Inherited Accounts – a new ISA allowance

Do take advice with regard to this new allowance to ensure you have up-to-date information as it has been suggested that this new allowance might be reviewed to make it simpler in operation.

Inherited ISA accounts-

Good news for married couples and civil partners (but not for “common law partnerships, which do not exist in law).

If your partner dies there is the possibility of you receiving an additional ISA allowance, referred to as an Additional Permitted Subscription (APS).

On the death of a partner his or her ISA accounts ceases as a tax-free investment, at the point of death. The proceeds form part of the partner’s estate and passes to the beneficiaries named in his/her will (no will? then that is your first job, otherwise your estate may well pass to people you would not normally choose).

The surviving partner needs to fill in a form to receive an APS for the amount that was held in the deceased partner’ ISA account at the date of death (including interest up to that date). The result being that the surviving partner can invest an amount up to the APS value into a new ISA thus sheltering it from tax for the rest of the survivors life.

You have from the date of death up to 3 years to use this additional ISA allowance but you should fill out the APS application form as soon as possible. It can be with any bank or investment firm who offers this facility.

Many financial institutions are not up to speed with this and it may be that the simplest approach is to file your APS with the same ISA provider that your partner used. This may mean filling in several APS applications. Once you pay funds in, it is registered in your own name. You then have freedom to transfer to any other ISA but not until you have used your full allowance otherwise it will be lost.

With cash ISAs you can use your own money into the APS.
With investment ISAs you have to wait until probate is complete.

Utilising this new relief can save thousands of pounds in tax. However, it is generally thought that the procedures may well be reviewed.