There are 2 different outcomes here, depending on who will inherit the ISA.
Since 5th April 2018
If your ISA is being left to your spouse or civil partner they can inherit your ISA allowance.
As well as their normal ISA allowance your ISA can add a tax-free amount up to either:
- the value held in their ISA when you died
- the value of the ISA when it’s closed
Contact your ISA provider or the provider of your spouse or civil partner’s ISA for details.
This change to the rules for inheriting an ISA was made to help surviving spouses or civil partners from tax. Especially as most couples plan their savings together, it often penalised the surviving partner. As women often survive their partners it has been an important levelling up initiative.
Passing an ISA to a child or someone else
This benefit does not extend to your children or other people you may wish to inherit your ISA. Upon your death the ISA will become part of your remaining estate. It 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 the closure date, but ISA investments will form part of your estate for Inheritance Tax purposes.
Stocks and shares ISAs
If you have a stocks and shares ISA, your ISA provider can be instructed to either:
- sell the investments and pay the cash to the administrator or beneficiary of your estate
- or transfer the investments to your surviving spouse’s or civil partner’s ISA – this is only possible if they have the same ISA provider as you. Otherwise the shares will need to be sold and instead the cash is then transfered on to your spouses ISA.
ISA providers and very helpful in these circumstances. So feel confident in calling or emailing them to ask for assistance and a copy of the terms and conditions of the ISA.
They will ask you for a copy of the death certificate and also who you are in relation to the deceased, executor, spouse, partner etc.
