If you made any payments to your lifetime ISA before death and the 25% government bonus hadn’t yet been claimed, Dodl will arrange for this to be added to your account.
No more payments can be made into your lifetime ISA after your death, but it will keep its tax benefits. So any interest, dividends or growth on investments after the date of death will continue to be tax free – until the first of the following events happens:
the lifetime ISA is closed
the administration of your estate is completed
three years after your death
Your lifetime ISA will then be paid out according to instructions from the people dealing with your estate.
The 25% government withdrawal charge doesn’t apply if your lifetime ISA is withdrawn and closed following your death – but its value will form part of your estate so will be subject to inheritance tax.