Granny Flat Agreements

This is a companion site to our main website and provides dedicated information about:

  • Granny flats/granny flat agreements
  • Disputes about granny flat arrangements

Types of agreement

The most common types of agreement involve a child or children providing accommodation and care for a parent or parents.

There are a number of varieties of these agreements.

Increasingly there are emerging agreements for the sole purpose of family/estate planning, particularly to prevent a wayward or estranged child from inheriting from the estate of the parent – see below.

 

Parent/child arrangements:

In this practice the most common arrangements we see are where a parent will transfer their home to children in exchange for lifetime care and accommodation.

The parent or parent will either continue to live in the property or move into the child’s home, with or without modifications being made.

The reasons for doing this are usually:

  • That the parent or parents are having difficulty maintaining their property but want to continue living there
  • a parent’s health is such that the only alternative would be residential aged care
  • a single parent is feeling isolated in their home and wants security and companionship
  • parent or parents can no longer afford to live in their home
  • a combination of the above

 

In the majority of cases parents are in receipt of a Commonwealth pension and care has to be taken not to infringe gifting rules. Most of these common arrangements do not infringe the rules.

Sometimes the parents will go and live in a smaller completely separate property – usually a smaller home or unit that they can more easily maintain and afford. This may be close to children who can conveniently provide care, assistance and companionship.

But these arrangements do not have to be between child and parent. For instance, a family could accommodate an elderly family friend in their home. These arrangements are treated exactly the same by Centrelink when pensions are involved.

The motivation for entering into these arrangements is very often the desire to avoid either the immediate need to enter into residential aged care or a perceived need to do so in the future.

 

Family/estate planning:

When we draw these agreements we are usually thinking very carefully about whether a child might be disinherited. For instance, when a parents’ major asset, their home, is to be transferred to one child. However, in an increasing number of cases this is exactly what the parent is seeking to do.

If there is a wayward or estranged child, or a child who the parent might have already financially benefited significantly, the parent might want to ensure that that child does not benefit from their Will. This is difficult to do because if you leave a child out of your Will the child can challenge the Will. The only way to avoid a Will challenge is not to have a large estate to leave in the Will.

The transfer of the parent’s home to one (or more) children in a granny flat arrangement is an unchallengeable way to achieve this. The estranged child cannot bring back the home into the estate – the home is not part of the estate when that parent dies. A child can only challenge and seek further provision from what is in the estate of the deceased parent.

Another variation on this is where a widow or widower forms a new relationship and either re-marries or forms a domestic partnership.

The parent might be concerned that the new partner might be able to claim on their estate and their own children might be disinherited.

In this case the parent can transfer the home to child or children in a granny flat arrangement (no gifting issues for pensioners) and therefore remove this asset from their estate.

The result is –

  • the child or children own the home
  • the parent has the right to live there for as long they wish
  • the partner can share in the parent’s estate, and can challenge the Will, but the home will not be part of the estate

 

 

Why Choose Us?
Dedicated practice

We are one of the few legal firms in Australia who advise in relation to granny flat agreements on a regular basis.

Efficiency

We make extensive use of technology to streamline document production. This significantly reduces the time we have to spend on drawing agreements.

Cost effective

Because of this experience in this area and our process efficiencies we can get matters finalised in a cost effective manner. Ask us about our fees.

Experience

The principal, Peter Gauld, has been practising in this area for fifteen years, and in relation to granny flat disputes he has had 30+ practising in dispute resolution.