How to transfer ISAs after someone has died
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My dad died earlier this year and we are in the process of sorting out his estate. We’ve got probate – he left everything to my mum so it was easy – now it’s simply a case of getting his assets transferred into her name. He had a number of ISAs: can you explain how we transfer these, please?
Douglas Bridges of Smith & Pinching responds:
When you notify ISA providers that an account holder has died, they will change the ISA to what is known as a continuing account of a deceased investor. The savings and investments in the account can continue to grow tax-free until the estate executors/administrators of the estate can distribute them. However, you cannot add to the ISAs after the date of death.
Provided your mother and father were married and living together when he died, your mother can benefit from a special one-off ISA allowance equivalent to the value of your father’s ISAs when he died or when it ceased to be a continuing account of a deceased investor, if greater. This is known as an “Additional Permitted Subscription” (APS) and is in addition to her normal ISA allowance of £20,000 for the tax year. A spouse or civil partner can claim the APS even if the ISAs have been left to someone else.
If your mother wants to keep the inherited ISAs in an ISA wrapper, she may be able to transfer them to either an existing ISA that she holds or open a new one, using the APS. However, not every ISA will accept a transfer in using the APS, so she will need to check that before arranging the transfer.
If your father’s ISAs include Stocks & Shares ISAs, there are two potential ways of making the transfer. The investments can be sold and a new ISA opened with the cash generated, or the investment portfolio can be transferred directly as it stands. The latter is known as an in specie transfer but is only permitted if the assets are transferred to an ISA with the deceased person’s provider.
The time limit for making in specie APS transfers with non-cash assets is within 180 days of distributing the assets to the surviving spouse or civil partner. The time limit for making cash subscriptions ends three years after the date of death or, if later, 180 days after the administration of the estate is complete.
It may be helpful to speak to an independent financial adviser to make sure that your mother uses her inheritance for investments that are suitable for her.
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Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
For more information, please visit www.smith-pinching.co.uk