Inheriting a Spouse's ISA: Do You Need Probate First?

A reader question in Which? this week looks at a problem many couples don't consider until it's too late. Anne from Sussex and her husband own almost everything jointly, apart from their ISAs. ISAs can only ever be held in one name, so she wanted to know whether a surviving spouse can take over the ISA allowance straight away or has to wait for a grant of probate. The answer is reassuring, but it depends on rules that many families, and even some executors, don't know about.

Why ISAs Are Treated Differently From Joint Assets

When a jointly owned bank account or a home held as joint tenants passes to the surviving owner, it does so automatically under the "right of survivorship". It falls outside the will and usually doesn't need probate.

An ISA can't be held jointly. When the holder dies, it becomes part of their estate and is dealt with under their will, or under the intestacy rules if there's no will. Before an ISA provider releases the money, it will often ask to see a grant of probate (or letters of administration if there's no will). With current probate delays, that can take months.

The Extra ISA Allowance for Surviving Spouses

This is where the Additional Permitted Subscription (APS) helps. If you were married to, or in a civil partnership with, the person who died, and you hadn't separated, you're entitled to a one-off extra ISA allowance. It's on top of your normal annual £20,000 allowance.

The APS is equal to the value of your spouse's ISAs. Since April 2018 the deceased's ISA keeps its tax-free status as a "continuing account of a deceased investor" until the estate is administered, the account is closed, or three years after the death, whichever happens first. Your APS is the higher of the value at the date of death and the value when the account stopped being a continuing ISA.

Importantly, you get the APS even if the ISA itself goes to someone else under the will, for example to children from an earlier relationship. The allowance belongs to the surviving spouse. The investments go to whoever is entitled under the will.

Can You Avoid Waiting for Probate?

Often, yes. As Which? explains, many providers accept a "small estates" form or indemnity instead of a grant of probate when the amount they hold is below their own limit. There's no single legal threshold. Each bank or investment platform sets its own figure, and the figures vary a lot. If the ISA is below the limit, the surviving spouse can usually deal with it quickly.

Above the limit, you'll normally need the grant first. Remember too that small estates paperwork for one asset doesn't mean the whole estate avoids probate. If the deceased owned property in their sole name, or held larger sums elsewhere, the executors will still need a grant.

Deadlines and Pitfalls to Watch

The APS doesn't last forever. Cash subscriptions generally have to be made within three years of the death or, if later, within 180 days of the estate's administration being completed. Other points to remember:

• Not every provider accepts APS payments, so check before you plan where to invest.
• Unmarried partners don't qualify. Cohabiting couples have no APS entitlement and no automatic inheritance rights under intestacy, so up-to-date wills are essential.
• ISAs aren't free of inheritance tax. They count towards the estate's value, although anything left to a spouse or civil partner is normally exempt.

How Good Estate Planning Makes This Easier

Anne's question shows why it's worth reviewing your will alongside your investments. Your will should make clear who inherits your ISAs, and your executors should know which providers you use. Keeping a simple list of accounts, with a note of the APS rules, can save your family months of stress at a hard time.

What Should You Do Next?

If you've recently lost a husband, wife or civil partner, or you want to put your affairs in order now, a wills and probate solicitor can explain how your ISAs, joint assets and will fit together. They can also handle the probate application for you if one is needed. Speak to the QualitySolicitors first contact team. They'll match you with a friendly, experienced solicitor near you who can guide you step by step.