The Law Handbook 2024

884 Section 9: Health, wills and other legal issues affecting older people As older people are living longer, it is important for individuals to understand their rights and responsibilities and consider the long-term effects of any financial decisions, including the expense of future aged care and health needs. How to limit the risk of financial abuse To limit the risk of experiencing financial abuse, older people should: • seek independent legal advice when making decisions or changes about property and finance; • consider the implications on social security benefits of decisions about assets, income, superannuation and property; • create formal written agreements regarding decisions about finance and care arrangements within the family. Transferring property or assets in exchange for care Overview Some older people decide to live with an adult child (in their own home or in the adult child’s home) or to construct a granny flat on land that belongs to an adult child. Common scenarios include: • purchasing a property with an adult child; • using the family home as security for a loan; • granny flat arrangements. The older person and the adult child usually agree that, in exchange for the older person passing on their property or the proceeds of the sale of their home to their adult child, they will be cared for, if and when they need it. For older people, the other benefits to this type of arrangement include being closer to grandchildren, not being alone, having meals prepared or other housework done for them, and not having to go into an aged-care facility if their health fails. This type of agreement is called an ‘assets for care’ arrangement. While these arrangements can be successful for both parties, often little thought is given to how to resolve issues if things go wrong. Often, the older person trusts their child and believes they will do the right thing if a disagreement occurs. So, the older person often does not seek independent legal advice before entering into an arrangement with an adult child. Unfortunately, even with the best intentions, sometimes unforeseen circumstances (e.g. the adult child becomes unemployed or bankrupt, or the child’s marital relationship fails and the property becomes the subject of a family lawproperty settlement, or the older person enters a new relationship, or the older person’s care needs increase so they can no longer be cared for in the home) create problems and the older person or adult child may seek to leave the arrangement. The best thing a person can do is to seek independent legal advice before entering into such an arrangement, and to create written agreements detailing what is agreed upon, even within a family, in case the arrangement fails or an unforeseen circumstance arises. Centrelink and tax implications Centrelink has specific rules for funds paid into granny flat arrangements (which can include a variety of property arrangements, not just granny flats). Previously, an interest created in this way was subject to capital gains tax ( CGT ) if the funds were invested into the building of a separately occupiable dwelling, for which rent was charged. However, in the federal budget handed down on 6 October 2020, the Treasurer announced that from June 2021, CGT will not apply to the creation, variation or termination of formal written granny flat arrangements providing accommodation for older Australians or for people with disabilities. If making a decision about transferring property or assets in exchange for care, advice should be sought from Centrelink. For more information about social security, see Chapter 5.1: Dealing with social security. Planning for a potential breakdown of an arrangement Ideally, before entering these agreements, considerable thought should be given by all parties about what happens if the arrangement cannot be maintained (e.g. if the relationship breaks down, if the adult child’s marriage breaks up, or if the older person’s health deteriorates past the point where they