Following on from our earlier blog on 10 things you need to know on opposite-sex civil partnerships, here are the next five things to consider for clients considering or planning an opposite sex civil partnership, or indeed any civil partnership.
In this part of opposite-sex civil partnerships we look at what should be considered regarding your estate.
OPPOSITE-SEX CIVIL PARTNERSHIPS: 10 THINGS YOU SHOULD KNOW – PART 2
Are there capital gains tax (CGT) benefits of entering into a civil partnership?
Yes, as there are special rules in relation to capital gains tax on gifts of assets to a civil partner. Provided you are living together if you give assets (i.e. shares or property) to your civil partner you do not have to pay CGT.
Using our example, Colin bought some shares 10 years ago when they were worth £2,000, they are now worth £20,000 and he wants to sell them. If he were to do so he would have to pay CGT on the gain above the CGT annual exempt amount, currently £12,000, so tax on £6,000. However, before selling the shares he takes advice and is informed that he could transfer some of the shares to his civil partner to utilise her CGT annual exempt amount as well. Patsy will inherit the shares from him at his base cost, i.e. what he paid for them, but can deduct her own CGT annual exempt amount from the gain, meaning no CGT on the sale of the shares.
As civil partners can you claim the Marriage Allowance?
Yes. Continuing the example above, Patsy earns under £50,000 a year and is a basic rate taxpayer and Colin is a non-taxpayer. As civil partners, he can transfer up to £1,250 of his personal allowance to Patsy, thereby reducing her income tax liability by £250 every tax year.
As civil partners can you claim Bereavement Support Payments?
Yes, as they are in an opposite-sex civil partnership with children, if Colin dies whilst Patsy is under the state pension age, she could be eligible for bereavement support payments, so a one off payment of £3,500 and a monthly payment of £350 for 18 months after his death. Had they not had children she would have been entitled to a one-off payment of £2,500 and a monthly payment of £100 for 18 months. Colin must have made national insurance contributions for at least 25 weeks during his working life for Patsy to be able to claim the payments. Bereavement support payment claims can only be back dated 3 months so it is important to claim as soon as possible to avoid losing out.
Patsy could not claim this if she and Colin were living together but were not married or in a civil partnership.
What about pensions for opposite-sex civil partnerships?
Workplace pension schemes are legally required to offer the same benefits to civil partners as they do for married couples.
As a civil partner, you may be able to claim a state retirement pension based on your partner’s national insurance contributions.
Will becoming civil partners revoke my Power of Attorney?
No, becoming civil partners does not end your power of attorney.
If you are considering entering in to a civil partnership, or have queries about how your estate would be dealt with pre or post-civil partnership, for more information or advice please contact Alison Craggs.