What Happens to My ISA When I Die?

When an ISA provider is told that the account holder has died, the account is usually frozen in a similar way to an ordinary bank account, and any regular contributions or standing instructions stop. The money remains invested or held as cash within the ISA, but it becomes part of the deceased's estate rather than continuing to be added to during the administration period.

The ISA's tax-free status does not necessarily end immediately. Many providers allow the account to continue as a 'continuing ISA' for a period after death, meaning any interest, dividends or growth remain tax-free until the earlier of the administration being completed, the account being closed, or a set period passing, commonly up to three years. After that, further growth is normally treated as taxable in the usual way.

The value of the ISA is paid out to the personal representatives and distributed according to the terms of the will, in exactly the same way as a bank account or other cash asset. There is no special rule that sends an ISA automatically to a spouse or any other particular person just because it is an ISA, unless the will or the intestacy rules direct it there.

This is a common misunderstanding, particularly because the additional permitted subscription is sometimes described loosely as the spouse 'inheriting the ISA', when in fact what they inherit is an extra tax-free allowance, not necessarily the underlying money itself if the will directs it elsewhere.

When someone dies holding an ISA, their surviving spouse or civil partner is entitled to an additional permitted subscription, which is an extra ISA allowance broadly equal to the value of the deceased's ISA at the date of death, or the value when the ISA is closed if that process takes some time. This allowance is separate from, and in addition to, the survivor's own annual ISA allowance.

Importantly, this allowance belongs to the surviving spouse or civil partner regardless of who actually inherits the underlying money under the will. Even if the ISA funds themselves are left to someone else entirely, the surviving spouse can still use their own money to subscribe up to that additional amount into their own ISA, preserving an equivalent amount of tax-free saving capacity that would otherwise have been lost.

Whoever administers the estate will need to notify each ISA provider of the death, providing a death certificate and evidence of their authority to act, such as a grant of probate where required. Providers will confirm the value of the ISA and explain their own process for closing it or transferring it to a beneficiary.

If the deceased's spouse or civil partner is entitled to the additional permitted subscription, it is worth contacting the ISA provider, or a new provider if preferred, to understand the deadline and paperwork involved, since this varies between institutions and is sometimes overlooked simply because it is not well known.

Because ISAs are often held with online-only providers and may not generate paper statements, they can be easy to overlook when someone is trying to establish the full extent of an estate. It is worth keeping a clear note of which providers hold your ISAs, along with your other savings and investments, so that your executors know where to look.

This is exactly the kind of detail included in the estate record within My Posh Will's guided online service, alongside a will that clearly sets out who should inherit your estate, including any ISA funds. A single will costs £69 and mirror wills for couples cost £89, both one-off payments with lifetime access, and the service includes clear instructions for signing and witnessing to make sure the will is valid.