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Property Ownership Issues

There are two common legal forms of property ownership in New Zealand.

A majority of couples own their properties as Joint Tenants. The significant feature of this form of ownership is that on the death of the first spouse, the property automatically passes to the survivor by way of a rule of law known as Survivorship. It does not matter what is in your Will, your surviving partner will take the entire property in his or her own name.

The second common form of legal ownership where two (or more) people own property together is as Tenants in common. Quite simply, this form of ownership allows for property to be owned in distinct shares. The most common form is tenancy in common in equal shares. Significantly, the rule of survivorship does not apply and as a consequence what happens to your share of the property on your death depends entirely on what you state in your Will.

Life Interest Will

If property is owned by two or more persons as tenants in common, they are free to leave their share of the property as they choose in their Will. Generally, a couple will leave a Life Interest in their share of the property to their spouse in their Will. This is called a Life Interest Will.

Your Executor or Trustee administers your estate through your Will. A Life Interest Will leaves your share of the property to your Executor(s) / Trustee(s) with instructions that they allow your spouse to live in the property for the remainder of his or her lifetime. Upon the ultimate death of the survivor, your share of the property then goes to the final or residuary beneficiaries of your Will.

Rest Home Subsidies

As discussed above, if property is owned as joint tenants, on the death of the first spouse, the whole property passes to the survivor. Should the surviving spouse require either rest home or hospital level care at a later date, they will have to meet the Ministry of Social Development’s (the “Ministry’s”) criteria before qualifying for a Residential Care Subsidy.

Because of this, many people today are choosing to become Tenants in Common as the surviving spouse will only own a share of the property. Therefore, should the surviving spouse ever require government assistance, they need only include the value of their own share of the property as they enjoy only a life interest in their deceased spouse’s share of that asset.

Timing will be critical as there are strong anti-deprivation clauses in the Social Security Act 1964. Any decision to change the way you own your home must be done in conjunction with the rules and regulations set in place by the Ministry.

As with all areas of law, it is important that you seek good advice from a team who understand how this area may impact on you. At Harmans we have experience dealing with estate planning strategies. Give Fleur McDonald a call on 03 352 2293 to arrange an appointment to discuss your situation.

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