Can I keep my late husband’s ISA?

23rd October 2015

My client Marie had been left in a strong financial position by her husband when he died, however we found that she needed something we had not done before.

Derek had accrued an ISA that was valued at £242,000 on his death. Marie had no ISAs of her own. The rules for ISAs changed on the 3rd December 2014 from which date an ISA can be inherited by a spouse, although these rules have turned out to be a little more complex than first anticipated.

Marie is able to inherit an additional ISA allowance (not the money in Derek’s ISA to which she was already entitled in accordance with his Will) called an Additional Permitted Subscription – APS. This means she can invest any amount up to £242,000 into an ISA in her name; this could be a Cash ISA or a Stocks and Shares ISA (but not split between both).

First we needed to decide what sort of investment Marie might need. As part of our financial planning process we established that, whilst she needs the capital as protection against the possibility that she has to pay for long term care, she does not need to achieve high returns. It would be important, however, to achieve returns in excess of inflation so it is unlikely that a Cash ISA will be appropriate.  Therefore we agreed that she should invest the proceeds of Derek’s ISA into a new ISA in her name using a low risk investment strategy, targeted to achieve returns a little above inflation, because this would be most likely to achieve her objectives.

At this stage under the APS rules she has a choice:

  • She can sell the assets held in Derek’s old ISA and reinvest the cash proceeds in a new plan
  • She can keep the assets and transfer them ‘in specie’ to a plan in her name

Although a cash subscription can be done within 3 years from the date of death any ‘in specie’ transfer must be arranged within 180 days of the completion of the estate administration.Senior woman leaning on hand and looking forward.

The existing assets were held by a stockbroker and Marie had no interest or knowledge with which to manage the money herself so we recommended that she sell the assets and invest the proceeds via an investment platform. This structure allows all of the new investments to be held in one place and gave her the confidence and comfort that someone is ‘looking after her money’.

As expert financial planners, once we have helped establish a client’s objectives, we can structure their investments appropriately so that they have the best chance to achieve them. Reviewing the strategy regularly ensures that changes can be made as appropriate to keep their plan on track.