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Civil rights

My partner and I want to ensure our financial arrangements are in order as we are about to have a child. As we are both female, I am aware that we need to be more organised than other couples, especially should anything happen to either of us.

The Civil Partnership Act, which came into force on December 5, 2005, has significant implications as it brings in a new type of legal relationship, the registered partnership.

The Act changes many things such as the rules of intestacy, the administration of estates, the law relating to wills and how life insurance can be arranged.

There is no intention to introduce same-sex marriage but, in many ways, the legal standing of civil partnerships is the same as marriage.

If you do not wish to enter a civil partnership, a number of financial arrangements need to be put in place in order to commit to each other. Married couples may also need to address the same arrangements but to a lesser extent.Arrangements include ensuring a valid nomination of beneficiaries is in place for pension benefits, executing wills, ensuring where possible that joint accounts are holding common monies and dealing with resident status for partners from overseas.

When considering property purchases, lenders are interested in credit scoring, ability to pay and property valuation, not the living arrangements of a couple. The title and mortgage deeds should be set up as joint tenants. Where a partner wishes to add a name to the deeds, this will be deemed to be a gift which is a potentially-exempt transfer, so he or she will need to survive for seven years in order for the transfer to be free of inheritance tax.

The execution of a valid will becomes important for many reasons. For IHT purposes, the inter-spousal exemption does not apply and therefore any assets bequeathed over the current threshold of £275,000 will be subject to IHT at one of highest taxation levels in the UK – 40 per cent.

Wills are also important to guide the executors in the distribution of the estate. When you have your child, remember that over 40 per cent of children in the UK are born to unmarried people and arrangements for caring for them could be contested where there is no will. Although a will in not legally binding in this context, it certainly helps minimise disputes. The use of a discretionary will trust for assets left on death may also be appropriate.

It is fairly straightforward to complete a nomination of beneficiary or expression of wish form to guide the payment of pension benefits. It is important that the nomination is clear so that the trustee knows who the intended beneficiary is. Simply stating “my partner Kate” or “my wife” is insufficient.

Given that heterosexual and gay and lesbian relationships are subject to break down at about the same rate, one cannot assume that relationships will last for ever. Nominations need to use full titles, addresses and even dates of birth. You should be aware that many pension scheme trustees and providers still demand proof of dependent relationship in the event of a claim and they may still ignore your wishes.

A civil partnership ensures that, upon death or the end of a relationship, a civil partner or former civil partner has the same rights as a spouse or former spouse.In taxation terms, if you give your partner assets as a gift, such as company shares or investments, you may be liable to capital gains tax where a married couple would be exempt.

Lesbians are not generally discriminated against for life insurance has been the case with gay men.

A regular review of the value of pension rights, protection policies and investments and how they are arranged should be made. Changing lifestyles, such as moving abroad or setting up a business, should also prompt regular financial reviews.

The basic aims of financial planning apply – to create financial independence for the individual and their dependants. This applies to all couples, regardless of their status. Financial independence comes when the property in which you live is paid for and there is guaranteed after-tax income greater than budgeted expenditure, whether or not that be by the “pink pound”.

Successfully constructing an investment portfolio depends on a variety of things but hinges on buying the right assets and maximising the tax-efficiency and security of investments to match both your risk profiles and investment outlook.


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