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Same-sex relationships: the law falls in line at last
Planning a December 'wedding'? Plan your joint finances too, advises Maria Scott
Sunday September 25, 2005
Christmas will not be the only excuse for parties in many homes throughout the country this year. Hundreds of gay couples are planning December 'weddings' as they rush to have their relationships recognised in law for the first time.
The Civil Partnerships Act, which gives same-sex couples the right to legal recognition virtually identical to that of marriage, will be introduced on 5 December, and registration ceremonies can be enacted from 21 December.
The government expects between 11,000 and 22,000 people to be in civil partnerships by 2010. It has launched a campaign to publicise the legislation and Stonewall, the gay rights group, last week launched a guide, Get Hitched, explaining the practical aspects of civil partnership.
Same-sex partners who register their relationships will gain a range of rights that previously were denied them even if they had lived together for decades in stable relationships: These include:
· recognition as relatives entitled to make decisions on a partner's medical care
· the right to receive payments from a dead partner's pension scheme; not all schemes recognise unmarried partners at present
· the right to pass assets to a registered partner on death free of inheritance tax
· rights under the rules of intestacy to receive a share of a partner's estate on death if he/she has made no will
· rights to certain state benefits on the death of a partner
· the ability to obtain parental responsibility rulings from the courts over the care of each other's children
· recognition by the courts after a relationship breakdown to maintenance for children of the relationship or a dependent partner
Before the partying starts, however, it may be worthwhile considering how civil partnership will affect the financial and legal arrangements you have with your partner. Solicitors are recommending that same-sex couples take action now to ensure they protect themselves in preparation for a December wedding. Anne Lewis, a partner with solicitor Cripps Harries Hall, says: ' There are a number of situations where civil partnership may affect you in ways you had not realised.'
Suzanne Kingston, a partner with London solicitor Dawsons, says it may be appropriate for couples to draw up contracts setting out how assets would be divided if the registered relationship breaks up.
As with pre-nuptial contracts for heterosexual couples, these agreements are not strictly binding under English law, but the courts may take them into account when a relationship breaks down.
Kingston says that pre-registration agreements may be appropriate if one partner has more money than the other and where a relationship is not longstanding. Other factors include: inherited assets that either party wishes to protect, or where one or both partners were born in other countries and this would affect the splitting of assets.
Ownership of property
This may be an appropriate time to decide whether property should be owned jointly, as joint tenants, which means that if one partner dies, the property passes automatically to the other, or as tenants in common. With the latter system each partner retains ownership of a share and although it may go to the registered partner if there is no will, this will not necessarily be the case.
A will may be necessary to ensure a partner is protected. Owning property as tenants in common can be useful when planning to avoid inheritance tax.
When you register a partnership, this will automatically invalidate previous wills. So partners planning registration should make new wills, which can be drafted 'in contemplation of registration', to come into effect as soon as the relationship is legally recognised. Registered partners will have the same rights as married spouses under the rules of intestacy.
In England and Wales, children or parents are entitled to a share of an estate over £125,000 (there are similar rules in Scotland but the entitlements differ).
It will not be safe to assume that registration of a relationship will protect a surviving partner fully where there is no will.
Registered partners will be able to pass on assets to each other on death free of inheritance tax, as married couples can. But couples with significant assets may wish to consider how to make the most of their new inheritance tax status.
Even though there will be no IHT to pay on the first death, that partner's personal IHT-free allowance, or nil-rate band - currently £275,000 - will be lost unless arrangements are made to use it. When the second partner dies, only one nil-rate band will be set against the value of the combined estate. Many husbands and wives write wills giving instructions for trusts to be set up on their deaths to receive assets up to the value of the nil-rate band.
Typically, assets in the trust will benefit children but money can be passed on to other survivors if there are no children. If a share of a couple's home is to be put into trust, ownership must be as tenants-in-common.
But specialist advice is needed; if these arrangements are not properly organised there could be tax charges.
If couples plan to give assets to each other or put property into joint names, it is best to delay this until after registering their partnership. Otherwise the transfer will be treated as a lifetime gift and the giver must survive seven years to be certain the money will escape IHT.
Capital gains tax
If a couple owns two properties, one will potentially become liable to capital gains tax when a partnership is registered as only one will be viewed by tax authorities as the main residence.
Anne Lewis at Cripps Harries Hall advises couples to nominate - and inform HM Revenue & Customs - which property is to be their principle residence; this will be the one that is free of CGT on sale. Normally this would be the property where the price has increased most.
Where partners have shares in a business together, the value of the shareholdings could be increased through registration.
As with married couples, the shareholding may now give the couple a controlling interest in a business, increasing the value of the investment. This will affect the value of the holding when assessing each partner's liability for inheritance tax.
If each partner owns a business, says Lewis, registration could result in the companies being viewed as associated, resulting in at least one of the companies losing its right to a lower rate of corporation tax.
Further information on civil partnerships, including information on how to become registered is available from Stonewall, telephone: 020 7881 9440 and website: www.stonewall.org.uk and also from the government's Women and Equality Unit, Tel: 020 7215 5000 www.womenandequalityunit.gov.uk