ONE HAPPY FAMILY
WHAT YOU NEED TO KNOW ABOUT GRANNY FLATS
Your kids have invited you to come and live with them. Sounds like a great idea? You could even give them large amounts of money to cover any expenses or just to say thanks and you might get a pension bump. Sounding even better?
WHAT COULD GO WRONG? YOU’RE FAMILY, RIGHT?
Most people think of a granny flat as a small apartment in the backyard of one of the kids’ home.
The government sees a ‘granny flat arrangement’ as a number of situations where the parent gives money to a child in exchange for the lifetime right to live with that child or in a home that the child owns.
Centrelink treats money given to children for a granny flat differently to other cash gifts, which have the potential to affect your age pension payment.
The following three scenarios are common and don’t trigger Centrelink gifting limits:
The child spends money to build or modify their home so you can live with them and you reimburse them for this expense.
You buy the child a house and they give you the lifetime right to live in that house or another house they own.
You transfer the title of your home to your child and they give you the lifetime right to keep living in the home or another house that they own.
WHAT ARE THE BENEFITS OF GRANNY FLATS?
Living with the kids is an obvious way of downsizing. You have built-in carers and company. They get a live-in babysitting service. It can have two-way benefits.
If you meet the eligibility requirements, you can still access support from the Commonwealth Home Support Program or Home Care Packages which may take some of the burden off your family and give you a bit more independence.
Just because you live close to the family, doesn’t mean they need to be your carer.
WHAT ARE THE RISKS?
Before jumping into a grannyflat arrangement, think carefully about the legal issues and family relationship implications.
We all like to think that blood is thicker than water, but an ageing parent presents particular challenges for families.
Granny flat arrangements often involve handing over large sums of money to one child, so think through what would happen if your child:
Gets divorced and needs to split assets with their ex-spouse. Becomes bankrupt.
Has a gambling or other addiction.
Becomes intolerably annoying and you change your mind.
Asks you to leave.
Isn’t your only kid and you want to leave a fair inheritance to others.
A carefully constructed legal document setting out the terms of the arrangement and what happens if things go pear-shaped might resolve some issues.
But if the relationship turns really sour, getting your money back might mean taking legal action. Suing your own children does not make for a relaxed retirement.