Civil partners and cohabitants life assurance issues 

Our society today is changing and more and more people are living together in ‘non-married’ situations.

Civil Partner:

A civil partner is either of two persons of the same sex who are;

  • Parties to a civil partnership registration that has not been dissolved or the subject of a decree of nullity or,
  • Parties to a legal relationship of a class that is the subject of an order made under section 5 (Recognition of registered foreign relationships) that has not been dissolved or the subject of a decree of nullity.

    Under the Act a civil partnership cannot be registered if;

  • The parties are within the prohibited degrees of relationship,
  • Either of the parties are already in a civil partnership,
  • Either of the parties are under age 18,
  • Either of the parties does not give consent,
  • The parties are not of the same sex,
  • Either of the parties are already married.

Cohabitant

A cohabitant is one of two adults, who can either be of the same or opposite sex, who live together as a couple in an intimate and committed relationship and who are not related to each other within the prohibited degrees of relationship, or married to each other, or civil partners of each other.

In deciding whether or not two adults are cohabitants the following will be taken into account;

  • The duration of the relationship,
  • The basis on which they live together,
  • If any financial dependence exists,
  • Any joint financial arrangements,
  • Whether or not there are dependant children, and the support arrangements for any children,
  • Whether the parties present themselves to others as a couple.

Qualified Cohabitant

A qualified cohabitant means an adult who was in a relationship of cohabitation with another adult and who was living with the other adult as a couple for a period;

  • Of two years or more, in the case where they are the parents of one or more dependant children, and 
  • Of five years or more in any case.

With the implementation of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 rights similar to those of a married couple have been conferred on registered civil partners and qualified cohabitants. And the tax changes proposed in the Finance (No 3) Bill 2011 currently being debated will also make positive changes to the tax treatment of these ‘non married’ couples.

The details of all the amendments made by recent legislation are not relevant for the purposes of thisupdate, however what is important to mention here is that the rights extended and the tax treatment will be different for both.

The new definitions introduced by the Civil Partnership Act are outlined as follows:

Succession and Inheritance Tax

Civil partners

Rights similar to legal spouses have now been extended to registered civil partners in the event of death. Under the Succession Act a civil partner is now automatically entitled to a portion of their deceased civil partners estate, subject to the needs of any children being met. (See revised Succession Act information provided). Also, as a result of separate legislation in the Finance (No 3) Bill the ‘spouse’ exemption from Capital Acquisitions Tax (Gift and Inheritance Tax) has also been extended to registered civil partners. So now civil partners are entitled to a portion of their deceased partners estate, and they can inherit it tax free.

Cohabitants

The same rights on death have not been granted to cohabitants. A qualified cohabitant now has the legal right to apply for provision out of their deceased cohabitants estate within six months of the grant of representation. However, it is not an automatic right, as in the case of a civil partner, and the cohabitant is only entitled to an amount after the spouse and civil partners rights have been satisfied.

It is also worth mentioning that, while the surviving cohabitant partner now has the legal recourse to claim from the estate of their deceased cohabiting partner, no change has been made to the capital acquisitions tax legislation which governs the payment of inheritance tax on the transfer of those assets. So while the surviving cohabitant may receive an award on foot of their application they may still have to pay inheritance tax on the value of the assets.

Financial Compensation Orders

Similar provisions to those in the Family Law Acts which allow a legal spouse to apply for a Financial Compensation Order dictating the treatment of life assurance contracts within 12 months of the date of the decree have been granted to registered civil partners. There is no restriction on when an application for such an order must be made. The same facility to apply for a Financial Compensation Order has not been granted to qualifying co habitants.

Other taxes

When all the proposed tax changes have been implemented registered civil partners will have much the same tax treatment as a married couple (see Summary provided). Some examples of interest might be exemption from exit tax on the transfer of ownership of a life assurance policy, exemption from stamp duty on the transfer of ownership of ‘property’ and relief from certain fees arising on the change of ownership between registered civil partners of a shared home, such as court fees, registry of deeds fees or land registration fees.

Cohabitants however have not been granted the same reliefs. The only reliefs extended to this group will be restricted to the tax treatment of maintenance payments and transfers of property following the court order on the termination of a cohabitants agreement.

Catriona Gaffney & Edel Hughes