Some older people, when thinking about downsizing, decide to live with family. This might mean family moving into the older person’s home; the older person moving in with family; or building a granny flat on land belonging to family.
Such scenarios – often called ’assets for care’ arrangements – often involve the older person agreeing to provide their property or money from its sale to their adult child in exchange for ongoing care and accommodation. Assets for care arrangements can give older people access to care and support and the opportunity to be close to grandchildren, while preventing them from having to enter aged care if their care needs significantly increase.
However, while these arrangements can benefit both parties, it’s important to consider various contingencies and have a plan for resolving any disputes that come up. Some of the possibilities to consider include the breakdown of the adult child’s relationship; the adult child becoming unemployed; an increase in the older person’s care needs; or either party wanting to terminate the arrangement.
Before entering into an assets for care arrangement, seek independent legal advice and create a detailed written agreement – just in case. Centrelink also have specific rules so get their advice before transferring property or assets. You will need to consider how the a may affect your pension entitlements and tax liabilities, as well as any future aged care fees and charges.
If you’re planning to build a granny flat or self-contained unit on a family member’s property, investigate what permits are necessary. Different councils have different requirements, and the financial implications can differ substantially depending on the legality of the structure and the permit type required. If council only allows you to build a ‘dependent person’s unit’, then it can’t be used for other purposes, such as rental accommodation.
The unit’s value may be far less than the cost of its construction. If the relationship with family sours or the older person’s care needs significantly increase, then it may be difficult to recover the construction costs. Despite being described as relocatable, units are often expensive to remove and therefore hard to sell.
This can mean that the older person is left high and dry, losing the relationship with family and left without funds for other accommodation. If this happens to you or someone you know, contact Seniors Rights Victoria on 1300 368 821.
Jan’s story
Five years ago, after the death of her husband, Jan sold her home and built a self-contained unit on her daughter’s property. Jan spent around $120,000 on the construction. Her daughter, Marie, and son-in-law, Paul, insisted that Jan also give them $85,000 in exchange for their promise to provide a home for life and care as required. Marie told Jan that by giving them the $85,000, Jan would be complying with Centrelink rules and so would not lose her pension entitlement. Although Jan was worried about the arrangement and the fact it wasn’t written down, she trusted her daughter and didn’t want to offend her family.
At first, things went well. Jan enjoyed being close to her grandchildren and having the security of Marie and Paul close by if ever she needed them. However, after the relationship between Jan and Marie soured, Marie told Jan that she had to leave the property. Jan has no savings left and relies on the age pension. When she tried to sell her unit, she was offered only $10,000 because the cost to remove it was so high. Jan is now seeking advice from Seniors Rights Victoria.
Diane’s story
Diane sold her home and contributed $250,000 towards the purchase of a large property shared with her daughter, Nicole, and son-in-law, David. Diane’s interest was not listed on title, but Diane trusted her daughter and didn’t want to rock the boat. Things went well and Diane enjoyed being close to her daughter and grandchildren. However, within three years, Nicole’s relationship with David broke down, and the home became the subject of a family law property settlement. Diane sought assistance from Seniors Rights Victoria, which helped Diane to recover her contribution to the property.
