Granny Flat Agreements 

Granny Flat agreements are becoming an increasingly common means of families managing the care of an elderly parent, but any such agreement needs to be considered very carefully, both in terms of Centrelink consequences, and also to preserve, and not damage, the personal family relationships.

Granny Flats are often seen as preferable to moving into an aged care facility, as they keep the family together, provide close care and support for the elderly parent, and can be a means of providing assistance to family in advance of death.

A common way involves the sale of the elderly person’s home, and payment to a child to live in the child’s home for the parent’s lifetime. That may include an extension being built.  Another way can involve the transfer of the elderly parent’s home to the child, with the child (and their family) moving in to the home of the elderly parent, again with the elderly parent having a life interest in the property.

Gifts to children can fall foul of the gifting/deeming provisions of Centrelink but done properly (with a legal document) a granny flat agreement may not trigger these provisions, with benefit for all involved, without loss of pension. The Centrelink consequences need to be fully explored prior to any agreement being entered into.

There are many risks however such as relationship breakdown between the parent and their child, relationship breakdown for the child with their spouse, financial problems for the child (even bankruptcy), health deterioration of the elderly parent (who needs extra care the child can’t provide) or of the child who can no longer care for the parent. All these possibilities need to be covered in the agreement. As well a wide range of things like payment of rates, insurance and electricity, cooking and care for the elderly person, perhaps offset against care for the grandchildren, etc. may need to be documented.

Where there are a number of siblings an arrangement with one child may cause tensions with the others, as the transfer or gift at the heart of the granny flat agreement takes away from the estate and can effectively benefit one child in preference to others.  A family meeting is recommended to consider the pros and cons of any arrangement before it is put in train.

Properly drawn granny flat agreements, with careful consideration of the consequences in all respects can achieve a beneficial arrangement for all concerned, being mindful of all the risks, both financially, and personally of any granny flat agreement.

Brisbane Elder Law are experts in all aspects of Elder Law including Wills, Estates, and elderly financial arrangements, including Granny Flat agreements.  For more information contact Don Macpherson on 1800961622.