Inherited ISA APS allowance question

[Gilgongo]

My father died and is survived by his (married) wife. Two of my father's accounts were stocks and shares ISAs (call them Provider A and B ).

My mother has her own S&S ISA with Provider C.

I think I understand that my mother can apply to have his ISAs transferred to hers and avoid tax under the APS allowance rules (as part of claiming his estate under right of survivorship).

What I don't understand is whether she has to open an APS ISA with A and B in each case first, then transfer those to her own ISA with with provider C.

Or can she just tell A and B to transfer to an APS ISA with her provider directly?

The forms I've been sent as his executor mention claiming inherited APS, but the wording is vague. I guess I might have to ask them what they mean

[uspaul666]

No. You can ask provider A and provider B to send proof of the value of your father's holdings to provider C and C will add the APS total to your mother. Contact provider C and ask about it. Note that it doesn't need to be a transfer or anything. You can cash in A and B and deposit the cash with C later. There will be certain deadlines and restrictions with financial years. Again, talk to your mother's provided to start the ball rolling.

[Gilgongo]

Ah good - I'll do that - thanks!

[yorkshirelad1]

No. You can ask provider A and provider B to send proof of the value of your father's holdings to provider C and C will add the APS total to your mother. Contact provider C and ask about it. Note that it doesn't need to be a transfer or anything. You can cash in A and B and deposit the cash with C later. There will be certain deadlines and restrictions with financial years. Again, talk to your mother's provided to start the ball rolling.

Personally, I wouldn't be cashing in A & B until C have confirmed it in writing (preferably signed in blood), just in case there's a problem for the sake of a week or two. The weekend paper money sections frequently have letters about people having problems with the APS after the death of the ISA holder, mainly due to ISA manager's implementation. Better safe than sorry (but maybe that's just me).

[Gilgongo]

Personally, I wouldn't be cashing in A & B until C have confirmed it in writing (preferably signed in blood),

Ah OK. And I'm not surprised there are reported problems. The rules seem barely understood or even known about (despite being in place since 2014?).

[jaizan]

My parents had one ISA each at iWeb and one older ISA each at another provider.

My father passed away, so we wold like to use an APS to transfer his iWeb ISA to her iWeb Isa and then do the same at the other provider.

Is this simply a matter of making two separate APS applications?

Has anyone successfully done that ?

I don't see why it shouldn't work, although I'm a little concerned about the wording on the iWeb form.

[ignotus20]

My parents had one ISA each at iWeb and one older ISA each at another provider.
My father passed away, so we wold like to use an APS to transfer his iWeb ISA to her iWeb Isa and then do the same at the other provider.
Is this simply a matter of making two separate APS applications?
Has anyone successfully done that ?
I don't see why it shouldn't work, although I'm a little concerned about the wording on the iWeb form.

I had the exact same scenario a couple of years ago. We transferred the iWeb ISA from my father's account to my mother's as an in-specie APS transfer. The same was done with the other provider (two separate applications for each provider). I can't recall the complexity of the iWeb form, but it all went through fairly easily.

We did have a snag with the other provider, who 'forgot' to credit some fairly chunky dividends and bond coupons in the interim period between my father's account being suspended and the transfer being completed. Definitely make a note of the holdings, check the ex-dividend and payment dates. Audit it carefully, post transfer. The other provider promptly paid the missing funds into my mother's account upon raising the issue with them. No problems with iWeb though.

[DrFfybes]

I had the exact same scenario a couple of years ago. We transferred the iWeb ISA from my father's account to my mother's as an in-specie APS transfer.

How does that work? I've done in specie with unsheltered assets, but AIUI the APS is the value of the holdings at date of death, so an in specie transfer would be the value at date of transfer, which could be considerably more (or less).

Paul

[richfool]

Can that sort of transfer still be done where the deceased assets and thus his ISA are being split between children, as well as the widow? The widow has an ISA.

[pochisoldi]

It is quite feasible for the APS to be inherited by the spouse, and the contents of the former ISA that the APS was derived from is inherited elsewhere.
The surviving spouse is then able to use the APS as they see fit.

For example:
Dad dies leaving £40k in a S&S ISA.
Son & Daughter inherit the S&S ISA
Mother inherits the rest of the estate.
Mother also inherits the £40k APS that came with the S&S ISA, opens a cash ISA and plonks the proceeds of a life policy in it.

Another point is that some providers allow transfers in but won't allow APS. In that case, open an easy access ISA with a provider that does, then transfer it to the intended provider.

[genou]

I had the exact same scenario a couple of years ago. We transferred the iWeb ISA from my father's account to my mother's as an in-specie APS transfer.

How does that work? I've done in specie with unsheltered assets, but AIUI the APS is the value of the holdings at date of death, so an in specie transfer would be the value at date of transfer, which could be considerably more (or less).

Paul

When you die, your ISA becomes a ‘continuing account of a deceased investor’. Hard stop is 3 years after death, but normally completion of the admin on the estate / closure of the account. APS is either value at death, or value at the point it ceases to be a ‘continuing account of a deceased investor’. In the latter case, essentially value at transfer. or 3 year time limit if something has gone adrift. There must be some point at which APS is lost, but I haven't checked that out.

I assume that if the in specie transfer value is less than at death , the heir has the ability to top up their ISA with the shortfall as they still have APS capacity.

[ignotus20]

Can that sort of transfer still be done where the deceased assets and thus his ISA are being split between children, as well as the widow? The widow has an ISA.

The APS ISA transfer is only permitted to the spouse of the deceased, not to their children or anyone else.

[ignotus20]

This article has quite a useful summary of the rules and various APS options: https://techzone.abrdn.com/public/inves ... for-ISAAPS

[richfool]

Can that sort of transfer still be done where the deceased assets and thus his ISA are being split between children, as well as the widow? The widow has an ISA.

The APS ISA transfer is only permitted to the spouse of the deceased, not to their children or anyone else.

OK, noted, though from what Pochisoldi said (copy below), the spouse has that full APS allowance (equal to the balance of the deceased's ISA at DoD), even if some of the ISA balance is passed to the children. She can thus add other funds to her ISA (cash or equity ISA) up to the limit of the APS.

It is quite feasible for the APS to be inherited by the spouse, and the contents of the former ISA that the APS was derived from is inherited elsewhere.
The surviving spouse is then able to use the APS as they see fit.

For example:
Dad dies leaving £40k in a S&S ISA.
Son & Daughter inherit the S&S ISA
Mother inherits the rest of the estate.
Mother also inherits the £40k APS that came with the S&S ISA, opens a cash ISA and plonks the proceeds of a life policy in it.

Another point is that some providers allow transfers in but won't allow APS. In that case, open an easy access ISA with a provider that does, then transfer it to the intended provider.

[ignotus20]

OK, noted, though from what Pochisoldi said (copy below), the spouse has that full APS allowance (equal to the balance of the deceased's ISA at DoD), even if some of the ISA balance is passed to the children. She can thus add other funds to her ISA (cash or equity ISA) up to the limit of the APS.

The APS transfer can be made in cash or in-specie. The value is set at the point administration of the estate is finalised (or three years after death - see genou's point).

According to the article I just referred to: https://techzone.abrdn.com/public/inves ... S#anchor_6

The APS is independent of the assets held within the ISA. Even if the assets aren’t inherited by the spouse or civil partner, they can still apply for the APS and make contributions from their own assets.

So, yes, theoretically children can inherit the assets from the ISA independently of the APS. My guess is they use up the IHT allowance, however, so an APS of £100k goes to the spouse with no IHT implication and £100k worth of assets could go elsewhere, but they would be subject to IHT (or at least count against the overall IHT allowance of the combined estate on second death). The assets inherited by the offspring would also be outside the ISA wrapper at this point.

You'd need someone with appropriate qualifications and experience to check these points. I also suspect you might have some fun and games with the ISA provider if you want to do something creative like this, especially discount brokers of the kind many of us on these boards favour.

[richfool]

It is quite feasible for the APS to be inherited by the spouse, and the contents of the former ISA that the APS was derived from is inherited elsewhere.
The surviving spouse is then able to use the APS as they see fit.

For example:
Dad dies leaving £40k in a S&S ISA.
Son & Daughter inherit the S&S ISA
Mother inherits the rest of the estate.
Mother also inherits the £40k APS that came with the S&S ISA, opens a cash ISA and plonks the proceeds of a life policy in it.

Another point is that some providers allow transfers in but won't allow APS. In that case, open an easy access ISA with a provider that does, then transfer it to the intended provider.

Pochisoldi, re the above, can I clarify, how this is done in practice? Presumably, one would have to apply to the deceased's ISA holder company, with supporting documentation re the death and requesting an APS? And then does the (in this case, let's say) widow take/submit that to the widow's current ISA provider to support a transfer in of funds?

[pochisoldi]

It is quite feasible for the APS to be inherited by the spouse, and the contents of the former ISA that the APS was derived from is inherited elsewhere.
The surviving spouse is then able to use the APS as they see fit.

For example:
Dad dies leaving £40k in a S&S ISA.
Son & Daughter inherit the S&S ISA
Mother inherits the rest of the estate.
Mother also inherits the £40k APS that came with the S&S ISA, opens a cash ISA and plonks the proceeds of a life policy in it.

Another point is that some providers allow transfers in but won't allow APS. In that case, open an easy access ISA with a provider that does, then transfer it to the intended provider.

Pochisoldi, re the above, can I clarify, how this is done in practice? Presumably, one would have to apply to the deceased's ISA holder company, with supporting documentation re the death and requesting an APS? And then does the (in this case, let's say) widow take/submit that to the widow's current ISA provider to support a transfer in of funds?

Don't know, haven't done it myself - google is your friend, search for "inherited isa allowance".