1.1.I.185 Interest in an asset (life, remainder, reversionary, contingent)
This definition applies to all payments.
Definition: life interest
A life interest arises when a person:
- acquires the right to use assets (1.1.A.290) or the income produced by those assets, or
- transfers a non-exempt asset to another person, but retains an interest in the asset, or
- is created by the will of a deceased individual.
A life interest remains current until the person:
- sells the asset, or
- formally surrenders the asset.
Definition: remainder interest
A remainder interest happens when the owner of an asset transfers the legal title of the asset to another person AND retains, or grants to a third person, an interest in the asset for life or a specified length of time. The interest held by the person is called a remainder interest. The person does NOT gain the benefit of their interest UNTIL the original owner's interest ends.
Although similar to reversionary interest, remainder interest is technically different.
Definition: reversionary interest
A reversionary interest happens when the owner of an asset grants an interest in the asset to another person for life or for a specified length of time. Ownership of the asset is NOT transferred.
When the other person's interest in the asset expires, the interest is returned (reverts) to the owner.
Although similar to remainder interest, reversionary interest is technically different.
Definition: contingent interest
A contingent interest happens when the interest in an asset is dependent (contingent) on an event happening. The event may never happen.
Policy reference: SS Guide 220.127.116.11 General provisions for exempt assets