Any funds held in a S&S ISA form part of your estate when inheritance tax is calculated.
ISA's protect your funds from income taxes and capital gains tax but NOT inheritance tax.
If you exceed your inheritance allowance, there may be a 40% tax for your family on the excess including money held in ISA.
If you and your spouse use the same ISA provider, they may be able to transfer assets directly to their own ISA. Any transfers between spouses are exempt from inheritance tax.
For further information see below:
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Individual Savings Accounts (ISAs)
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How Inheritance Tax works: thresholds, rules and allowances
- Inheriting an ISA from your spouse or civil partner