Mildred was a widow who had a close and loving relationship with her children.
Due to family concerns over Mildred’s age and living on her own, she sold her home and spent a substantial amount of money building a granny flat on one of her children’s property. After some years, Mildred became too frail to continue to live in the granny flat. The property had also become the subject of family court proceedings due to her child’s separation from their spouse.
Mildred and her child had not entered into a written agreement in relation to the granny flat. This caused concern within the family as to Mildred’s future financial and personal welfare.
A granny flat agreement would have assisted Mildred with her predicament.
Granny flat agreements are designed to assist families to resolve contingencies that may arise in situations such as Mildred’s. They are best entered into before putting plans into action.
Granny flat agreements can cover things like rights of residency, financial contributions, care arrangements, ongoing costs, dispute resolution, and the all-important exit strategy.
Granny flat agreements are necessary for Centrelink compliance, tax benefits, security of tenure, and clarity around estate planning.
Each party to a granny flat agreement should receive independent advice. The same lawyer, accountant or financial advisor should not act for both the elder person and any other party, as this would create a conflict of interest.
The case of Richardson v Lindsay is reflective of where poorly drafted agreements can go awry. The outcome of the case was upheld on appeal, with no real winners. The elder person was left without a home, a warring family, and litigation costs impacting on her finances. It’s worth a read.
Vital Checklist: Granny Flat Agreements
- Beyond Property: Agreements should cover residency rights, financial contributions, and ongoing care arrangements.
- The Exit Strategy: Essential for handling contingencies like family separation, illness, or the need for aged care.
- Compliance & Tax: A formal deed is often required for Centrelink assets test exemptions and capital gains tax (CGT) benefits.
- Independent Advice: Each party must have their own legal and financial advisors to avoid conflicts of interest.
