Granny flat agreements are increasingly being used as an estate planning tool.
A parent may not want to benefit an estranged child in their Will.
A parent may have already given significant financial help to one child and not to another.
In such cases the parent may not want to benefit that child in their Will.
But leaving a child out of a Will may invite a challlange to the Will.
The parent’s home is often their major asset. Entering to a granny flat agreement which involves the transfer of the home to the non-estranged child or children will remove that asset from the parent’s estate. It will not form part of the distribution under their Will. A child can only challange and seek further provison from assets that form the deceased’s estate.
The result is that the parent can continue to live in their home and their wishes as to the distribution of their estate have been achieved. If the parent is a pensioner, the granny flat arrangement will deal with gifting (deprivation) issues.
All parties should of course seek financial advice about such an arrnagement so as to properly consider any Centrelink and taxation issues.
See our post on legislative changes to end capital gains tax liabilities for granny flat agreements – here.