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Moving in to a granny flat within or alongside your children’s home can be an attractive proposition. It can be easier to manage and stay in touch with family as you age, with the added bonus for your kids of built-in babysitting and a hand with the bills.
For older people, giving up their own establishment and making a home with the younger generation can mean company, security and lower living costs.
But a lack of clarity around financial arrangements can be a source of tension for families in multi-generational living arrangements. It makes sense to sort out the money side of things upfront to reduce the likelihood of trouble down the track if you’re considering going down the granny flat route.
Here are some of the things you need to consider and discuss before deciding to move in.
Will you live with the kids for free, or do you expect to contribute for board, lodging and bills in cash or in exchange for help around the house? A business-like conversation at the outset can mean all parties know where they stand and can make sure there’s no awkwardness or acrimony when the bills come due. Whatever arrangements you agree to should be documented to make it easier to resolve misunderstandings or disputes.
Are you planning on an arrangement where you contribute to the cost of your shared accommodation as well as its running expenses? With house prices stubbornly high around much of the country, a parental top-up can relieve financial pressure or allow you to move into a bigger or better place.
One way parents can contribute a lump sum to the cost of a property is via what’s known as a granny flat right, or interest. This is a legal arrangement which provides an individual with a life interest in accommodation within a private residence in exchange for a sum of money or other assets.
Centrelink entitlements may be affected depending on the size of the sum exchanged. The Department of Human Services applies a reasonableness test which weighs the older person’s life expectancy against their contribution and may deem them a home owner for aged pension asset test purposes, if the amount they have contributed is on the high side.
Alternatively, parents may choose to transfer ownership of their home to a child but retain the right to live there, or in another private property, for the rest of their lives.
Adult children need to be aware that accepting cash via a granny flat interest comes with the legal obligation to provide a roof over Mum or Dad’s head for life, irrespective of changing circumstances.
This can be a complex area and both parties are advised to seek financial and legal advice before entering such an arrangement.
It seems a good set-up for now but what happens if things change? A work transfer, relationship breakdown, or iIlness – yours or theirs – could mean arrangements are no longer suitable and new ones need to be made. The question of how you’ll manage if your care needs increase significantly should also be considered. Although not the cheeriest of themes, looking at some ‘what if’ scenarios and discussing ‘exit clauses’ for both parties is a conversation best had before, rather than after, events unfold.
Are you considering setting up home with your parents and need some help with the financial aspects of the arrangement? QSuper members can access QInvest1, which can provide guidance and personalised advice for individuals and families at all ages and stages of life.
For more information, or to speak to one of QInvest’s1 team of qualified advisers, contact us on
1800 643 893 or visit qinvest.com.au
1 QInvest Limited (ABN 35 063 511 580 AFSL 238274) (QInvest) is ultimately owned by the QSuper Board (ABN 32 125 059 006 AFSL 489650) as trustee for QSuper (ABN 60 905 115 063). QInvest is a separate legal entity responsible for the financial and credit services it provides. Advice fees may apply.
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