would not be able to have all the money.

NanookOfTheNorth

With this 3 year and 1 day after death, is that just a timeframe for the spouse to inherit the APS?  Then once inherited the APS remains with the spouse indefinately?  

So say the deceased husband/wife dies with £100k in an ISA, when the APS is transferred to the spouse, does that £100k ISA (APS) remain with the spouse indefinately (ie after the 3 year 1 day after death)?

Runner_Duck

Indefinitely I think but this was not an issue when dealing with my Mum's estate so I did not research it in detail.

badger09

NanookOfTheNorth said:

With this 3 year and 1 day after death, is that just a timeframe for the spouse to inherit the APS?  Then once inherited the APS remains with the spouse indefinately?  

So say the deceased husband/wife dies with £100k in an ISA, when the APS is transferred to the spouse, does that £100k ISA (APS) remain with the spouse indefinately (ie after the 3 year 1 day after death)?

Once the APS ISA allowance has been claimed & used by the spouse, it loses its separate identity and becomes part of surviving spouse’s ISA going forwards. Forever, unless the rules are changed.   

PaulW63

badger09 said:

NanookOfTheNorth said:

With this 3 year and 1 day after death, is that just a timeframe for the spouse to inherit the APS?  Then once inherited the APS remains with the spouse indefinately?  

So say the deceased husband/wife dies with £100k in an ISA, when the APS is transferred to the spouse, does that £100k ISA (APS) remain with the spouse indefinately (ie after the 3 year 1 day after death)?

Once the APS ISA allowance has been claimed & used by the spouse, it loses its separate identity and becomes part of surviving spouse’s ISA going forwards. Forever, unless the rules are changed.   

Reassuring. Thank you 🫡👍

PaulW63

Newly_retired said:

A spouse inherits the Additional Permitted Subscription allowance, but not necessarily the money, if s/he is not entitled to it from the estate or intestacy rules.
So if for example the estate was left to wife, brother , sister, in equal shares, and if the wife's share did not amount to the full total in the ISA, she would not be able to have all the money.

Thanks for your reply. 

In my case, my wife would inherit everything (in my will).