Last week Chancellor George Osborne announced in his Autumn Statement it will be possible to pass on ISAs to surviving spouses when a saver dies.
The changes came into effect immediately, but there was a concern that the rules had not been updated to allow investments held in the ISA to be transferred automatically – known as an in specie transfer – meaning investments would have to be sold and the money reinvested in order to replicate the deceased’s ISA.
‘Bed and breakfasting’, as this is known, incurs a number of costs, including exiting and reinvesting, as well as the risk of being out of the market.
The Treasury had confirmed in specie transfers of ISAs between spouses would be allowed. "They have told us that in specie transfers are allowed and that is a good thing because it means investors can switch assets across without the cost of buying and selling and market moves," he said.
‘The Treasury is still crossing the ‘T’s and dotting the ‘I’s but it is good to know they are looking at it.’
There is still work to be done on how much time a surviving spouse would have to complete the transfer.
There is already a precedent for in specie transfers to ISAs from the government-backed ‘save as you earn’ (SAYE) scheme, which offers tax breaks for employees investing in their company’s shares. Once the SAYE shares reach maturity, employees have 90 days in which to transfer them to their ISA in specie. After that date they have to be bed and breakfasted.
Expect the timeframe for transfers to be longer than 90 days as settling an estate after death can take a long time. "I do not think the time-frame will be the same as there will be a much longer period of administration [after a death]," he said.
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