With an increasingly ageing population along with a shortage of good aged care options and their skyrocketing costs, granny flat agreements are becoming popular. That’s when elderly parents or relatives move in with you, often in a converted section of your home, and there is usually a transfer of money or assets to assist with construction and care costs.
It sounds simple and straightforward, but it is a serious property transaction and it’s advisable to document your intentions and expectations at the beginning. Situations can change and the clarity of intentions can fade over time so it’s a good idea to seek legal advice. Preparing a Deed of Family Agreement can clarify expectations and reduce the likelihood of misunderstanding in the future.
As situations change, a variety of circumstances may affect your ability to provide care. When these possibilities are discussed upfront and planned for, it will be much easier to move to new arrangements. Some areas to consider are:
• marriage or relationship breakdown
• discord and conflict among siblings
• serious illness or disability
• death of any of the principal parties
• the nature, extent and duration of care to be given
• quantifying a carer’s contribution in dollar terms
• transferring the arrangements to another property if one of the parties wants to do so.
Protecting all parties
Drafting a Deed of Family Agreement is relatively inexpensive and will protect all parties from financial loss and disagreements, particularly when death occurs. A firm agreement that is part of an overall Estate Plan will ensure that the legacy of the elderly person lives on and costly legal action is not undertaken.
Centrelink requirements for granny flat agreements
Centrelink recognise the increasing importance of granny flat agreements. In most cases, payments are exempt from asset tests and pensions are not reduced. Documenting granny flat agreements will make it easier to demonstrate compliance with Centrelink who refer to these situations as a Granny Flat Right or Interest.
It’s important to note that Centrelink’s use of the term Granny Flat Right or Interest is a description of an agreement and does not refer to the actual dwelling.
A granny flat doesn’t have to be a separate dwelling
To many people, the term granny flat refers to a separate part of the property, but for the purposes of a granny flat agreement it can be any part of a private residence not owned by you or your partner.
WMD Law has a team of specialists in Estate Planning and Property Law. We are well placed to advise you regarding your available options. We can also assist with drafting a Deed of Family Agreement that will meet Centrelink’s requirements and clarify your situation. Click here to contact us and arrange an initial free consultation.