Testing

Residential Care Subsidies – Life Interests

It is common for families to arrange the ownership of their homes so that each spouse owns a one-half share as a tenant in common in equal shares.

This enables them to leave in their wills a life interest in the property to the surviving spouse, with protection from the risk of the surviving spouse owning the whole property and having its value disappear in rest home charges. Life interests may also be useful to protect the children of a first marriage, if it is not intended that ownership of the whole property passes automatically to the spouse that lives the longest.

The Ministry of Social Development’s position on life interests is that a life interest should be for life, rather than until entry into rest home care. Life interests (whether granted pursuant to a will or other instrument) where the interest is not for life, but specifically until entry into a rest home may be treated as a deprivation of income. If the surviving spouse needed full time rest home care, the value of the life interest of the deceased spouse will have an income earning potential which will be regarded as income by the Ministry. That income would be expected to be available to support the surviving spouse in care, and would therefore be subject to normal income testing limits.

Clearly, care needs to be taken in ensuring that the preparation of life interest wills do not contravene the Ministry’s policies but at the same time meet the family’s need to protect assets in a second family situation.

Our experienced property lawyers will be happy to review your will in light of the Ministry’s policies.