Family Agreements

Family agreements, or more colloquially ‘granny flat agreements’ are predicted to become a more and more important part of the aged care landscape in the future.

The harsh economic reality over the next 40 years is that governments simply won’t be able to continue to fund aged care the way they do now. The Federal government currently spends $6 billion per annum on aged care. The number of people requiring aged care of some kind is predicted to triple by 2050 because of changing population demographics.

Innovative ways are going to have to be found by governments to fund aged care and one way may well be to provide taxation and other incentives, for, especially, children to become more involved in the care of their elderly parents.

For children to be involved in the care of their parents, forward planning and economic planning become essential. What sort of accommodation will be provided? What sort of care will be required in the short and long term? Will one of the children have to give up work to provide the care? How is the child to be compensated? Who is going to pay for a granny flat or other home renovation? What is the effect of this expenditure in relation to inheritance issues? How does expenditure by the parent affect pension entitlements?

These and many other important questions have to be considered.

The difficulty that has arisen is that very often such arrangements are not formalised into an agreement. This inevitably leads to conflict within the family.

The other difficulty is that informal arrangements very probably have no legal significance. There is a presumption at law that agreements between close family members, or arrangements between them, are not intended to be legally binding.

In order to avoid the conflict that can arise within families from these care arrangements, especially when large sums of money have been spent, it is essential that a formal documented agreement be created. The agreement should set out exactly what is understood between the family members and what will happen in most of the predictable scenarios that might arise in the future.

A properly prepared agreement, in consultation with all relevant family members, will mean that all of the family has had a chance to think about the issues involved and to understand what will happen in the future. This will in turn mean that there is far less scope for later disagreement.

Those families who are considering arrangements of this kind are very strongly advised to formalise the arrangement in a written document, and to resist the understandable reluctance to do so on the basis that the law has no place in family arrangements. The law does have a place – often large sums of money are involved, pension entitlements may be affected, and issues of inheritance arise. A common sense and practical approach to this now could well avoid some even larger (legal!) problems later on.


© Peter Gauld LL.B.

Peter J. R. Gauld LL.B

Gauld & Co. Elder Law Solicitors

Suite 5, 1st Floor,

838 Glenferrie Road,

Hawthorn, Melbourne, Australia, 3122.

03 9024 3868

0401 230 711

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