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Does a life interest have a value if you need residential care?

1 October 2015

What is a life interest?

Good question! Life interests are a complex puzzle – but can be very valuable when done right.

Put simply, they ensure your loved ones have security after your death, and that your assets – the results of a lifetime of hard work – end up in the right hands.

Under your Will, you can grant a right to a person to use your assets after your death – such as your home, income or household items – without giving away your assets outright.

When a life interest ends, the life interest asset returns to your estate to be passed on to a permanent recipient of your choice, such as your children.

For example, life interests are especially beneficial for two people entering into a second relationship where each person wants to protect their interest in a home for their separate children. A life interest enables the surviving partner to live in the home until a specified event occurs – such as after a number of years have passed or the survivor enters a new relationship.

When applying for a residential care subsidy, a life interest is valued by the Ministry of Social Development based on a person’s age, the likely ‘life’ left in the life interest and the value of the life interest asset.

Close scrutiny is paid to when a life interest ends and on what terms. It is possible that a life interest could be deemed to continue even when it does not, resulting in the surviving partner being required to pay for his/her care with money he/she doesn’t have. 

Sound legal advice is critical to ensure that your life interest works as it should.

- Jess Holtom 
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