Overview: What are family care agreements, family agreements and granny flat agreements?
Family agreements, family care agreements, granny flat agreements, and other similar phrases are generally used to describe arrangements in which one or both parents are provided with accommodation and care in the home of a child.
These agreements should not be confused with what real estate agents refer to as granny flats. A house sold with a granny flat is just that – a granny flat that may be used from time to time by friends, relations and children. A granny flat agreement is a legal agreement with, amongst other things, provision for accommodation for a person, but not necessarily at the home of the person providing the accommodation.
The care and accommodation is often provided by the child in exchange for some payment, and sometimes the transfer of the parent’s home. Sometimes the parent will provide funds for a granny flat to be built, or modifications to be made, at the child’s home.
But there are a great variety of arrangements that are made – there is no typical arrangement.
Depending on the level of care that might be required, sometimes the child will give up work in order to provide the care.
The principal idea behind these arrangements is that the parent can continue to live at home with loved ones for a longer period than might otherwise be the case.
Because significant lifestyle changes can be involved by both parents and children, and the exchange sometimes of large amounts of money, legal and financial difficulties can arise if these arrangements are not carefully planned.
Accordingly, in this series of pages we seek to emphasise that these arrangements should not be entered into lightly. We also emphasise the importance of each party to the transaction obtaining independent advice and having the arrangement reduced to writing.
It is particularly important for the elderly person to obtain independent legal and financial advice given that so much is at stake, and to prevent the possibility of financial abuse occurring. An elderly person will not usually be able to recover their financial position if things go wrong.
But these arrangements do not always involve relatives or elderly people – the importance of the Centrelink/pension rule
Centrelink uses the term “granny flat” in its website material but goes on to make it clear that these arrangements do not necessarily involve parents or relations, and do not necessarily involve what we generally consider to be a granny flat – a separate self-contained part of a home where a parent or parents can live. Moreover, a granny flat arrangement so far as Centrelink is concerned does not have to include any care provisions – the arrangement can simply be for accommodation, and can be for a person of any age and not necessarily a relative.
The Centrelink rules about granny flats are concerned about lessening/eliminating the effects of the gifting rules (deprivation rules) which would otherwise potentially involve consequences for the amount of pension a person is entitled to receive.
One of the pages is devoted entirly to considerations for pensioners entering into these agreements.