Making use of deceased spouse's ISAs

[Bouleversee]

I am finding it very difficult to get my head round this, but as I understand it (from one ISA manager) one can apply for an ASP (what does that stand for) and if you have an ISA yourself with the same provider the shares/funds can be transferred from your deceased spouse's ISA to yours in specie, with an adjustment for any increase/decrease in value since date of death. However, if the spouse (and possibly you also) had ISAs with other providers as well they cannot do the same there since one can only have an ASP with one provider, so one can retain the shares but not in an ISA and if one has sufficient cash add an equivalent amount to the APS with the other provider. I didn't get as far as asking what happens if one also has a substantial cash ISA but presumably one can transfer that cash to the original ASP. Added to your own ISA with the ASP provider, this could add up to a sum far in excess of a sum one might want to have with any one provider, that being the reason one wanted to spread it round several providers in the first place. I am not clear as to whether the spouse can increase their ISAs to the value at date of death of the spouse's ISA using their own cash, and then sell the spouse's shares

Why should the Govt. have restricted our choices in this way and why do they make everything so complicated? And why should only spouses be able to inherit an ISA (funded with taxed income) without any IHT implications whereas pensions (funded with tax allowances) can go to any heirs
free of IHT? I am pondering whether there is any point in taking advantage of this extra ISA allowance or whether I should simply cash them in and give the proceeds to my children/grandchildren, using some or all of my late husband's IHT allowance. Perhaps a bit of mix and match.

[bionichamster]

APS is "Additional Permitted Subscription"
As far as I understand it does not allow you to transfer the content of ISA's (regardless of whether you share providers with the deceased or not), rather it allows you to benefit from having their ISA allowance transferred to you.

However having flicked through the Government guidance you'll see that the allowance seems to be based on how much the deceased had in their ISA, thus if they only had £5 of assets in their ISA then it appears that you are only allowed a to have an extra £5 allowance. If they had £500k then it appears that might become your allowance. You are also allowed to use their ISA assets to fund your allowance, you can do that by selling the assets and then paying the money into your ISA, but if you share providers this can be done 'in specie'. This isn't penalisation it's just that shares in an ISA are held in nominee accounts so i being moved to another nominee they would have to be sold and bought again by the relevant providers at a cost, if you share a provider then the nominee remains the same so it is uneccesary and thus ownership can just be transferred.
See Gov guidance https://www.gov.uk/government/publicati ... a-investor
Ulitmately in effect this is a mechanism to allow a transfer of the entire deceased's ISA contents into the ISA's of the spouse it's just a roundabout way of doing it.

Why should the Govt. have restricted our choices in this way and why do they make everything so complicated? And why should only spouses be able to inherit an ISA (funded with taxed income) without any IHT implications whereas pensions (funded with tax allowances) can go to any heirs

In effect it's a derestriction from the previous rules....Personally I think it is a reasonable idea that has been badly implemented and like many of Osbourne's other ISA/pension changes is heavily slanted to helping the comfortably well off maintain their wealth at the expense of encouraging those of average and below average means from improving their savings situation .e.g. if you inherit a large ISA legacy of £100k+ you can make it your with a massive extra ISA allowance, if on the other hand you inherit £30k in non ISA cash you get no extra allowance to quickly squirrel it away if your spouse didn't have an ISA. Seems like a weird principle, but maybe I've mis-read it.

As for why spouses should inherit an ISA without any IHT implications, don't spouses inherit everything without IHT implications anyway? So no change there. If pensions are exempt from IHT to any heir (are they?) then I personally think that is where the problem is. There are good reasons (shared enterprise and inter-reliance) to allow additional benefits to spouses, but I see no reason to allow it for any other inheritor unless they are a genuine dependant (e.g.. a child or severely disabled adult dependant), but I realise many people have strong feelings on IHT on both sides of the argumen.

BH

[Pheidippides]

Hi BH,

It's not roundabout. It's retention of the non-taxable ISA wrapper. What it means for my newly-widowed MIL is that she can continue to not pay any income or dividend tax on the ISA savings that she and her late husband spent decades building.

Regards

Pheid

[Dod1010]

I do not think there is any need for the APS to remain with the same provider. In fact my late wife had a small cash ISA with National Savings and I was able to get the APS transferred to Alliance Trust Savings and what is more I simply added it to my Stocks and Shares ISA with them, and for various reasons I was not even inheriting anything from her estate! So it is simply a transfer of the value as an Additional Permitted Subscription. In other words I had to fund it or it would lapse.

Incidentally TDInvesting knew nothing about it, but ATS has a form on their website which you can download and print off. So depending on your provider you may need to educate them.

[PMTI]

Bouleversee

We are going through a similar scenario. We have found various providers have varying understandings of APS products.

I wanted to pick up on your point about only having one APS account. I have received conflicting advice on this; one provider says only 1 is allowed, whereas another doesn't interpret their guidance in the same way. To be honest, I'm at a loss as to who is correct.

We have a S&S ISA and a cash ISA to deal with and would ideally like to just transfer to the spouse 'as is' due to the sums involved, and buy ourselves more time to formulate a long term plan.

Good luck!

PMTI

[felixcanis]

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/512781/ISA_guidance_notes_April_2016.pdf

In paraprgaph 6A.3(i)
Subscriptions made to the manager who held the deceased’s ISA
The subscription can be made to a cash, a stocks and shares, or to an innovative
finance ISA the surviving spouse holds with that manager or to a new cash, stocks
and shares, or innovative finance ISA opened for the purpose. Or to any
combination of existing or new ISAs. Managers can insist on a new ISA being
opened if this will allow them to monitor the additional permitted subscription limit.
An ISA opened solely to receive the additional permitted subscriptions will not cause
the saver to breach the ‘one ISA of each type per tax year’ rule.
Where the deceased held ISAs with a number of different managers the surviving
spouse will have additional permitted subscription limits with each manager.

Section 6A of the link deals with Additional Permitted Subcriptions. Hope this helps a bit

FelixC

[Bouleversee]

Many thanks for all replies. Am too tired and stressed to cope with this at the moment. Seems horrendously complicated. It will have to wait till after the cremation tomorrow and memorial service on the l6th as there are still some details to tie up there. The fact that even providers don't all sing from the same hymn sheet confirms what I said initially. I think we may want to vary the Will. I don't even know what the value of the assets totalled at date of death yet but they will be out of taxfree wrappers now so can't leave it too long to take action.

[Bouleversee]

Having had the dreaded ubiquitous virus over Christmas and beyond am only just getting round to picking up on all the probate stuff etc. Still waiting for some valuations to come in. I am alarmed to find, reading through this thread, that I can't remember reading any of it befofe, though I must have done since I responded to the replies. Am I getting Alzheimer's or just overloaded?

As has been said before, the various organisations give different information so it is necessary to go to the horse's mouth. I will use the link Felix Canis has kindly provided and hope to understand it all. My husband had a cash ISA with Newcastle which contained over £50k and I have just received their letter stating the balance as at date of death, 22 November 2016. It also stated "interest £7.79". When I asked what period that covered, they said it was interest from 22 November to l5 December, that the interest was paid monthly, that it would not be taxable and that no more interest would accrue to the account. I said that surely it must be accruing interest for someone's benefit, albeit not the deceased, but he said no. Can this be true? Heaven knows the interest on cash accounts is little enough now (down to 0.75% from the original 5%) but even if not in an ISA wrapper any longer, can they really just sit on the capital without adding anything, can they? And what if I applied to take up the allowance? They have sent me nothing about this and the person I spoke to clearly had never heard of it. Anyway, even if I did apply for the allowance I wouldn't be able to use my husband's ISA cash till I had got probate and possibly varied the will, which might take some time, so again no interest which I find surprising. If the Newcastle chap is correct, presumably the same applies to NSandI index linked certificates, which are also transferable, Again, one would expect interest to be credited till they are cashed in, even if to an executor's account. And what about dividends? My husband had a large amount in equity ISAs. Who is now getting the benefit of those dividends? Can the brokers also pocket them?

Perhaps I can find the answers on HMRC's website. All a nightmare. As someone else said (Julian?) one really ought to spend more of one's money while one can. We have not been able to get out to spend any for many years but I would have given more away if my husband had not been worried about the cost of nursing home fees, not needed for him in the end. It's more trouble than it's worth.

[Dod1010]

Bouleversee

If I were you I would engage a decent lawyer. They will do all the necessary paperwork for you and hopefully explain the transfer of the ISA allowance. I agree that few ISA managers seem to understand it. in fact I found only Alliance Trust Savings to really to have a grip on it. During 2016 I went through all of this with my late wife's estate and it just takes time and patience but one needs a good understanding of what is involved and a lawyer should be the best person to undertake the task. Nowadays they are required by the Law Society to give you an estimate of cost before undertaking the work. It is not cheap; for my wife's estate, including as it happens a Deed of Variation, the costs were around £10,000 but so what? You will have plenty of other things that need to be done. Then you just need to ensure that he is acting expeditiously. Time is money.

In my experience, dividends in an ISA will continue to be credited but the ISA manager wants to be rid of the problem asap, and depending on the amounts involved, might pay over the assets to your lawyer without waiting for probate (Confirmation in Scotland) I can tell you that a Deed of Variation if you know what you want done and it is not complicated can if necessary be completed within a few days. My wife's was completed within about 48 hours but I had the residual beneficiary staying with me at the time and was able to take him to the lawyer's office to sign the Deed. (He was the one who was losing some benefit).

[PinkDalek]

... And what about dividends? My husband had a large amount in equity ISAs. Who is now getting the benefit of those dividends? Can the brokers also pocket them?

The Estate will receive the dividends in due course. Here is a chart from Shareview (Equiniti) outlining the process (which might assist with some of your questions over at Legal Issues):

http://www.shareview.co.uk/4/Info/Portf ... _guide.pdf

[Dod1010]

The trouble with that extract PinkDalek is that it seems to be referring to mainly certificated holdings rather than ISAs and each ISA manager has their own way of handling it.

Dod

[PinkDalek]

The trouble with that extract PinkDalek is that it seems to be referring to mainly certificated holdings rather than ISAs and each ISA manager has their own way of handling it.

Dod

Yes, you may well be correct, I missed the mention of ISAs despite Boulee having mentioned them, having included the extract in my reply and the name of this board!

The dividends will still be paid though, which was the thrust of my reply.

[Bouleversee]

Dod -

It goes against the grain to cough up a large sum if I can do it myself, though some aspects I shall be happy to delegate to a solicitor.

The ISA managers have said there is no hurry. After all, there is no loss to them. We are the ones who have money sitting there doing nothing.

Nobody has commented about the lack of interest from date of death. Seems odd that divs. continue to accrue but not interest. Can't be right, can it?

Did your wife have any cash accounts or NS&I certificates/bonds.

Thanks to you and PD for comments and help.

[PinkDalek]

... Nobody has commented about the lack of interest from date of death. Seems odd that divs. continue to accrue but not interest. Can't be right, can it? ...

I don't know the answer but you were told the additional £7.79 was "interest from 22 November to l5 December". Merely a guess but was (?) 15 December the date on which you informed them of the death?

I haven't searched for Newcastle's Terms & Conditions but did you ask them to put anything in writing (if they will, of course).

[Dod1010]

Dod -
Did your wife have any cash accounts or NS&I certificates/bonds.

Yes my wife had a five figure sum in a current account and a cash ISA with NS & I, as well as a property.

The bank (Bank of Scotland, now part of Lloyds) paid out without the Scottish equivalent of probate and so did NS & I so the question of interest did not really arise.

Most of her assets went to third parties under her Will and although I guess I could have dealt with much of it I did not but as an Executor took a keen interest in all of it. Well worth getting legal advice even if you undertake the actual work yourself. It is a bit of a minefield. All settled in about five months.

Dod

[Bouleversee]

Bouleversee wrote:
... Nobody has commented about the lack of interest from date of death. Seems odd that divs. continue to accrue but not interest. Can't be right, can it? ...

PD wrote:
"I don't know the answer but you were told the additional £7.79 was "interest from 22 November to l5 December". Merely a guess but was (?) 15 December the date on which you informed them of the death?

I haven't searched for Newcastle's Terms & Conditions but did you ask them to put anything in writing (if they will, of course)."

No, I didn't tell them till after Christmas; too busy dealing with funeral arrangements etc. and chasing up my residual annuity income before then and I stayed at my daughter's for an extended Christmas. I gather the interest was credited monthly (though they haven't sent us any statements) so I guess the l5th was the regular date and it had already been added but they say no more will be. I shall send the passbook in to be brought up to date and I have asked them to send me details of the transferable spouse's ISA allowance, which they didn't send with the valuation. It will be interesting to see what their understanding of that is.

I really must do my last year's tax return before the end of the month so you may not hear much from me on this subject for a while as I shall have some complex computations to do.

[bionichamster]

.. Nobody has commented about the lack of interest from date of death. Seems odd that divs. continue to accrue but not interest. Can't be right, can it? ...

I suspect you have to dig deep into the bank's terms & conditions to find the bit that says the interest stops upon death. It seems pretty mercenary but hardly surprising. Think of it along the lines of: if you own a share in a company you are entitled to the dividend payment which is of course set by the company, the bank/broker can't alter that or pretend it doesn't exist because it's a payment to you from the company via the broker (even if it's in a nominee account).
Contrast this with bank account interest which is set by the bank to whatever they like; yes it may be set with reference to an official base rate but basically they just think of a very small number, then half it, and that's what they offer as interest this month. In the case of the account holder being deceased then the bank just merely choose to set the interest for the account to zero, it's their choice and I suspect they do it because they can, like I said it's pretty mercenary but they seem to be getting away with it and it's probably viewed by some dispassionate accountant somewhere as a good way of adding a few million to the bottom line without a second thought to the upset it an problems it might cause to those spouses who may genuinely need the income (if there are any these days with interest rates so low).

Hope you get it sorted quickly and tell them that you will take all your business elsewhere due to their (lack of) generosity.

BH