What is an APS allowance
When the holder of an ISA account dies, their spouse automatically is entitled to an APS allowance that is equal to the valuation of their deceased spouse’s ISA account.
The surviving spouse can then “subscribe” that figure into their own ISA account. If they do not hold an ISA account, then one can be opened in order to utilise their APS allowance. Using the APS allowance is not actually considered a subscription and hence does not affect the spouse’s annual ISA allowance, nor do they need to have a valid ISA application form. There is also no limit to how high the APS allowance can be.
Note: the APS allowance is not connected to the deceased assets and, as such, the spouse is entitled to the allowance regardless of whether they are the beneficiary of the deceased’s estate. Hence, the spouse may use the deceased ISA account to satisfy the allowance or they may use their own funds.
How is the APS value calculated?
The surviving spouse’s APS allowance is the higher of the deceased’s ISA portfolio as at date of death or date of transfer to the surviving spouse’s ISA.
What is needed to use your APS allowance?
If the spouse is using their own funds and their ISA is held with the same provider as their deceased spouse, then they will need only to sign an APS authority form and provide the necessary funds.
Where the assets held in deceased’s ISA account is being used to satisfy the APS allowance, then the ISA provider will need legal proof that the spouse is entitled to use those assets. This will usually take the form of providing a copy of the Grant of probate and an instruction from the deceased estate’s executors instructing the provider to use the deceased’s assets for this purpose.
Can the stock held in the deceased’s ISA be used for an APS allowance?
The answer is yes, where the deceased and spouse’s ISA are held with the same provider, and the executors have given their authority.
As stated above, the APS allowance value will be calculated as the higher value of the stock and cash as at date of death, or date of physical transfer from the deceased’s ISA to the spouse’s ISA.
If the spouse has opened an ISA with a different provider to the one where the deceased’s ISA was managed, then the APS can only be done in cash.
What is an APS transfer?
The spouse is under no obligation to use their APS allowance with the same provider as the deceased. If they do have, or open, an ISA with a different provider, then they will need to sign and complete their ISA manager’s APS transfer form.
The spouse’s manager will send the APS transfer form to the deceased manager, whom will issue a declaration stating the value of the APS allowance and confirming that they will not use or transfer the allowance to any other provider.
The spouse will then only need to sign an APS authority form, in order to use their APS allowance.
Note: an APS transfer consists only of the abovementioned declaration. It is not connected to the assets held within the deceased’s ISA. If the spouse is the beneficiary of the deceased’s estate, then transferring those assets will be a separate process.
To reiterate, after an APS transfer, the APS allowance can only be done in cash. The stock held in the deceased’s ISA cannot be transferred into the spouse’s ISA account.
Deadlines
For APS subscriptions in cash, they must be done within 3 years of date of death, or 180 days after the completion of the administration of the deceased’s estate, if this is greater than 3 years. This is to protect the spouse’s APS allowance, where there is a dispute or delay in completing the administration
For APS subscriptions using the stock held in the deceased’s ISA (in-specie), this must take place within 180 days of the beneficial ownership of those assets passing to the spouse. Often managers will take this date as the date their receive the executors’s instructions.