ISAs: Transfer of benefits to surviving spouse or civil partner on death

An Individual Savings Account (ISA) provides a means of saving money without paying tax on the benefit that is gained. ISAs are well known and used by many of us. However, what happens to a person's allowance when they die?  Since 6th April 2015, the rules have changed - Bedfordshire Wills solicitor Mikhala Leak explains how. 

There are two types of ISA:

  • A cash ISA, where you pay no tax on the interest that accrues; and
  • A stocks and shares ISA, where you pay no tax on any income or capital gains you make on investments.

The Individual Savings Account Regulations 1998 set out the amount that can be put into an ISA in each tax year and the number of ISAs an individual can have in each tax year. The tax year runs from 6 April to 5 April and the current rules allow an individual:

  • To put money into one cash ISA and one stocks and shares ISA each tax year; and
  • To save up to £15,240 in one type of ISA or split that allowance across both types of ISA.

When a person dies, their tax-free ISA allowance dies with them. The beneficiaries of the deceased’s estate can only invest the inherited savings into ISAs subject to the usual annual limitations. However, for spouses and civil partners the rules have now changed.

What do the new rules set out for surviving spouses and civil partners? 

Since 6th April 2015, for any spouse or civil partner who dies after 3rd December 2014, the surviving spouse or civil partner can benefit from an additional ISA allowance equivalent to the value of the deceased’s ISA at the date of their death. This is in addition to the surviving spouse or civil partner’s own ISA allowance. For example, if Adam dies owning a cash ISA with a balance of £5,000 at the date of his death, his surviving wife Eve would be entitled to an additional ISA allowance of £5,000 over and above her usual allowance of £15,240.

What about the contents of the deceased's Will?

The additional ISA allowance is only available to a surviving spouse or civil partner and not to other family members or friends. The surviving spouse or civil partner does not have to be the beneficiary of the ISA under the terms of the deceased’s Will or Intestacy Rules (where there is no Will) to benefit from this additional allowance.

Deadlines claimants need to be aware of

In order to benefit from the additional ISA allowance the surviving spouse or civil partner must make a claim for the allowance within 3 years of the date of death or up to 180 days after the administration of the estate is complete, whichever is the later date. Where the deceased died between 3rd December 2014 and 5th April 2015, the 3 year deadline begins from the 6th April 2015. If the transfer of the additional allowance is not applied for within this period then it is lost.

Transfering the allowance 

The surviving spouse or civil partner can transfer the additional allowance to any ISA provider they choose but not all ISA providers are currently offering this service. The ISA provider at the date of death should provide the information needed so that this additional allowance can be used and to allow it to be transferred.

Need help or advice?

Please contact Wills solicitor Mikhala Leak in Sandy, Befordshire on 01767 680251. 

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