What happens to an ISA when you die?

26 October 2021

Typically what happens to an ISA when you die is that your ISA is closed by an Executor as part of the Probate process. Otherwise, your ISA provider will usually close your ISA three years and one day after you die.

However, many couples are unaware of the Additional Permitted ISA Subscription (APS) available and may be losing out on this valuable benefit announced by the government in 2014.

What is an Additional Permitted ISA Subscription (APS)?

Introduced with effect from 6 April 2015, a surviving spouse or civil partner (‘spouse’) can claim an additional ISA subscription on top of their annual ISA allowance on the death of their spouse, provided the death occurred on or after 3 December 2014.

The spouse is in effect ‘inheriting’ the tax benefits from the ISA.  However, in order to claim successfully, the couple must not have been legally separated at death.

How Much Can a Spouse Claim?

For deaths occurring on or before 5 April 2018, the additional ISA subscription was limited to the value of the ISA at the date of the death of the deceased spouse. However, this was changed for deaths on or after 6 April 2018 to enable a spouse to claim either the value at the date of death or the value when the asset ceases to be a ‘continuous ISA’ i.e. the earliest of:

  1. the completion of the administration of the estate;
  2. the third anniversary of death; or
  3. the closure of the ISA.

This change allows the surviving spouse to benefit from any growth in the ISA from the date of death. If several ISAs were held by the deceased with a number of different providers, a separate APS is available for each.

Is the APS Available for Cash and Stock ISAs?

Yes, although different rules apply depending on whether the deceased held a cash or stock ISA. A cash subscription must be invested within three years of death (or 180 days after the completion of the administration of the estate, whichever is the latest).

Interestingly, a claim can be made by a surviving spouse for a cash APS even if they do not inherit the deceased’s ISA. The spouse can invest with the deceased’s ISA Manager or any other ISA Manager.

Where an APS is in the form of stock, re-registration of the holding must be made within 180 days of ownership passing to the spouse. As opposed to a cash subscription, only inherited ISA stock can be claimed by the surviving spouse and the investment must be made into an account with the same investment manager.

With different rules depending on the type of ISA and the timescales for making a successful claim, some may find claiming the APS confusing. For further guidance on what happens to an ISA after you die, or for help making a claim, contact our team. You can also find out more about our Probate and Estate Administration Services here.

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