Using late wife's accumulated income in S&S ISAs as surplus for IHT purposes

Dextersgranddad

My wife passed away in July late year and probate was granted about 6 weeks ago.  Her entire ISA holdings have been transferred to me under APS allowance including her stocks and shares ISA.  Because we couldn't reinvest her funds she has accumulated about £20k in interest, sitting now as cash in my account.  Will there be any issue if clearly identifiable sums from her income receipts are given away from my account to my children as surplus.  Neither of us gave away surplus income beforehand.  

eskbanker

You can do what you like with the money but if your query relates to whether or not such a gift would be exempt from IHT then there is an exemption for 'normal (or regular) expenditure out of [surplus] income’ and so a one-off seems unlikely to qualify:

https://www.gov.uk/inheritance-tax/gifts

Do you anticipate your estate being subject to IHT and if so, have you taken any measures to address that previously?

masonic

Not a problem if you live another 7 years.

The money in your account is not your income, it is capital. If you wish to start a regular pattern of gifts from surplus income, then you'd need to link it to your own income (going forward).

badger09

Dextersgranddad said:

My wife passed away in July late year and probate was granted about 6 weeks ago.  Her entire ISA holdings have been transferred to me under APS allowance including her stocks and shares ISA.  Because we couldn't reinvest her funds she has accumulated about £20k in interest, sitting now as cash in my account.  Will there be any issue if clearly identifiable sums from her income receipts are given away from my account to my children as surplus.  Neither of us gave away surplus income beforehand.  

Have you considered a Deed of Variation? Effectively this changes your late wife’s will so some of your inheritance bypasses your estates & goes direct to your children. Assuming you’re the only beneficiary adversely affected by such a change, it’s entirely up to you. 

Must be done within 2 years of her death. 

https://www.gov.uk/alter-a-will-after-a-death

poseidon1

badger09 said:

Dextersgranddad said:

My wife passed away in July late year and probate was granted about 6 weeks ago.  Her entire ISA holdings have been transferred to me under APS allowance including her stocks and shares ISA.  Because we couldn't reinvest her funds she has accumulated about £20k in interest, sitting now as cash in my account.  Will there be any issue if clearly identifiable sums from her income receipts are given away from my account to my children as surplus.  Neither of us gave away surplus income beforehand.  

Have you considered a Deed of Variation? Effectively this changes your late wife’s will so some of your inheritance bypasses your estates & goes direct to your children. Assuming you’re the only beneficiary adversely affected by such a change, it’s entirely up to you. 

Must be done within 2 years of her death. 

https://www.gov.uk/alter-a-will-after-a-death

That would adversely  impact the transferable Nil Rate Band from wife going forward.