The Civil Partnership Act 2004 came into force on 5 December 2005. The Act gives a same sex couple who register a civil partnership the right to be treated in the same way as a married couple in may respects. This can have drawbacks as well as benefits.

Probably the most important change for many couples is the availability of the spouse exemption for Inheritance Tax. Once they are civil partners, the couple will be able to leave property in their estate to their civil partner without a charge to IHT (this is subject to the limit for non UK domiciled civil partners). Presently, no such exemption applies.

The parties to the civil partnership may have already made wills to help ensure they receive at least part of each other’s estate on the first death or to mitigate the IHT payable on the surviving partner’s death. The registration of the civil partnership will invalidate any wills made before the civil partnership is registered (in the same way that wills made before a marriage are invalidated). So, in any event, any previous planning goes out of the window. The wills will have to be re-drafted, and along with that the IHT position should be reviewed. If the wills are not redrafted each civil partner will be considered not to have made a will (i.e. be intestate).

If a civil partner dies without making a will, the surviving partner will be treated in the same way as a widow or widower whose spouse died intestate. This means that if the deceased partner had children or a parent or brothers and sisters (or nephews and nieces) who are still alive, the surviving partner might not be entitled to all of the deceased partner’s estate.

In addition the Act includes provisions for maintenance for partner and dependents; assessment for child support; equal treatment for life assurance; employment and pension benefits; and all this should be reviewed when making a new will to ensure the surviving partner is able to inherit in the best possible and most tax efficient way.

The Act also has implications for Tax Credits, Capital Gains Tax and Corporation Tax for civil partners.

The change to Inheritance Tax announced in the 9 October 2007 Pre Budget Report affects Civil Partners as well as married couples. Provided the Civil Partnership is in place at the time when the first of the partners dies, any unused Nil Rate Band can be utilised by the surviving partner on their death. This means that if all the estate is passed to the surviving partner, they will be able to use 2x the Nil Rate Band on their death. But remember, it may be necessary to make a will to ensure this happens, depending on the size of the estate.