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Close to home: financial hazards for older people in family accommodation

Older people living with younger family members is increasingly popular, but there can be associated legal issues if the relationship breaks down. Shutterstock

Last year, having recently lost her life partner, 78-year old Miriam* was advised by her children that the family home was now “too big” for her to live in. She sold her property and moved into the home of an adult child, Sophie, using the proceeds of the sale to discharge Sophie’s mortgage and agreeing to contribute to household expenses.

Miriam believed this contribution would compensate Sophie for her accommodation and aged care expenses. Recently, there was a falling out between Miriam and Sophie’s partner, and Miriam was asked to leave.

Family accommodation arrangements, where older family members live on or in the same property as younger members, are increasingly popular in Australia. Although there are many possible variations in the structure of these arrangements, it typically sees an older person’s family receiving a financial benefit in exchange for a promise to provide accommodation for, and in some cases care of, the older person.

At first glance, the arrangement seems ideal: an older person ages in a supportive family environment. Any financial input made by the older person is seen as a contribution to the family in consideration of their assistance. But what happens when this arrangement breaks down?

Unfortunately, the legal framework regulating family accommodation arrangements is precarious. Despite the prevalence of “assets for care” arrangements, and the recognition of the potential for exploitation of the older person, the law is difficult to understand and, from a practical perspective, largely ineffectual. Most of these arrangements are informal and only come to light when something goes wrong.

Even assuming the older person has the financial and emotional fortitude to take a legal route, a dispute regarding a family accommodation arrangement can give rise to a confusing mix of legal issues including contract, real property and local government laws as well as equity, trusts and family law. There may also be Centrelink and taxation consequences.

So, what are the key issues here? In most cases there is no “contract” - nothing is written down and family members can have differing recollections as to what the “terms” of the arrangement were.

In court, the older person may also face the difficult task of proving undue influence or unconscionable dealing has occurred. There is no presumption of undue influence in relation to transfers from a parent to child and old age is not, in itself, a special disadvantage in establishing unconscionable conduct.

Additionally, the older person’s name is often not placed on the title to the property. It is therefore up to a court to decide whether the older person holds an interest in the property.

Depending on the nature of the transaction, a court will need to consider perplexing legal creatures such as resulting or constructive trusts (which can be imposed by a court regardless of the intention of the parties), equitable liens (a right to secure the performance of an outstanding obligation) or estoppel (that a claim cannot be made if it contravenes a prior claim of the same party). Unfortunately, decisions indicate some inconsistency of approach even on similar cases.

How the transaction is classified by a court, however, is crucial and will determine the remedy available to the older person. Despite this, in most cases, it is impossible for the older person to be awarded enough money to arrange an equivalent standard of accommodation.

Older people don’t always have the emotional or financial capacity to argue their case if family accommodation arrangements fall apart. Shutterstock

Currently, all that can really be done is to encourage older people and their families to seek legal advice and enter into a formal family arrangement. Mediation may also help to encourage the family to set mutual expectations and responsibilities.

All contingencies, even the unpalatable prospect of a breakdown in the arrangement, should be considered. Unfortunately, in most cases the attitude is that lawyers are too expensive and that “those things happen in other families, not ours”. Should the law, then, be amended to make a legal path easier for the older person?

A revised law should compel mediation in the first instance and permit such matters to be heard in less formal, lower cost forums. It should also introduce a presumption of undue influence in significant parent to child transfers. The American state of Maine, for example, presumes undue influence where an older dependent person transfers real estate or has undertaken a major transfer of personal property or money for less than full consideration.

Further, any new law should disregard the presumption of advancement in relation to gifts from parent to child and avoid treating such transactions as joint ventures akin to a commercial transaction. Consideration needs to be given to the familial nature of the transaction, the expectations of the parties and the potentially serious consequences to the older person.

As the population ages and the cost and availability of aged care increases, the number of family accommodation arrangements will continue to rise. Although there is a legal route for an older person disputing a family accommodation arrangement, the reality is that pursuing the matter is expensive and emotionally draining. Even if the action is successful, the result is likely to be broken family relationships and insufficient compensation to enable an older person to “start again”.

*The names of all parties involved have been changed.

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