A fair deal soon for partners

Same-sex couples have finally won their own 'marital' money rights, says Faith Glasgow

Getting married gives couples some important financial protection - and now MPs have finally backed plans for civil partnerships, same-sex couples can win the same rights. From 5 December, when the new Civil Partnership Act comes into operation, it will be possible for gay couples to get legal recognition for their relationships, and although there's a 15-day waiting period between giving notice at the registry office and returning to sign the register, the first official civil partnership celebrations will be in full swing from 21 December.

Getting married gives couples some important financial protection - and now MPs have finally backed plans for civil partnerships, same-sex couples can win the same rights. From 5 December, when the new Civil Partnership Act comes into operation, it will be possible for gay couples to get legal recognition for their relationships, and although there's a 15-day waiting period between giving notice at the registry office and returning to sign the register, the first official civil partnership celebrations will be in full swing from 21 December.

The Act crept unobtrusively into law on 18 November last year, squeezed out of the media limelight by the parliamentary furore over fox hunting. But despite its low-key arrival, civil partnership is a huge deal for same-sex couples, because it will effectively give them the same rights that married couples have in civil law. In the event that the relationship breaks down irretrievably, the new legislation also provides a formal divorce-like route through the courts (known as dissolution), to which there will be rights attached as there are for divorcing couples.

According to Alan Wardle of the gay rights campaign group Stonewall, which lobbied hard to get the Act through in its present form, the changes are everything the gay community could have hoped for. "It does address all the relevant issues; it's great, because it finally gives same-sex couples equality in all the practicalities, but also the legal recognition and respect they deserve."

"It's extremely wide-ranging," agrees Julian Washington of Mayfair law practice Forsters. "Just as marriage affects a couple's tax situation, pension rights, rights in family law, and rights in the event of splitting up or the death of one partner, so does the Civil Partnership Act."

The legislation will mean that same-sex couples will get the same treatment as married partners (for better or worse) when it comes to state income-related benefits such as unemployment benefit. Indeed, Louis Letourneau, of Isis Financial Planners, points out that this aspect of the Act extends to same-sex couples living together, regardless of whether or not they are civil partners.

State pension benefits for civil partnerships will be equalised, and couples will be able to make unrestricted gifts to each other without worrying about capital gains tax liability. They'll also be able to take legal parental responsibility for each other's children, and they'll be recognised as a couple for immigration purposes.

If the relationship is formally dissolved, each partner can expect a fair share of the jointly owned property and some "appropriate" contact with any children involved. And if one partner dies, the other will be able to claim survivor rights on the state pension and bereavement benefits. Importantly, he or she will also benefit from the same exemption from inheritance tax as married couples (and be recognised under the intestacy rules if there is no will).

This latter change means that scenarios such as that given by Chris Morgan, of Compass Independent Financial Advisers, should become a thing of the inequitable past. "I had a case last year where I was called to see a couple, one of whom was dying," he says. "They had owned their house together for about 30 years, and it was now worth about £600,000. But under the law as it stands, the home and other assets do not pass tax-free to the survivor on the partner's death, as they would for married couples. He was, therefore, faced with an inheritance tax bill of £70,000, and in order to enable him to stay in his home, we had to draw the money off the value of the property."

Letourneau highlights the problem faced by certain unfortunate couples in the 12-month period between the Act being passed and coming into force. "I have already seen the situation where a long-standing couple have plans to register for civil partnership in December, but one partner dies in the meantime. In the case I saw, they had been together 25 years and the survivor has been left with a huge inheritance tax bill which he'll probably have to sell the house to pay," he says.

Letourneau believes such misfortune, in this hiatus before the Act's implementation, is a great opportunity for the Inland Revenue to show it has feelings. "I have been asking the Revenue to show compassion over the issue of inheritance tax in these rare cases, but I'm not sure how familiar it is with the concept," he says.

The date for the Civil Partnership Act's introduction has been set, but there is still a great deal to do on the specific regulations. As Washington points out: "Although civil partnership is an entirely new legal status, there are many similarities to marriage in terms of the rights and obligations that will arise." Because of this paradox, he explains, many of the Act's 429 pages are taken up with amendments to other pieces of law: "Everything from the criteria for Jobseeker's Allowance to the Explosive Substances Act 1883 is being revised to bring the treatment of civil partners into line with spouses."

Letourneau still harbours concerns over the details that will come out over the coming months. "The Act leaves ministers with wide powers regarding the implementation of civil partnerships, so I am a bit worried," he admits. One announcement for which he and other campaigners will be listening particularly closely is that relating to the tax treatment of same-sex couples, which should address the vexed issue of inheritance tax. This is due in the next Finance Bill on Budget Day - 16 March.

But Letourneau is also keeping a close eye on the implementation of pension plans. "My main worry concerns retrospective pension rights," he explains. "If someone is retiring in three years, will they have only three years of survivor pension benefits to pass on to their partner, or will there be benefits attached to the entire pension, as there are for a married couple? It's not clear at this stage because, although the Act deals with the state pension, it makes no mention of rights in relation to private pensions. I'm pretty confident on equal rights for civil partnership pensions going forward, but to be honest I'll be surprised if we get them fully backdated, so there may be more work to do there."

Washington suggests there are legal issues that couples planning to register in December could usefully think about. "Same-sex couples tend to be relatively clued up financially, partly because they don't make any assumptions about supposed common-law rights in the way that many heterosexual unmarried couples do," he says. "They're more likely, for example, to have wills. If so, they will need to review their wills when they register, as civil partnership, like marriage, means that existing wills are automatically revoked."

Washington also anticipates that many couples registering in the early days of the new regime will have been together for many years and built up substantial assets between them over that time. In such cases, he says, they should consider using a pre-registration agreement - the equivalent of a pre-nuptial contract for married couples - to specify what happens to their wealth if they split up.

"It's an interesting case for lawyers, because pre-nups are not recognised by the courts, on the grounds that marriage is supposed to be for ever," he observes. "But civil partnership has no history and no such baggage, so pre-registration agreements cannot be said to undermine it in that way." Washington believes it's likely that the dissolution courts will tend to uphold any agreement in place, especially in cases where no children are involved.

'Legal security will make a difference'

Phil Borge, a PR executive, and his partner, Garry Baxter, who works in telecoms, have been together four years. "I'm 24 and Garry's nine years older, but from an early stage we were both certain this was It," says Phil. The two rented together before buying their home in Peckham, south London, a couple of years ago.

They plan to register as civil partners in December. "Garry was married before we got together, and he has a 10-year-old daughter whom we see regularly," says Phil. "As things stand, if something happened to him, his life insurance would cover his half of the mortgage; I would still own half of the flat but I wouldn't necessarily be able to stay there because his daughter, as next of kin, would have a claim to a share of it.

"I think it's fair enough for her to have a share of his estate, and we need to make a will to clarify that - but it will be good to know that as his partner I have the legal right to remain in the flat.

"Partnership will be important for us, to show our commitment and for practical reasons. We are thinking about some career changes in the future which will mean we are much more financially dependent on each other, and greater legal security will make a big difference."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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