GRANNY FLAT AGREEMENTS >OH[ HYL .YHUU` -SH[ (NYLLTLU[Z& Granny Flat Agreements (GFAs) are where one or both parents are provided with accommodation in the home of an adult child. The accommodation is usually provided by the child in exchange for some payment, and may sometimes involve the transfer of the parent’s home. In some cases, the parent will provide funds for a granny at to be built at the child’s home. In most cases, care is required for the parent and is in fact the impetus for considering a granny at agreement in the rst place. Whatever the arrangements are for security in old age, a granny at agreement needs to establish a ‘granny at interest’. There needs to be a transfer of assets/money to the owner of the property (the child) in which the parent will live in exchange for a life tenancy or interest in their property. (JJVTTVKH[PVU *HYL (UK ;OL 0TWVY[HUJL 6M ;YHUZWHYLUJ` Although most GFAs often include arrangements for the care of the parent, this does not necessarily have to be the case. Arrangements may just be for the provision of accommodation alone but problems can set in if parties do not take a long term view. A parent may enter into an arrangement when they are relatively healthy, but their health may deteriorate drastically and can place a toll on emotions, nances and lifestyle adjustments. Therefore, not only must the child who is party to the granny at agreement be involved, but every family member in the household (example the child’s spouse) should be consulted about the arrangement as well. Siblings not living in the same household should also be consulted because it may be perceived that one child is receiving an advantage over another. For these reasons, we often advise our clients that all affected family members should “sign off” on the GFA – not because they are direct parties to the agreement but because it is vital they acknowledge witnessing and understanding the arrangement which should be as transparent as possible to avoid disputes later on. ;OL 9VSL 6M *LU[YLSPUR (UK 0[Z 9\SLZ Centrelink rules are designed to facilitate GFAs being entered into. Normally, transferred property or funds would be deemed to be a gift, however, Centrelink’s granny at rules allow for any property transferred or money paid to the parent’s child to be exempt of the gifting/deprivation rules. Whilst we have observed a lot of exibility by Centrelink in recognising a myriad of different styles of arrangements, there are certain rules which nonetheless need to be adhered to. These include: Centrelink will look at the value of the asset transferred to see if the parent paid a ‘reasonable amount’. If they consider that the parent has transferred more than the value of the granny at right, they will determine that the parent has been deprived of an asset. This will directly affect the amount of pension received Assets that can be transferred in exchange for a ‘granny at interest’ include the ownership of the parent’s home or other forms such as cash, stocks, bonds or jewellery and heirlooms The parent being provided with accommodation and/ or care cannot own the property that they are going to reside in The home in which the accommodation is provided must be the parent’s principal home While there is no need to physically “build” a separate granny at or a separate residence, there must be a designated room or area that allows for the parent’s exclusive occupancy. .L[[PUN -PUHUJPHS (K]PJL GFAs involve not only legal but also nancial matters. This is particularly the case where the parent receives a bene t from Centrelink or Department of Veterans Affairs or if the requirement for aged care is possible in the future. We work with specialist nancial advisers who can address those issues with you. 0TWHJ[ 6U >PSSZ 7YVIH[L Parties entering into a GFA need to be aware that money or assets given to the child in exchange for the ‘granny at interest’ no longer forms part of the parent’s estate. This means that upon the death of the parent any property or money handed over to the child will not be distributed in accordance with their will. We advise parents on their requirements for a GFA taking into account their estate planning needs as a whole. 12
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