ISA's - Inherited extra ISA allowance (Additional Permitted Subscription, APS) - UK

When an ISA saver dies who was married or in a civil partnership, the surviving partner is entitled to an extra ISA allowance that is equal to their partner's ISA balance on the date they died.

This inherited extra allowance is called the additional permitted subscription (APS) allowance. It means that a deceased spouse can pass on their ISA "wrapper" with the tax advantages of saving into an ISA to their surviving partner. 

How to model an inherited additional ISA allowance (APS) in Voyant

For a surviving spouse or partner to inherit an ISA allowance (APS) in Voyant, the survivor must have an ISA in the plan to act as a container or wrapper in which to deposit funds.

This could be an existing ISA with funds on deposit at the start of the plan.

Or it could be a hypothetical future ISA with a zero balance at plan start.

In either case, this ISA must be owned by the survivor who must be the spouse or civil partner of the deceased in order to inherit their ISA allowance.

On the Dashboard > Savings and Investments > ISA complete the Spousal Inherited Allowance Contribution information at the bottom of the Basic screen.

Contribution £:  Specify the amount of the allowance that is to be received by the ISA. Enter 100% if the ISA is to receive the full inherited allowance. The allowance could be entered as a percentage or a specific monetary amount. 

Number of Years: Specify the number of years the inherited allowance will be used. Enter 1 if the entire allowance is to be used in the year of the spouse's or partner's death. A maximum of 3 years could be entered if this allowance is to be utilised over a three year period. 

The additional ISA allowance can be used for up to 3 years from the date of death or 180 days after the completion of the administration of the estate. 

With these settings in place, click Done to save your changes.

You can view the future deposit of funds upon death in the Year View>Investments

This method will create a spike in your cashflow. If you want to prevent the spike showing in your cashflow you would not complete the Spousal Inherited Allowance Contribution information, but would use the method below instead;

Transfer from survivor's default surplus account into the survivors ISA at Mortality Event

Upon death the survivor will receive the inherited ISA benefits into the default surplus account. Set up a Transfer from the default surplus account to the surviving spouse's ISA at the mortality event.
 
This will not create a big spike in your plan as transfers between accounts are hidden from the charts. The transfer into the survivor's ISA will show in Year View > Investments at the mortality event.

 

Set the Spousal Inherited Allowance Contribution in the survivor's ISA to 0%, to prevent the spike in your cashflow.

From the survivor's ISA, click Transfers (menu on the left hand side) and select the survivor's default surplus account in the Transfer From field. Input the Amount to be transferred (estate value of deceased client's ISA). In Timing, select the first mortality event.

 

 

Click Done.

 

Once this has been done you will see the Dashboard chart change. You can check the transfer is working as expected by clicking on Year View > Investments and scrolling to the year in question. 

 

You can see that there is no spike in the cashflow however, please bear in mind that the actual ISA deposit could be less than the value of the deceased client's ISA if the funds are needed to to pay other expenses. 

 

Selecting Yes in the Transfer Before Paying Expenses field of the transfer instruction stops this happening.

 

NOTE: If the annual contributions for the surviving spouse's ISA are set to Maximum Allowed, there may be an additional contribution for the normal ISA allowance on top of the spousal allowance in the year of mortality. Change the ISA contribution to Amount or Amount with Inflation and specify the amount to be contributed annually if you don't want this to happen.