Written family care agreements: What’s involved and what can go wrong?

Litigation over failed family agreements is increasing, with much litigation relating to a verbal arrangement that is set up by the parties involved. While written family care agreements might not always be thought of in this situation, they can be relevant in instances where adult children are living with their parents, or just their mum or dad.

HopgoodGanim Partner Brian Herd is recognised as one of Australia’s leading experts in the areas of elder law, retirement, disability and aged care. In this article, we feature an adapted extract from Brian’s book, Avoiding the ageing parent trap, with insights about written family care agreements and how a lawyer can help.

Why seek legal advice about family care agreements?

Just getting advice on and understanding the issues that need to be addressed in, an actual and real-life document called an agreement, can have a number of beneficial effects:

• It may save you from family implosion and a breakdown in your relationship with your parents (and siblings).
• It will record for posterity and as an anti-dispute mechanism, what the terms of the agreement are.
• It will provide an open and transparent record of the agreement to the other interested siblings.
• It may well force your parent to review their estate planning (as we are all inclined to avoid) because of the implications of the agreement on the terms of their Will and even their Enduring Power of Attorney.
• If your parent is on an age pension, it will highlight the care that needs to be taken in putting together your arrangement to ensure it does not adversely impact on their pension.
• Depending on the arrangement, it will also give you the opportunity to determine if there are any CGT consequences for you (as discussed further below).
• It may avoid later accusations against you of ‘elder abuse’ if your oral arrangement breaks down.
• Finally, and perhaps, ironically, it may well convince you not to enter into the arrangement because of the risks and potential consequences.
• In what also can be described as a downstream disaster for both you and your parents, a failure to document that leads to litigation, will, usually, seriously erode the finances of a parent in their later life. It could also result in the parent becoming homeless. In that there is a maudlin message – your parent will be unable to fund alternative accommodation as, any resources they do have, are locked up in litigation and you may well be called upon then, for a second time, to step up to the plate to meet their needs.

Terms and conditions of living with family

Shared living within families can come in all shapes and sizes and on all sorts of terms and conditions. Essentially, they can involve:

• a parent transferring their home to a child in return for a promise that the child will give a lifetime right to the parent to continue to live in the home;
• a parent financing the construction of a flat or unit on a child’s property or an extension to the property where the parent can live; and
• where a parent simply moves in with the child and lives in a room in the child’s existing home.

Inherently, these agreements should not be discouraged. In a lot of cases, they are helpful and of real benefit to the parent for all the reasons mentioned above. They can also provide a sense of security and reassurance to a child to know that they now have the ability to oversee their parent’s care and welfare. It can be an antidote to the sense of ‘releasing the hounds’ guilt that can invariably imbue the ‘putting my parent into aged care’ scenario. 

What is covered in a family care agreement?

In considering entering into such an agreement, what are the issues to be conscious of? We have drafted many types of these agreements and they tend to cover the following major issues:

1. Background and purpose
2. Legal and financial advice
3. Dealing with the property
4. The loan
5. The accommodation
6. Licence to occupy
7. Care obligations
8. Payment for care
9. Holidays and respite
10. Security of payment
11. Voluntary ending of agreement
12. Involuntary ending of agreement
13. Disputes
14. Insurance
15. Enduring Power of Attorney and Will
16. Costs

While these headings may be cryptic, they give you some insight into the breadth of issues that need to be addressed. While our philosophy is to keep it simple as much as possible, there is no substitute for ensuring the agreement can address as many contingencies as possible and to provide solutions for those contingencies.

Brian Herd won Solicitor of the Year (Large Firm) at the Queensland Law Society Excellence in Law Awards 2022. He was awarded the 2021 Australasian Journal on Ageing (AJA) Book Award after publishing his book, Avoiding the ageing parent trap, which is available to order from Booktopia.

Further advice

HopgoodGanim’s Estates and succession team provides careful, considered and precise estate planning and succession advice to ensure family and business assets are transitioned as intended. The team designs estate plans for clients, in addition to supporting with estate administration, estate litigation and SMSF matters. You can find out more about Brian’s expertise and reach out to the team with any enquiries related to SMSFs and broader estate planning.

HopgoodGanim Lawyers also have an award-winning family law team if you require support with wider family and relationship law matters.