When I die can my ISAs be passed onto my wife?

Q: When I die can my ISAs be passed onto my wife while retaining their tax-free status?

The short answer is that, yes, you can pass your ISA money to your wife when you die and its tax-free status will be retained.

The slightly longer answer is that, when a person dies their ISA officially ends but their allowance can be passed to a spouse or civil partner and added to their ISA allowance.

The ISA ends when either the executor of the will closes it, the administration of the estate is completed or three years pass. ISA money will then normally form part of the deceased’s estate for Inheritance tax purposes.

However, spouses and civil partners can pass unlimited sums to one another on death without IHT applying. So, money previously held in the deceased’s ISA can be passed to the spouse and then added to their expanded ISA allowance, effectively continuing the tax-free protection on this money.

In the case of stocks and shares ISAs you can instruct your ISA provider to either sell investments and pay the proceeds to the beneficiary or - if you both have the same ISA provider - transfer the investments direct to their ISA without the need to sell assets.

Bear in mind that the exemption for gifts to spouses does not extend to other family members, including children. We recently answered a different question relating to that here.

If you are concerned about Inheritance tax, there may be ways you can mitigate your liability. Check out this recent article on eight exemptions to help you cut and IHT bill.

If you are not confident in planning your financial legacy our professional advisers may be able to help.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.