As of the 31st of December 2019, heterosexual couples in England and Wales can choose to formalise their relationship by entering into either a civil partnership or a marriage. The Civil Partnerships Act 2004 first introduced the status of ‘civil partnership’, but for same-sex couples only. In 2014, Rebecca Steinfeld and Charles Keidan, a mixed-sex couple whose application for civil partnership was originally rejected because they were not a same-sex couple, challenged this law through the process of judicial review. After a unanimous landmark decision by the Supreme Court, the Act was amended as it was found to be incompatible with article 14 of the European Convention on Human Rights.
Civil partnership vs. marriage
First, what are some of the key differences between the two statuses…
The government expects approximately 84,000 heterosexual couples will form civil partnerships in 2020. Many of these couples will opt for this status due to being opposed to the religious connotations associated with marriage or their desire to simply not marry for personal reasons, yet they seek legal recognition of their relationship.
With regard to the process of entering into each union, marriages traditionally involve a ceremony where the couple will express vows to each other, often in the presence of family and/ or loved ones and become 'spouses'. In a civil partnership, the process involves the signing of a document where the partners become ‘civil partners’.
Next, let’s take a deeper look at the impact of one’s relationship status if they were to pass away.
How are Wills affected?
In England and Wales, after a marriage, any existing Wills are automatically revoked and become invalid. For this reason, updating one’s Will is a vital step as soon as possible after getting married. If one passes away after getting married but before creating a new Will, the estate would be distributed following the rules of intestacy.
If a spouse has a valid Will, then the surviving spouse will inherit any assets according to the terms of the Will.
In a civil partnership, the rules are identical to marriage.
What about Inheritance Tax?
To keep things simple, civil partners are treated the same as married couples for tax purposes. In other words, Inheritance Tax exemptions that are made available to a surviving spouse who is a beneficiary of their spouse’s assets, are also available to surviving civil partners. Spouses and civil partners are also able to transfer their unused nil rate band allowance to their partner in order to reduce the potential tax payable on the second death.
Conversely, cohabiting couples (i.e. neither married nor in a civil partnership) would not be exempt from Inheritance Tax when one person passes away, therefore taxes would be payable on everything over £325,000 which is the current nil rate band. Additionally, any unused nil band rate allowances cannot be passed to a cohabiting partner and would therefore be lost upon the first death. As a result, married couples or civil partners have the potential to pay much less tax than cohabiting couples.
So, what does it all mean?
While there are some differences in the process and titles used in marriage versus civil partnerships, honestly, not much else is different, particularly as it relates to the process and components of estate administration. Today, everyone has the same opportunities regarding their relationship status, including the stability and legal benefits that were only available to married couples or same-sex civil partners. With this new legislation that allows heterosexual couples to enter into a civil partnership, many of the 3.3 million cohabiting couples in the UK may consider this option to add legal recognition to their relationship.