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 that adult child. Common scenarios include:
- purchasing a property with an adult child;
- using the family home as Money or property promised to be handed over as a guarantee for repayment of a loan, or as a guarantee that a defendant will meet their bail conditions. 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 A document that sets out what a person wants to happen to their money and other property after they die. 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 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 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.
Centrelink has specific rules for funds paid into what are termed ‘granny flat’ arrangements (which can include a variety of property arrangements, not just granny flats). 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 A voluntary, formal and legally binding agreement between two people to have a permanent relationship together. There must be a statement in front of official witnesses who register the marriage with the authorities. See also cohabitation; de facto; divorce; domestic relationship. breaks up, or if the older person’s health deteriorates past the point where they can be cared for at home). It is preferable that all such considerations and agreements be put in writing.
If you are considering transferring part or all of your home to a family member, or selling your home and giving the family member the money so that they can care for you in the future, it is very important that you:
- think carefully, especially about how it will affect all your relationships;
- talk to all those involved;
- get independent, expert advice;
- understand the tax implications (e.g. how it will affect the older person’s pension);
- understand how the agreement may affect the older person’s ability to choose or enter into an aged-care facility in the future;
- protect your interests (e.g. by having a formal agreement, or putting the agreement in writing);
- put alternatives in place in case things go wrong.
For more information about the types of scenarios you should consider before entering into such an agreement, contact Seniors Rights Victoria (see ‘Contacts’ at the end of this chapter) to access the booklets, Care for your Assets, and Assets for Care: A Guide for Lawyers.
The following section discusses some common circumstances where financial abuse can occur, and what older people can do when things go wrong.
Purchasing a property with an adult child
In this scenario, the older person agrees to sell the family home and put the money from the sale into purchasing a larger property, with room for the older person, their adult child, and their family. Often the arrangement is that the proceeds from the sale of the older person’s property form the bulk of the purchase funds, and the balance is provided by the adult child by way of a A restriction attached to ownership of property to secure the repayment of money borrowed. The mortgage stops the owner of the property selling it until they have paid off the debt. over the property for which the adult child is responsible.
The older person may or may not be on the A document created by Land Victoria that gives details of where a piece of land is, who owns it, any mortgage on it, and other restrictions on the title. Certificates of title are official copies made from registers kept for all land in the state. See also transfer of land. See also encumbrance. of the purchased property. If the older person is on the title, they are usually also a A person or organisation directly involved in a court case. Parties include the plaintiff or applicant, the defendant, and any third party added to the action, but not independent witnesses. to the mortgage, even if the adult child makes the repayments.
If the arrangement fails, and one or both parties wish to leave the property, it can be difficult for the older person to retrieve their contribution.
Issues to consider include:
If the older person is not on the property’s title, it can be difficult for the older person to force the property to be sold, or to retrieve their investment if the arrangement ends. However, there are usually legal remedies for this situation; for example, the law of constructive trusts (see Muschinski v Dodds (1985) 160 CLR 583) and purchase price resulting A type of property ownership or arrangement where one party, known as the trustee, holds property or money for the benefit of another party, referred to as the beneficiary. (see Calvery v Green (1984) 155 CLR 242) may apply in such circumstances).
The older person may discover that any borrowings have increased over an agreed or understood limit, thus reducing the (1) Fairness and justice. (2) A right to property that the court will recognise even though it does not amount to full legal ownership. (3) A set of legal rules that aims to reduce any harshness that would result from strict application of the law. in the purchased property.
The older person may be on the property’s title but may also be a co-borrower on the mortgage, even though they have agreed that the child will pay the regular payments. If the adult child ceases to make the payments for any reason, the older parent may be required by the bank to pick up payment of the mortgage. Older people on Centrelink age pensions struggle to do this and, if they can’t meet the repayments, the property is then at risk of being sold by the bank.
The older person may be on the property’s title as a joint tenant, but they may have wanted to be a tenant in common in shares reflective of contributions so that, upon their death, their portion of ownership can be shared among all their children. (‘Joint tenants’ means that your share of the property automatically goes to the other title holders on your death and does not form part of your All the property a person has, including real property and personal property. It is often used to describe property belonging to someone who has died, or the property of a bankrupt.. Whereas, ‘tenants in common’ means that your share of the property will form part of your estate on your death, and will be dealt with in accordance with your will or – if you do not have a will – the laws of intestecy.)
The mortgage may be set up to allow for re-draws against the mortgage, and the older person is not always aware of this. This means that they may see the mortgage repayments are being made and feel everything is okay, but in fact money is being withdrawn from the mortage, which could reduce the older person’s equity in the home.
Always seek independent legal advice from a different lawyer to the one engaged by your adult child if you are considering purchasing a property with an adult child, or if you wish to leave such an arrangement.
Using the family home as security or going guarantor for a loan
Sometimes an older person agrees to use their home as security for the purchase of a home by one of their adult children. Often there is significant pressure for them to do this because of the difficulties younger people are facing in relation to home ownership. Banks may agree to loans but require the additional security of the family home.
Issues to consider include:
- If the mortgage is not paid by the adult child for any reason (e.g. illness, job loss, relationship breakdown, etc.), the family home is put at risk, as the older person is unlikely to be able to pay any outstanding and ongoing mortgage payments as they are likely to be on a fixed or limited income.
- Changes to an older person’s assets may affect their pension entitlements.
- If you are considering going guarantor or using your home to secure a loan for a family member, seek independent legal and financial advice from a lawyer who is not the lawyer engaged by your adult child.
Granny flat arrangements
Older people sometimes decide to pay for the construction of a granny flat or self-contained unit on a child’s property. Issues to consider include:
Local councils have different requirements in relation to these types of structures. The financial implications of the construction of a granny flat can differ considerably depending upon the legality of the structure and permit type. For example, a construction that does not have a permit may have to be pulled down or removed before the house can be sold. In this case, the granny flat has not added any value to the property. There are financial penalties for building without a permit: up to 500 penalty units, which equates to $82 610 (s 16(1) Building A written law made by parliament. Also called an ‘Act of parliament’, ‘statute’ or legislation. 1993 (Vic)). (See ‘A note about penalty units’ at the start of this book.)
If the council only allows the construction of a ‘dependent person’s unit’, the unit cannot be used for other purposes (e.g. as rental accommodation). As such, its value may be considerably less than what it actually The amount charged by a lawyer for legal work. Lawyers can only charge the amount agreed with the client in a costs agreement or the amount stated by a court in its rules. The party who loses a case usually has to pay all their own costs plus most of the costs reasonably incurred by the other side. See also indemnity costs. to build it. If the relationship sours and the older person seeks to leave and take with them the value they added to the property, this may be considerably less than the construction costs. These types of issues should be thoroughly researched prior to commencing building.
If the relationship sours, or the older person needs to move into a facility with a higher level of care, they are unlikely to recover the money the unit cost to build. These units are hard to sell as the removal costs are significant (if this is actually possible), making the purchase of a second-hand unit an unattractive proposition to potential buyers.
Redress for failed assets for care arrangements
When any of the above scenarios fail, the older person can be left with no funds, no home, and a soured relationship with family members. However, in some cases, there are legal avenues for redress.
Often, the older person may not have a legal interest in the property because they are not on the title. However, depending on the circumstances, the older person may have what is known as ‘an equitable interest in the property’. This means that the law might see that in good conscience, the older person’s claim should be recognised in part or in full. However, there are many requirements that need to be met. Legal advice should be sought as soon as possible to pursue that interest.
Legal action to recover funds can be complex and could involve, if the dispute is between co-owners, applying to the Building and Property List at the Victorian Civil and Administrative A body set up to hear and decide disputes, usually with less formality and less strict rules of evidence than in a court proceeding. (VCAT) (see ‘Contacts’ at the end of this chapter). Other scenarios may require action through the County An independent body that hears legal claims brought by parties and decides between them. Serious cases are heard by a judge and jury, or just a judge. Less-serious cases are heard by a magistrate. or the Supreme Court, which can be more complex and costly.
If relevant, a (1) A warning or notice – for example, to a buyer to thoroughly check a product before buying it (see caveat emptor). (2) A notice filed with Land Victoria warning anyone who searches the land title that someone claims ownership or some other right in the land. claiming an equitable interest should be lodged as a protection from any unilateral action by the title holder, such as selling the property or refinancing the mortgage (s 89 A document used to change ownership of land from one person to another. The transfer must be registered with Land Victoria. See also certificate of title. Act 1958 (Vic)). A caveat remains in place on the title until it is withdrawn by the caveator. Thus, it can provide an incentive to an adult child who wants to sell the property to settle the matter with the older person because buyers must have Outright ownership of property, without any debts or charges. to finalise their purchase.
Seek independent legal advice early on so that any Material presented to a court to prove or disprove a fact. It can include what witnesses say as well as documents and other objects. is both well remembered and documents are available as proof. Note that institutions (e.g. banks) often dispose of documentation after seven years.
Loans and gifts
Parents or older people are sometimes asked (or pressured) by children or other family members for a loan to buy property, or to put money into a business or other financial investment. Unfortunately, these loans are often based on verbal agreements and the terms are not discussed in detail. Assumptions are made by both parties and sometimes these assumptions are inconsistent.
When loaning or gifting money to a family member, it is very important to be clear what the agreement is right from the outset. Things to establish include:
- Is it a gift?
- Is there an expectation that the money will be repaid?
- If the money is to be repaid, when and how? Will interest be paid? If yes, how will the interest be calculated?
- What happens if the money cannot be repaid?
An agreement in writing setting out how and when a loan should be repaid is essential, particularly when things go wrong. Often the family member who has been provided with funds will claim they do not have to repay the money as it was a gift. Under the legal presumption of advancement in parent–child relationships, it is up to the older person to prove that the money was given as a loan and not a gift.
Money owing on loans can be pursued through the courts. Action should be taken as soon as possible to try to recover money owed. There is a six-year The period within which time court proceedings must be issued. This varies according to the type of case and requires legal advice. It is generally 15 years to recover land and 6 years for contracts and torts other than personal injuries (3 years if the injury was discoverable, and early notification requirements may apply, but a more generous long-stop limitation period may also apply). for commencing court proceedings to recover money owing on loans (unless special circumstances can be shown to exist). The limitation period starts from either the date the loan was made (if no repayment have been made) or from when the first failure to repay occurred.
Impact of loans and gifts on Centrelink payments
Another matter that should be considered before loans or gifts are given, is the potential impact on any government payments the older person may be receiving. If considering giving a loan or a gift, older people should be aware that there are strict Centrelink gifting rules that only allow $30 000 to be gifted over five years, and no more than $10 000 in one year, without impacting Centrelink payments (Part 3.12 Social Security Act 1991 (Cth)). These rules apply to the gifting of both money and assets.
If Centrelink believes that the gifting rules have been breached, the older person’s pension can be reduced totally or partially. Loans do not attract this penalty but Centrelink may require evidence that it was a loan and not a gift: a verbal agreement usually does notsuffice.
Use of funds without authority
If an older person becomes ill or frail, they may choose to provide access to their bank accounts or appoint a payment (1) A person put forward as a candidate for an elected position. (2) A person chosen to act on behalf of someone else. See also agent. for Centrelink purposes. In this instance, the older person is requesting that the person acts on their behalf and they do not give permission for their funds to be used, other than for their benefit. If the appointed person misuses this access, they are committing financial abuse. Misusing this access may also constitute a criminal A criminal act prohibited by state or commonwealth criminal law. An offence is either a summary offence (minor) or an indictable offence (serious)., which can be reported to the police for investigation if the victim wants to involve the police.
Often the older person is unaware their money is being misused, until they find their accounts have been depleted. Usually the person wrongly using the money has spent it and has no assets from which repayments can be made. This makes retrieving the money nearly impossible.
Obtaining a court order does not A binding promise made as reassurance that another person will carry out their legal obligations (e.g. paying a debt). The person making the promise is called a guarantor. If the person being guaranteed fails to pay, the guarantor becomes responsible for the debt. the funds will be repaid, if there is nothing to get. At best, it may provide that should the perpetrator’s situation improve within the next 15 years, the order can be enforced. If action is possible, then attention needs to be paid to any applicable limitation of action period, to avoid missing the opportunity to To take legal action in a civil case. for recovery of the funds. Generally, this is six years from the date the action accrued; however, it is wise to get legal advice as soon as possible.
Misuse of powers of attorney
Having an enduring financial A formal, written legal document in which one person gives another person power to make decisions or take actions for them in certain situations. See also enduring power; supportive attorney. in place is important for when an individual experiences loss of The ability to understand and be held responsible by the law for your actions. It also refers to a person’s ability to understand and agree to something, such as to undergo medical treatment. Full legal capacity is reached at 18 years of age, when a child becomes an adult. or serious ill health.
The person who makes the power of attorney is called the principal. It is important that the attorney(s) appointed by the principal clearly understand that their responsibilities are to the principal not to themselves. They must always act in the best interest of the principal and in accordance with what the principal would wish to happen (ss 63–70 Powers of Attorney Act 2014 (Vic)).
Revoking a power of attorney
Provided the principal (i.e. the older person) has legal capacity, attorneys who misuse funds can be removed by the principal completing a Cancellation of a previous law or legal document. For example, when a new will is made, the old one is usually revoked. document. If the principal is no longer legally competent, an application can be made to VCAT’s Guardianship and Administration List (see ‘Contacts’ at the end of this chapter). Depending on when the abuse took place, VCAT can also order the attorney to account for how and why they spent any missing funds and make an order to repay it (s 116 Powers of Attorney Act 2014 (Vic)). However, like with any Money that is owed by one person or business to another. matter, if the attorney has no assets and the funds have been spent, it may not be possible to recover any money.
The Office of the Public Advocate booklet, YourVoice: Trust Your Choice, provides tips for older people making enduring powers of attorney.
For more information on powers of attorney, see Chapter 8.7: Understanding powers of attorney.
Signing documents: Pressure or fraud
Older people may sometimes be asked to sign documents they do not understand and cannot read. The risk of this is increased for older people who are reliant on their family for support and advice. This can include people with limited English and/or who are not literate in either their original language or English. Older people with vision impairment may sometimes be unable to read documents for themselves and therefore put a lot of trust in their children or other family members to give them honest information about what they are signing.
Take care if assisting an older person to sign a document who is vulnerable because of illiteracy, second language issues or limited or no sight. An independent, qualified interpreter should always be used to explain what is being put before them.
Applying pressure to sign a document that a person does not want to sign or does not understand is abuse and an A court order that prohibits a person harming or harassing another person. See also family violence intervention order;personal safety intervention order. is a possible course of action. Relief may be sought by older persons if documents or contracts have been signed under circumstances of pressure, An intentionally dishonest act, or lack of action, done to deceive someone and bring some advantage over those who have been deceived., Behaviour that takes unfair advantage of a vulnerable person in a contract or other transaction. The vulnerability can be due to factors such as poor education, disability, language difficulties or being affected by alcohol., or Taking unfair or improper advantage of the weakness of another person. The influence is to make them agree to do or not to do something they would not do of their own free will. (see Commercial Bank of Australia v Amadio (1983) 151 CLR 447; Johnson v Buttress (1936) CLR 113; and Louth v Diprose  HCA 61).
Sharing a home with an adult child
There can be a number of reasons why an adult child may not move out of the family home, or may wish to return to live in their parents’ home for a short or long-term period. This arrangement may work well for both the adult child and the older parent, but it can also be a source of conflict, which can become abuse or family violence.
When adult children seek to return to live in their parents’ home, the request may be sudden and unexpected. Parents may have little time to consider whether they really like the idea, or to discuss how living arrangements might work. They may feel pressured by the child or other family members to agree to the arrangement even if it is not what they want. Having an adult child (and possibly grandchildren too) suddenly sharing an older parent’s house is not always easy. Things might go well in the short term but, over time, these situations can deteriorate, and some people even end up afraid of their adult children.
When children seek to return to their parents’ home, they are often motivated by something going wrong in their own lives. They could be dealing with a range of problems, which may affect their behaviour and, over time, create problems for the older person. These problems can include:
- violence: some adult children who return to their parents’ home are fleeing family violence, while others may have been the cause of it;
- depression, anxiety or other mental health issues: mental health problems are increasingly common in today’s society, and may be brought on by a relationship breakdown or substance misuse;
- alcohol or drug abuse: again, a common cause or effect of relationship breakdowns;
- gambling issues: problematic gambling can cause financial stress and dramatic mood swings;
- unemployment or financial difficulties.
What can older people do?
Whether adult children already live in the home, or the older person is just considering the possibility, it is always a good idea to set out some ground rules. Even if those involved do not want a formal written agreement, it is wise to have a conversation about the different aspects of living together.
Although conversations of this sort may be uncomfortable, many problems can be avoided when both parties’ expectations are clear. It also gives everyone a common foundation from which to raise any issues they may have later. At a minimum, conversations and agreements should address the following aspects:
- what contributions towards household expenses (e.g. bills and groceries) are to be made;
- how chores will be shared;
- who is responsible for home Money paid to a person to financially support them. When a couple has separated both parents have a duty to support their children, and a court can order a parent to make regular payments to support the children. Maintenance for a spouse is now less common, and must be applied for within 12 months of a divorce. It is usually covered in a final settlement of all property.;
- the duration of the adult child’s stay;
- what rent or board is to be paid; and
- whether or not partners can move in.
Failure to contribute to the household, especially if combined with a refusal to leave the home, and/or verbal, emotional and psychological abuse, can be considered to be family violence, for which there are remedies. If abuse is occurring, of whatever sort, it may be possible to obtain an intervention order that excludes and removes the adult child from the house or allows the adult child to remain in the house but protects the older person from family violence and abuse.
For more information on intervention orders, seeChapter 4.4: Family violence.
If an adult child refuses to leave the home after being requested to do so by the older person, and the older person does not wish to apply for a A court order made to protect a family member from violence, intimidation or harassment by restraining a person from harmful or annoying conduct towards that family member. See also intervention order., there are other options available to the older person depending on the circumstances. These options require careful assessment of any safety risks to the older person while they are under the same roof as the adult child.
If the circumstances support that there is a A document that sets out an agreement between a landlord and a tenant for the renting out of property, or for the use of other personal property such as a car. or sublease arrangement with the older person as the landlord (e.g. rent is being paid), there may be an option to issue a Notice to Vacate in accordance with the Residential Tenancies Act 1997 (Vic). If the circumstances support that there is no lease or sublease arrangement, but rather a licence to reside (e.g. no rent is being paid, no exclusive (1) Having control over property. Possession is not the same as ownership. For example, a bicycle you have borrowed from a friend is in your possession but you do not own it. (2) Having illegal drugs on your person or property.), there is the option to revoke the licence to reside. This is done via a letter to the adult child, which provides notice of which date they must leave. Their presence after this date constitutes (1) Going onto someone’s land without permission. (2) Trespass to goods is wrongful interference with someone’s personal property, for example doing something that harms someone’s computer. (3) Trespass to the person is doing something that interferes with a person’s body without their permission, for example giving a very drunk person a tattoo..