Inheritance ISAs are aimed at people whose partners had an ISA at the time of their death. The value of their combined ISA accounts at the time they died is added to your own ISA allowance. For example, if your partner had £20,000 in ISAs when they passed away, you would receive an additional ISA allowance of £20,000, giving you a total allowance of £40,000. Inheritance ISAs are available to anyone who has lost a husband, wife or civil partner since December 3, 2014. The additional allowance is available for three years after your partner has passed away, or 180 days after the administration of the estate has been completed (whichever is the later date). You can’t replace any money you take out; you can only use up your remaining allowance and you may only register your inherited ISA allowance with one provider.
The inheritance ISA – or additional permitted subscription (APS) as it is sometimes known – is not dependent on the surviving spouse inheriting the actual money or investments held within their partner’s ISA. In addition, the APS allowance can be used with the ISA provider of the deceased or it can be transferred to another ISA provider, subject to the other ISA provider’s terms and conditions. However, inheritance ISAs can only be transferred once and only where no subscriptions have been made under the allowance.
While some ISA providers will allow the spouse to make regular payments, some will only allow a one-off lump sum payment. Unlike cash ISAs, stocks and shares ISAs, innovative finance ISAs and many other types of independent savings accounts, inheritance ISAs are not limited to UK residents. If someone has moved abroad but their spouse held an ISA in the UK when they died, the surviving spouse is entitled to claim the APS allowance. The APS allowance cannot be transferred to another person and it’s only to be used by the spouse or civil partner of the deceased. It does not apply to Junior ISAs or Child Trust Funds.