By Marie Brownell, National  Manager Estate Planning, Equity Trustees

It can seem like the perfect solution to downsizing and staying close to family – especially when the big old family home is well, too big now, and maybe a bit further away from the grandkids than you’d like.

And maybe your health and fitness are not what is used to be, so it’d be nice to have family around in case you need the odd lift or a bit of help. Maybe it gets a bit lonely from time to time particularly after the death of your life partner.

Sadly, in our line of work, we often see cases where people have ended up in very difficult circumstances at a time when they are most vulnerable.  The assets they have built during their lifetime, especially the value in the family home, should provide them with the financial security they need and deserve as they get old.

It’s unfortunately common and the story goes something like this: Mum or Dad (let’s say it’s Mum) is recently widowed and getting on in years.  A well-meaning adult child suggests and convinces them that the best thing for them to do is to sell up the family home and move into a purpose-built granny flat on their property.  They promise Mum that they will take care of everything including them.  Mum will be happier and safer.  Mum finally decides this may be for the best.  The family home is sold, and Mum is persuaded to put the proceeds of the sale into the adult child’s mortgage, loan it to them, or invest it in something like a holiday house for “the whole family to enjoy”. Sometimes it’s presented as an ‘exchange’ or just to ‘help out’, sometimes to ‘offset the cost’ or to financially contribute in some way to the new arrangement.

This leaves Mum in a perilous financial situation. Mum has lost the value of those assets and if the time comes when a place in aged care is needed, her options are now very limited.

In the worst cases, the money has gone into the family mortgage and after a period, the house (and granny flat) are sold and the kids move on to a new home or the adult child goes through a relationship breakdown and the house must be sold under the terms of a property settlement. 

This leaves poor Mum to find alternate accommodation, with limited options as she has been cleaned out and there is nothing left of the family home to lean on financially. Which is nothing compared to the stress, shame and heartbreak of finding herself in this situation.

No-one ever thinks this will happen to them. We wish we never saw it happen to anyone. Sadly it can and does happen.  They are a number of ways to protect yourself financially if you decide to “move in with the kids”.  It’s important to obtain legal and financial advice before making such a decision to ensure you are properly protected and fully understand the risks. 

If the granny flat decision is made by an attorney under a Power of Attorney, and someone is concerned about the decision made or that Mum or Dad is being financially abused, there are steps that can be taken to have the decision and attorney appointment reviewed through the relevant State or Territory Tribunal or Supreme Court. 

The best way to avoid these potential financial disasters is to be make informed decisions, plan and formalise decisions in the appropriate documents.  

Do it when you are well in control of your life and when your capacity to make decisions cannot be disputed. Don’t wait – it’s perfectly fine for you to make sure you are safe and secure in your future.

This article by Marie Brownell, National Manager Estate Planning, Equity Trustees was also featured in  The Australian Senior on 20 May 2019

More information about estate planning and wills can be found here on our website. Or you can call and speak to us about all your estate planning needs, including protection for your beneficiaries and ensuring specific arrangements of your Will and Super can work together.