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I’m helping my father deal with my mother’s finances after her death.
I understand that he can take over her Isas but I’m concerned that her bank, Goldman Sachs, wants to transfer the money to his current account.
I’ve always understood that if money is taken out of an Isa then it loses its tax-free status.
Can you advise?
A Which? Money member
'Your dad will inherit your mum's Isa savings, and her Isa allowance'
Mike Croxford, Which? Money expert, says...
To recap: savings and investments in Isas are free of tax (with the exception of inheritance tax - more on that below).
If you take money our of an Isa, it loses its tax-free status.
Your dad, however, can then put the money into another Isa, because he'll get an extra allowance.
The Additional Permitted Subscription (APS) is an extra amount that your father can now pay into an Isa above and beyond the usual £20,000 annual limit, and equivalent to the value of your mother’s Isas including any interest or growth since death.
The Additional Permitted Subscription is an extra amount that your father can now pay into an Isa
Crucially, it doesn’t have to be used up by the same money and you don’t have to make an Isa-to-Isa transfer.
Therefore, it is fine for the money to be transferred out of Isas and into your father’s current account, then into another Isa if he wants.
The only restriction is that APS allowance must be used within three years of the spouse’s date of death.
Unfortunately the APS only applies to spouses and civil partners. So if you inherited your mother's Isas, the money would lose its tax-free status.
Isas aren't excluded from inheritance tax, so while widowers can inherit their partners' Isas tax-free, for everyone else Isas form part of the estate for inheritance tax purposes.
- Find out more: Can you inherit an Isa?
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