Do you need probate for an ISA?
An ISA cannot be joint, so it is always tested on its own. Whether the provider wants a grant depends on the balance. Separately, a surviving spouse has an allowance that never needs one.
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The short answer
- An ISA is a sole-name account, always. Its balance counts against the provider's limit like any other account there. Below the limit, released on the death certificate; above it, the provider wants the grant.
- The ISA keeps its tax-free status for up to three years after death as a "continuing account", while the estate is dealt with.
- A surviving spouse or civil partner gets an extra ISA allowance equal to the value of the deceased's ISA, the "additional permitted subscription". Claiming it does not need a grant.
- The allowance and the money are separate things. The allowance is a right to pay in; the money itself still passes under the will or intestacy.
- Stocks and shares ISAs are valued at the date of death for the estate, and can usually be transferred to a spouse in specie.
The provider's limit
An ISA held with a bank or building society is added to any other sole-name accounts the person held there, and the total is measured against that institution's limit for releasing funds without a grant. At most large banks that is around £50,000; some smaller providers are lower. An ISA held with an investment platform is measured against the platform's own limit, which is often similar. See closing a bank account for how the limits work.
Because ISAs are where many people keep their largest single sum, and because they cannot be joint, a cash ISA is frequently the one asset that tips an otherwise simple estate over a limit. A couple with a joint home and joint current account, but £70,000 in one spouse's ISA, will need a grant on that spouse's death.
What happens to the ISA itself
From the date of death the ISA becomes a "continuing account of a deceased investor". No new money can be paid in, but the tax-free treatment of interest, dividends and gains continues until the earliest of: the completion of the estate's administration, the closure of the account, or three years after the death. That gives the executor time to deal with the estate without the ISA generating taxable income in the meantime.
The provider will need the death certificate and either the closure form (below its limit) or the grant (above it). It will then pay the balance to the estate, or transfer investments in specie to a beneficiary where its systems allow.
The spouse's additional permitted subscription
A surviving spouse or civil partner can pay into their own ISA an extra amount, on top of the normal annual allowance, equal to the value of the deceased's ISAs. The value is taken at the date of death or, if the ISA stayed open as a continuing account, the value when it is closed, whichever is higher. The allowance must be used within three years of the death or 180 days after the administration is completed, whichever is later.
The allowance does not need a grant. The surviving spouse claims it from the deceased's ISA provider (or transfers it to another provider) with the death certificate, the marriage or civil partnership certificate, and a declaration. It is a right to pay money in, not an entitlement to the deceased's money: the money itself passes under the will or intestacy, and the spouse may use the allowance with the inherited funds or with their own.
The allowance is often missed. A widow who simply closes her late husband's £60,000 cash ISA and puts the money in a savings account has given up the right to shelter £60,000 from tax, permanently. Ask the provider about the APS before closing anything.
Stocks and shares, Lifetime and Junior ISAs
- Stocks and shares ISAs are valued at the closing prices on the date of death. A spouse using the APS can usually have the investments transferred into their own ISA without selling. Other beneficiaries receive the cash or the investments outside an ISA.
- Lifetime ISAs are paid to the estate without the 25 per cent withdrawal charge. The APS applies to the value.
- Junior ISAs belong to the child; if the child dies the account is closed and paid to the child's estate. The death of a parent has no effect on it.
- Innovative finance ISAs hold peer-to-peer loans that may take time to realise; the provider will explain.
Common questions
Is an ISA frozen when someone dies?
No new money can be paid in, but the account continues as a 'continuing account of a deceased investor' and keeps its tax-free status for up to three years while the estate is administered. The provider will release the balance on the death certificate if it is within its limit, or against the grant if it is above it.
Do you need probate to transfer an ISA to a spouse?
Not for the additional permitted subscription, which the surviving spouse or civil partner claims from the provider with the death certificate and marriage certificate. Whether the provider will release the actual money without a grant depends on whether the balance is within its limit. Many providers let a spouse move the investments across in one step where the value is within the limit.
What is the ISA additional permitted subscription?
An extra ISA allowance for a surviving spouse or civil partner equal to the value of the deceased's ISAs, on top of the normal annual allowance. It must be used within three years of the death or 180 days after the estate is finished, whichever is later. It is a right to pay in, not an entitlement to the money, and it needs no grant.
Does an ISA form part of the estate for inheritance tax?
Yes. The ISA's tax advantages apply to income and gains, not to inheritance tax. Its value at death is part of the estate and, unless it passes to a spouse or civil partner, counts towards the taxable total.
Can an ISA be held in joint names?
No. ISAs are individual by law, which is why they are always tested on their own after a death rather than passing to a survivor like a joint account.
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Important
Solace is not a firm of solicitors and does not provide legal, tax or financial advice. We are an estate administration service and we are not regulated by the Solicitors Regulation Authority, the Financial Conduct Authority or any equivalent body. Nothing in this guide constitutes legal, tax or financial advice, and no solicitor–client relationship is created by reading it.
This article is general information only. It reflects the position in England and Wales at the date shown above; the law and the figures change, and Scotland and Northern Ireland differ in important respects. It may not apply to your circumstances. Whether a particular estate needs a grant is ultimately decided by the organisations holding the assets, and their limits change. Administering an estate carries personal legal responsibility, and you should obtain advice from a qualified solicitor, accountant or other regulated professional where appropriate. Always check current rates, fees and deadlines against GOV.UK before acting.