ISA benefits transferable to surviving spouse – Time to review your will?

In his autumn statement the Chancellor announced a number of changes to ISAs which come into force in April 2015. One of the key changes include the ability to transfer ISA benefits to a surviving spouse or civil partner.

Draft regulations to implement the changes have recently been published by HMRC. Broadly, this measure will mean that the spouse or civil partner of a deceased ISA saver will be able to benefit from additional ISA allowances. Individuals will be allowed to save an additional amount in an ISA up to the value of their spouse or civil partner’s ISA savings at the time of death without this counting towards their own ISA entitlement (currently £15,000).

The change will apply to deaths on or after 3rd December 2014 and spouses will be able to claim this additional allowance from 6th April 2015. They will be entitled to the allowance even if the assets pass to someone else in the Will or are used to meet liabilities of the estate.

In view of the changes it may be a good opportunity to consider reviewing your Will particularly if many of your investments are held within an ISA.

It may be beneficial to ensure that your spouse inherits the ISA assets so that they can continue to utilise the tax advantages an ISA offers without eating into their own allowance for the year.

For example if your spouse or civil partner had £100,000.00 in ISAs when they died you will be able to reinvest that amount plus your own £15,000 entitlement.

If however your children were to inherit the ISA assets they will only be able to invest their own entitlement of £15,000.00 in that year meaning it will take several years to ensure all of the assets are back in the tax-advantaged wrapper. Your spouse would still however, get the additional £100,000.00 allowance.

As the rules are still in draft the full details of how this will work in practice are yet to be decided.

For further information or if you wish to discuss amending or making a Will please call Lindsey Bohanna on 0121 634 2065 or via email Lindsey.Bohanna@coleyandtilley.co.uk