Excluding life interest from the means assessment

Clients applying for a Residential Care Subsidy need to tell the Ministry of Social Development if they have a life interest (also known as a lease for life) in their application.

A life interest is only included in the financial means assessment of assets if the Ministry considers the life interest can be realised as a cash asset.

If the client gets an income from the life interest, or there is an intention by the estate to pay a reasonable income to the client, the Ministry may consider the life interest is not realisable.

If the Ministry considers the life interest is not realisable, the life interest is excluded from the means assessment of assets and is included as income instead. The client cannot use the income-from-assets exemption for the income, as the life interest is not a realisable asset.

In some cases a life interest may give an income and also be a realisable asset. The Ministry will consider these on a case by case basis.

If an estate needs time to prepare a property for sale or renting in order to generate income or realise a life interest, and intends to honour the will provisions, the Ministry may not consider the life interest to be a realisable asset.

Instead, the Ministry may undertake a review of income once the property has sold or been rented out, as there has been a change in the circumstances of the client.

The Ministry may allow up to 6 months for the estate or trust to prepare a property for sale or rent. This may be necessary when a client has lived in the property for many years, and the property requires considerable maintenance before it can be sold or tenanted.

If a client or estate advise the life interest has ended, and the client has not been paid out by the estate, the Ministry may consider deprivation of an asset may have occurred.

The Ministry must consider the client's role in any decision to transfer or dispose of their life interest without being paid out, the specific circumstances of the client and the structure of the life interest.

Any decision to include a deprived asset or income stream from a life interest outside the 5 year gifting period in the financial means assessment depends on whether there are any other resources available to the client that can be used to pay for their residential care.

When the terms of a life interest given in a will are not honoured by an estate, the Ministry may calculate the fair value of the life interest and consider whether it should be included as deprivation in the financial means assessment.

This will depend on the client's full circumstances, including the nature of the life interest, the terms of the will, the reason the terms are not being honoured and the relationship between the client and the administrators of the estate.

If this is unclear please contact Legal Services who will be able to assist.

The fair value of a life interest is calculated by the Ministry using tables in Schedule 2 of the Estate and Gift Duties Act 1968.

The life interest is calculated using the asset values, and client's age on the date they applied for a Residential Care Subsidy.