Life interest retained from the sale of a property

Sometimes a life interest is still retained (held) by a client after the property the client had a self-interest in, is sold by the estate. The client's life interest may be carried over to a new property or investments made with the proceeds of the sale. The terms of the will should specify what may happen in this case, and the arrangement between the estate and the client.

If the type if life interest is unclear, contact Legal Services for advice.

The Ministry of Social Development should find out if the estate is going to pay the client a regular income from the new property or investments, or buy out the life interest and pay the client a lump sum.

If the life interest has been paid as a lump sum to the client, it is no longer a life interest and is treated as a cash asset in the financial means assessment.

If the client invests the lump sum payment and is getting an income stream from their new investment, some or all of the income may be exempt from the income assessment under the income-from-assets exemption. The new investment itself is included as an asset in the client's financial means assessment.

When a client still holds a life interest after property has been sold, and the estate has not paid them a lump sum or other income from the sale, the Ministry may calculate the fair value of the life interest and consider whether it should be included as a realisable asset in the financial means assessment.