Civil partnerships: Offering financial security for cohabiting couples
On 31 December 2019, mixed-sex couples were officially able to enter into civil partnerships. The rise in the number of cohabiting couples highlights that marriage is no longer a main priority for many, and that civil partnerships could be a popular alternative.
What is a civil partnership?
Couples in a civil partnership benefit from the same rights and protections as their married counterparts. However, it is free of religious connotations and ideas of ownership, making it an attractive option for those for want to legally commit to each other in a less traditional manner.
What benefits does a civil partnership offer?
There are a host of reasons why a couple might opt for a civil partnership, but one of the main reasons is the financial security it offers.
- Income tax – Civil partners are entitled to the same income tax allowance as married couples.
- Inheritance tax – Civil partners are completely exempt from inheritance tax should they inherit their partner’s estate. The surviving civil partner can also effectively double the amount that they can leave to family and friends without having to pay inheritance tax, by transferring the first to die’s unused nil rate band.
- ISAs – Civil partners can inherit their partner’s tax-free ISA allowance, by using the Additional Permitted Subscription (APS).
- Transfer of capital assets – These transactions become tax neutral for civil partners, allowing them to move funds and assets between them without generating an immediate charge to capital gains tax.
- Pensions – Private and occupational pension schemes offer the same rights to civil and married partners. The surviving partner may be able to claim a higher state retirement pension, based on the first to die’s national insurance contributions.
However, for those wishing to enter into a civil partnership, there are still administrative tasks that must be completed, such as the drafting of new wills and other documents. Assets should also be considered and advice surrounding prenuptial agreements should be sought.
Estate planning is vital no matter the legal status of a relationship in order to safeguard assets for themselves and their wider families. Contact Matt Parr on 01908 304 420 to find out more about how our private client team can help you.
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