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Transferring an ISA on death

I don't know about you but this can be hard work and complicated. Not because it is just because the organisations dealing with ISAs seem to have less of an idea about what to do with them than we do! I thought I would try and simplify the issue.

Since April 2015 it has been possible to transfer the ISA from a deceased's estate into the name of the surviving spouse. If spouses were not living together at the time of death, are separated or the marriage has broken down this will not apply. This ensures that the annual ISA allowance is not lost nor is the tax free wrapper. Before April 2015 it had not been possible to do this. The process of the transfer is now known as the Additional Permitted Subscription Allowance, APS for short. Any funds transferred under an APS are added to the ISA allowance for the surviving spouse.

Until 5 April 2018 the amount that could be transferred were limited to the value in the deceased's ISA at the date of their death. If the deceased died after 5 April 2019 the transfer value will be the amount at the date of death together with the increase in value to the date upon which the ISA stopped being an account of the deceased.

When you inherit an ASP ISA you are able to continue to add funds into it as you would do a regular ISA but you can only transfer up to £4,000 in one tax year not as much as you would do into an ISA of your own. You are still able to transfer into cash ISAs, stocks and shares ISAs or innovative finance ISAs so the options are no different to if you were looking for yourself.

There is a process which has to be followed to deal with the transfer and this is where it can get complicated. You have to notify the ISA provider that the holder has died and that you want to claim the ISA under the APS scheme and you will need to let the provider know your personal details, prove your marriage and you will need to declare that you are the surviving spouse and were living with the deceased that their death.

You must watch the time limits for applying for the APS transfer though. If you are transferring like for like then this must be done within 180 days of the beneficial ownership passing to the surviving spouse. If you are dealing with cash ISAs this must be done within three years. If you over the three year period then the application must be made within 180 days of the completion of the estate administration.

These transfers are not easy and are complex. If you are thinking about transferring the ISA of your spouse who has recently died please take advice and make sure it is done properly.


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