What happens to my ISA when I die?
An Individual Savings Account (ISA) is a popular way to save and invest in the UK, thanks to its tax advantages. But what happens to your ISA when you pass away?
Last Updated: 1 January 2003
This isn’t personal advice – if you’re not sure ISAs are right for you, you should ask for financial advice. Remember tax rules can change, and benefits depend on individual circumstances.
A continuing ISA
ISAs are designed to help you save and invest money without paying UK tax on the interest, dividends, or capital gains you make.
There are several types of ISAs, including Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs (LISA) and Innovative Finance ISAs.
When you die, these accounts don’t simply disappear – there are specific rules for how they’re treated.
Your ISA will be classified as a 'continuing ISA' for a limited time. This continuing ISA will stay open and can continue to benefit from its tax-free status until one of the following happens:
- The administration of your estate is finalised.
- Your executor decides to close the ISA.
If neither of these happens within three years and one day from your date of death, your ISA provider will close the account.
How are ISAs treated in your estate?
Your ISA forms part of your estate. This means it could be subject to Inheritance Tax (IHT) if the total value of your estate is more than the nil-rate band (currently £325,000 for individuals) unless it’s passed onto a spouse or civil partner.
If you leave your ISA to your spouse or civil partner, they won’t have to pay IHT on it, thanks to the spousal exemption.
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Additional Permitted Subscription (APS) for your spouse or civil partner
Your spouse or civil partner can also benefit from an Additional Permitted Subscription (APS).
This lets them contribute an amount equivalent to the value of your ISA at the time of your death, or the date it stops being a ‘continuing ISA’, if higher, on top of their own annual ISA allowance of £20,000. This means they can continue to benefit from tax advantages on their savings.
Transferring the ISA when you die
The process of transferring an ISA to another person or provider after death can vary from provider to provider.
Your executor (the person responsible for managing your estate) will need to contact the ISA provider to let them know of your passing.
The provider will likely request documentation, like a death certificate, and will provide information on how to handle the account. The death certificate will also be essential so your provider can value your ISA on the date of your passing.
After your death any investments or cash in the account can continue to grow until they’re distributed, tax free while the account remains a ‘continuing ISA’ (see above), but no more money can be paid into it.
Beneficiaries and inheritance
Who inherits your ISA depends on your will. If you’ve named beneficiaries, the ISA will pass to them as outlined in your estate planning. If there’s no will, your assets will be distributed according to the rules of intestacy, which might not align with your wishes.
It’s crucial to keep your will updated and to inform your executors about the ISA, as they might need to take specific steps to arrange for the cash and investments to be paid to your beneficiaries once you’re gone.
What if I’m not leaving the ISA to a spouse or civil partner?
If your ISA is passed to someone other than your spouse or civil partner, they won’t benefit from an APS. The value of the ISA will simply be part of their inheritance.
They can withdraw the cash and investments but won’t be able to reinvest them into their own ISA without affecting their annual ISA allowance.
Remember though, if you aren’t leaving your ISA to a spouse or civil partner, they can still benefit from an APS allowance.
Planning ahead
To make sure your ISA is managed according to your wishes, it’s essential to think about the following:
- Make a will – this ensures your ISA and other assets are distributed according to your wishes.
- Discuss the ISA with your executors and beneficiaries – make sure that those you plan to leave your ISA to understand its value and how to distribute any cash and investments after your death.
Understanding what happens to your ISA when you die is essential for effective estate planning. By knowing how your savings and investments will be treated, you can take steps to ensure your loved ones are cared for and that your wishes are honoured.
Whether it’s through an APS for a spouse or direct inheritance for other beneficiaries or loved ones, clear planning can make a world of difference during a challenging time.
Read more about what happens to your investments when you die
