While same-sex marriage was legalised in 2014, civil partnerships continue to offer same-sex couples equal rights and responsibilities to marriage.
And, just like marriage, entering into a registered civil partnership impacts all your financial arrangements. It has implications for Wills and intestacy, insurable interests, maintenance and share of property if you dissolve the partnership, state benefits, pensions, inheritance tax, income tax and capital gains tax. It also impacts on areas of immigration and nationality.
A civil partnership must be registered however to have the same benefits as a marriage. Unless your civil partnership is registered, you will have no more protection than if you were in a co-habiting heterosexual relationship.
Registering a civil partnership means that any Will written under the law of England and Wales and Northern Ireland will automatically be revoked. This doesn't apply to a Will written under Scottish law, however.
Anyone in a registered civil partnership will be protected in the same way as a spouse if their partner dies without having made a will. If you're thinking about a Civil Partnership though you should make sure that you both review your Wills, especially if either of you have children or your Will includes provision for inheritance tax.
When it comes to inheritance, the tax exemption that applies when leaving everything to your spouse has now been extended to civil partners under the Civil Partnership Act. Similarly, the exemption relating to gifts in consideration of marriage now includes gifts in consideration of civil partnership.
This means you may no longer need any plans you've already made in relation to inheritance tax (IHT), such as single life policies to meet first death IHT liabilities.
Again, as with a spouse, civil partners now have unlimited insurable interest in each other and you can hold life of another and joint life policies as part of your partnership. This is especially relevant if you wish for any children to be beneficiaries on the second death of the partner.
There are many other possible IHT planning benefits which civil partners should now consider, like trusts, will trusts and insurance plans. After entering a registered civil partnership, you will need to reassess all your IHT arrangements.
Civil partners can also transfer assets to one another without having to pay Capital Gains Tax (CGT) on the usual 'no gain/no loss' basis that married couples benefit from.
Because estates and income can be equalised by transferring assets without incurring a tax penalty, civil partners can arrange their IHT and tax matters to maximum advantage, in the same way as spouses.
IHT plans that you'd already made as a couple may have been subject to legislation for pre-owned assets tax (POAT). But as civil partners have equivalent rights to married couples when it comes to tax, POAT isn't applicable and you won't have to undo any of your provisions.
How will my civil partnership work abroad?
Countries in Europe, as well as Australia and certain US states, have similar civil partnership legislation to the UK and some will recognise UK partnerships and vice versa.
But, even if there is similar civil partnership legislation as the UK, other countries may not recognise a civil partnership as equal to marriage, particularly when it comes to tax and intestacy matters. Or they may not recognise a UK civil partnership as equal and you may have to register a civil partnership again in the relevant country.
Therefore, if you have overseas property, either you or your partner have non-domicile status, or you are thinking about moving abroad, you must check the status of a UK civil partnership in the relevant country, especially in relation to tax and intestacy.
Are there any negatives to a civil partnership?
Just as civil partners have the same rights as a married couple, they will also be subject to the same tax responsibilities. If you both own properties you will have to name your main place of residence within two years of entering into a civil partnership, and you can lose Capital Gains Tax exemption on the other. Any provisions, including those arranged before your civil partnership, may be subject to various pieces of anti-avoidance legislation, including those restricting transactions between spouses and partners, such as settlor interested trust rules.
How do I make sure my civil partnership is legally registered?
- You will need to register your civil partnership in front of a registrar and in the presence of two witnesses.
- Similarly to marriage, public notice must be given. This is a minimum of 15 days in England and Wales.
- Because civil partnerships, and now same-sex marriage, was only available until relatively recently, some of those wishing to now enter into a legal arrangement may not have sought a divorce from a previous marriage. As with marriage though both parties must be single before registering a civil partnership.
Inheritance tax planning or Will writing is not regulated by the Financial Conduct Authority.
Related ArticlesCapital Gains Tax | Inheritance Tax
This article (Civil Partnerships) is intended to provide a general appreciation of the topic and it is not advice.
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Article expiry: 05 Apr 2018