Life interest given in a will
There are different kinds of life interests (also known as a lease for life) that may be given to a person in a will, including but not limited to a:
- right to use, occupy and enjoyment of a property, or part of the estate from a will (a lease for life)
- right to income from an estate, including from investments or other assets
- right to rental income from a property
A person who is given a life interest is sometimes called a 'life tenant'.
When a person is given a life interest, legal ownership of the property or other assets is not included in the life interest. The property or other assets remain held by the estate or trust.
In determining the nature and extent of the interest the specific wording used is important.
Life interest clauses will need to be reviewed on a case by case basis, as the extent of the interest may change depending on the specific wording of the will.
Extinguishing events
The person will generally have the right to benefit from the life interest for their lifetime, or until an earlier 'extinguishing' event written in the will.
Examples of extinguishing events may include the person remarrying, or being unable to maintain or live in the property they have a life interest in.
Disposing of a life interest
A person may be able to transfer or dispose of their life interest as they choose during their lifetime, but the life interest will not continue past the death of the original life tenant.
Life interest in share of property as a tenant in common
A life interest may be created when a couple owned a family home in individual half shares as tenants in common. In the will the deceased partner may leave the surviving partner a life interest over the deceased partner's share of the property.
This is different to when a couple own a family home as joint tenants. A joint tenancy is when there is no distinct share of the property owned by each partner, they own the property together. In this case, when one partner dies, the legal ownership of the whole property automatically transfers to the surviving partner by survivorship (regardless of what the will says). There is no life interest in this case.
This is why it is important to confirm ownership of the property. You can generally confirm this by obtaining a copy of the certificate of title for the property.
If the type of life interest is unclear, contact Legal Services for advice.
Life interest from matching wills
A couple may have matching wills that each provide for a life interest to the other.
The partner given the life interest will generally keep ownership of their own share in the property or other assets, as well as get a life interest in the deceased partner's share.
Example of life interest given in a will
Bernard is a widower and owns half of the family home he and his wife June owned, and June's estate holds the other half. June's Will says that until Bernard dies, he has a life interest in her share of the property.
It also says that when Bernard dies the estates of both June and Bernard will be distributed to their children.
When Bernard applies for a Residential Care Subsidy, the Ministry needs to consider whether his life interest in June's share of the house is realisable.
Factors to consider are:
- whether the house is going to be sold and will the estate administrator pay Bernard for his life interest as a lump sum asset or
- will the estate administrator rent the house out and pay Bernard a regular income stream instead or
- is the house already rented out or sold, and is the estate administrator already paying Bernard income from the estate or
- is there no intention by the estate administrator to pay anything to Bernard?
If the type of life interest is unclear, contact Legal Services for advice.
For more information see:
Legislation
- Means assessment for long-term residential care schedule 2 Residential Care and Disability Support Services Act 2018
- Present value of annuity or other interest for life of male or expectant on death of male schedule 2 Estate and Gift Duties Act 1968
