Granny Flat Agreements: what you need to know
Thinking about making changes to a loved one’s accommodation can be emotional, particularly when it relates to a loss of independence or mobility.
Where circumstances are appropriate, a granny flat right may provide much needed support and care for an elderly family member.
This arrangement is often used by older people to secure housing while maintaining some financial independence
As Granny Flat rights are complex, you’ll need to seek the advice of a financial planner, tax agent and solicitor.
What is a Granny Flat?
A granny flat is a self-contained housing unit located on the same block as a single-family dwelling, often used for an ageing parent.
Granny flats are becoming increasingly common on many properties with enough land to accommodate them.
However, the path to building one on a property is not straight forward, and care should be taken when entering into an agreement to avoid disputes.
Because a granny flat agreement is accommodation for life, it can affect a person’s social security and aged care implications and opportunities.
In addition to this, a granny flat agreement may assist in managing the costs if the elderly family member enters residential care in the future.
How can a Granny Flat Agreement be beneficial?
There are a few reasons why people explore this avenue when taking care of an elderly loved one:
- More Living Space: Granny flats can provide additional living space while providing safety and support for the resident.
- Increased property value: In areas where space is limited, granny flats can increase the value of a property.
- More time with family and less pressure financially: An extra dwelling can allow family members to live close by and financial burdens can be shared.
Does the agreement need to be in writing?
While there is no formal requirement that the arrangement be in writing, if you want to be eligible for concessions in Centrelink, you will need to work closely with a financial planner and solicitor so they can draft the terms of an agreement.
The agreement should cover the requirement to provide accommodation in another dwelling where the original home has been sold, certain features the accommodation has (e.g. single story), if the client is expected to make additional financial contributions and when and if the arrangement will come to an end.
Granny flats are a way to transfer a significant amount of wealth, bear in mind that since it will impact your loved one’s overall estate planning strategy, all parties should receive independent legal, financial and tax advice.
If you are thinking about a granny flat as an option, please reach out to our financial advisors for a meeting.
Ph: 1300 187 358