It is clear that ISA’s can be left between spouses - the well established mechanism for the survivor having a one off allowance to the value of the deceased’s ISA and thus “copying and pasting” across from deceased to survivor.
Question - what if the deceased’s ISA forms part of a life interest will trust with the spouse as life tenant (and the normal right to occupy family home etc).
My reading suggests ISA’s lose their tax free wrapper status 3 years and 1 day after death, so if the Will Trust continues for longer than 3 year 1 day, what happens then? Does is suddenly fall into CGT charges on trading gains within it, and income tax on the income it produces?
Fully appreciate the ISA could be carved out as a named exception in the Will, but if testator has already lost capacity and therefore no more wills are likely and that document is effectively locked now, the problem is unavoidable perhaps.
Thanks for your advice.