Article posted: 5 March 2015
Inheriting your partner’s Individual savings account
One of the rabbit-out-the-hat features of December’s Autumn Statement was the announcement that if you outlived your spouse or civil partner you could ‘inherit’ their ISA. It sounded an attractive option, but the idea was far from developed when Mr Osborne made it public at the end of last year.
The Treasury and HMRC have now issued further information and a set of draft regulations. The effect of the regulations in their current form will be to:
- Permit a surviving spouse/civil partner to make an additional ISA subscription equal to the value of the deceased spouse’s/partner’s ISA at the date of their death;
- Allow non-cash holdings (e.g. unit trusts, OEICs and shares) in the deceased spouse’s/partner’s ISA to form part or all of the subscription; and
- Set a time limit for the subscriptions, broadly 180 days after administration of the estate is complete or, in the case of cash assets, three years from the date of death, if later.
The opportunity to transfer existing ISA investments is helpful – the Autumn Statement had appeared to suggest that investments would have to be realised and subscriptions could only be in cash. However, the current regulations leave unchanged what happens between the date of death and the new subscription being made. That will mean the ISA assets will be taxable as part of the estate between the date of death and the making of the subscription. To complicate matters further, because the subscription value is fixed at the date of death, a transfer of non-cash holdings will be affected by changes in value before the subscription is made.
The Treasury says the cost of this reform will be negligible in revenue terms – £10m in 2019/20 – but if the two of you regularly take full advantage of your ISA limits, it could prove a valuable benefit for the survivor.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.