Central Office Instruction

Instruction No. 11

Date of Effect: 8 January 1991

EFFECT OF RECENT AMENDMENTS ON ELIGIBILITY OF WIDOWS

Purpose

The purpose of this Instruction is to clarify the impact of the recent amendments to the DSH Act on widows entitlement.

Background

The recent amendments to the DSH Act allow an eligible person who is or has been previously assisted with an initial advance (or an initial and further advance) based on the eligibility of their spouse, the right to receive an advance based on their own eligibility.

• This amendment allows married eligible persons the right to obtain in turn an initial advance based on each person's eligibility.

Sub-section 4(1) of the Act contains the revised definitions of "initial advance" and "further advance".

Another group affected by this amendment is the widows of "eligible persons" as specified in the Act.

• The widow of any eligible person is herself an eligible person under the definition of "female dependant".

Sub-section 4(1) of the Act contains the definition of "female dependant".

Implications / Implementation

There are essentially three 'categories' of widow.

• Those where an advance was taken out by the eligible husband with the wife as a joint tenant and the advance was discharged before the husband's death.

The widow clearly was never a borrower for any reason other than merely because she joined in the advance granted to her eligible husband.

She is now entitled to an initial advance in her own right on the basis of her current status as a "female dependant" as defined in the Act.

• Those where an advance to which the widow was a joint borrower was still current at the time of her husband's death and the widow has continued as a borrower by survivorship.

Although there may be some argument that, at the time of her husband's death, the widow became a borrower in her own right, full consideration of the various issues leads us to the view that the provisions introduced by the revised definitions of initial and further advances must be applied equally regardless of the status of the loan at the time of the death of the male borrower.

Therefore, she is also to be granted an initial advance in her own right on the basis of her current status as a "female dependant" as defined in the Act.

• The third group is the widows of eligible persons where the advance was borrowed in the sole name of the eligible person. For this group where, following a sole borrower's death and the finalisation of the estate, a widow becomes a borrower by continuing the existing subsidised loan she receives this benefit on the basis of her status as a "female dependant" (i.e. she has never been anything other than a borrower in her own right).

It is important to counsel widows in this situation of the advantage of retaining the property in the name of their deceased husbands' estate until such time as they wish to exercise their own entitlements to acquire another home.

In counselling widows in this group, the following points should be covered:

• restrict comments to the facts of the case (i.e. no reference should be made to the situation had the home been jointly owned).
• she should be advised that she has an entitlement in her own right as a widow of an eligible person. She has options for the use of this entitlement which include:

* requesting a transfer of the home (and subsidy) to herself;

+ in which case she will receive only the outstanding balance and, if she ever chooses to move to another home, she will be entitled to portability of the reduced balance.

* preserving her entitlement to an initial advance of $25,000 for use when she next moves. This, of course, would be subject to her being able to meet Westpac's lending criteria at that time;

+ to preserve the entitlement she would have to choose to retain the home in the name of the estate.

However, while the home is still in the estate, she cannot obtain an additional advance nor a widows advance because she does not own the property and she is not a borrower. It is also probable that she may not qualify for a rates rebate from her local authority.

+ she should be reassured that she will continue to enjoy the benefit of the existing subsidy through the estate.

Widowers

The Minister has announced his intention to amend the legislation to remove sex discrimination from these provisions and extend them to cover widowers of eligible female persons. Further instructions will issue on this aspect when the amendment has been made.

General Orders

General Orders will be updated shortly to reflect the contents of this instruction.

FELICITY M. BARR

GENERAL MANAGER

1 March 1991