Previously, when an ISA holder died, the account closed and the tax-free status of the investment terminated. The new regulations reverse this entirely – provided certain conditions are satisfied.

“Now, for example, if your partner passes away leaving an ISA valued at £25,000 at the date of their death,” James says, “you will be entitled to an ISA allowance in the 2015/16 tax year of £40,240 – your annual ISA allowance of £15,240 plus your inherited allowance of £25,000.”

To claim, the surviving spouse or civil partner must already have an ISA account managed by the same account manager as the deceased’s account (unless HMRC authorise another account manager to accept the subscription), and have been living with the deceased account holder at the date of death and not be separated by a court order or a deed of separation. “I expect HMRC will interpret ‘living together’ to also include one of the couple living in a care home owing to illness or old age, for example,” notes Andy. “In this way, the provision emulates the married couples allowance.”

If the departed partner holds more than one ISA, these will be combined to create an overall sum – the surviving partner can then claim it, in addition to their own ISA allowance for the tax year. This means the new regulations allow for the opening of additional ISAs above and beyond current limits. Any additional subscription must be made with the ISA manager who maintained the deceased’s account, unless permission is given by HMRC to use another manager.

Those who wish to capitalise on the increased ISA allowance must do so within three years of their partner’s death, or 180 days after completion of their partner’s estate being fully administrated.

Spouses will be entitled to the allowance even if the ISA assets are left to someone else in a will or are used to meet expenses from the estate. No one else will be entitled to this allowance, even if they have received the assets from the ISA. The new freedom presents couples with fresh planning opportunities, and will almost certainly also affect how ISA holders structure their Will.

“There is clearly an advantage for the surviving spouse to gain the tax advantages of their partner’s ISA, which previously existed only for the benefit of the ISA holder themselves,” says James. “If gaining the tax-free income is the most important element for the surviving spouse, then this announcement is a positive development for them.”

Though this change will be welcome to many, it is important to bear in mind that depending on one’s situation, there could be superior tax-efficient financial tools on offer than an ISA – if one wishes to lock money away for children, for instance, or other future inheritors.

“In many cases, a surviving partner will be elderly themselves,” notes James. “Many elderly people hold their investment portfolios until death, at which point capital gains are exempt from being taxed anyway.”

Furthermore, concerns have been expressed about the change. Consumer group Which? made 156 anonymous calls to 13 of the biggest banks and building societies in January, asking for information about the new Government rules on inheriting ISAs.

Which? said it found widespread confusion and ignorance about the inheritance transfer rules, with just 19 per cent of call handlers able to correctly answer questions.