By Eileen Webb
Professor, Faculty of Law at University of Western Australia
11 August, 2013
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.
SOURCE: The Conversation.com
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