Growing numbers of older Australians are opting into care arrangements with their adult children rather than moving into aged care homes – a trend that is expected to escalate as the Aged Care Royal Commission continues to spotlight serious and alarming shortfalls in the quality of institutional care.
Protection: Somes is supporting law reform that makes legal remedies easier to access for older people when asset-for-care deals fail.
But informal ‘asset-for-care’ arrangements within families, in which parents transfer money or property typically to an adult child in exchange for accommodation and care, are proving a legal and emotional minefield.
Older Australians, as research by Macquarie University Associate Law Lecturer Teresa Somes highlights, are at risk of losing everything if circumstances change or relations with their relatives sour.
“Such failures can occur through the breakdown of relationships, or events such as divorce, bankruptcy or the increasing care requirements of the older person which the adult child can’t fulfil,” says Somes, who is urging law reform to make legal remedies easier to access for parents when asset for care arrangements fail.
The proposal has emerged from her PhD research that examined the legal position of the older person in these arrangements, including an analysis of the complexity of the law and whether it is fit for purpose.
“It’s an access to justice issue,” Somes says.
The power of trust
Somes says the 'asset-for-care' arrangements are made in the context of trust and confidence and are mostly informal and imprecise as to their terms despite involving the transfer of major assets. They most common involve parents selling their property and giving the proceeds to the relative or transferring the title of their home.
As the population ages, the arrangements are gaining in popularity because they seem a perfect solution, having clear advantages for both parties, Somes says.
People can enter into these agreements very quickly, if someone’s been widowed or they’ve had a fall ... and they think they’re okay because it’s family, and they can trust them.
The parent can be cared for within a family environment and family assets preserved rather than being handed over to external care providers.
The children benefit from an injection of funds to help pay a mortgage or relieve financial stress, or from enhanced value to their property by way of extensions or renovations to house their parents, aka the ‘granny flat’. ‘Sub’ agreements, for instance involving care of grandchildren can further supplement the arrangement, Somes says.
However, parties generally fail to seek any legal advice prior to entering the arrangement, nor do they plan in case of its failure.
“People can enter into these agreements very quickly, if someone’s been widowed or they’ve had a fall, and they don’t want to spend the money going to a lawyer and they think they’re okay because it’s family, and they can trust them,” Somes says. “It’s a bit like a prenup agreement, and that question of, ‘why would you have one? Because that suggests you don’t trust me’.”
In the event of failure, if the adult child is unwilling or unable to repay the contributions, the parent – who is rarely included on title as a registered owner, Somes’ research shows – risks being rendered homeless, or reliant on social housing or the generosity of friends, Somes says.
Trust: generally neither side in a 'granny flat for care' arrangement seek legal advice, but when things go wrong it can be emotionally fraught and wildly expensive, says Somes.
She cites a recent case in the Supreme Court of NSW where a woman was staying with friends – “in other words, couch surfing” – after the relationship with her daughter and son-in-law soured and she was asked to leave the home in which she had contributed nearly $170,000.
Somes says where the child holds legal title to the property and there is no agreement concerning the return of contributions, parents are faced with a bewildering array of law. Generally, remedies are sought through the complex area of equitable grounds for relief, heard in the Supreme Court where a three-day hearing can cost in the vicinity of $90,000-$130,000. “While some cases reach the courts, we suspect many do not because at present, legal action to secure a return of contributions is hugely expensive, time consuming, very stressful and emotionally fraught,” Somes says.
“An older person must either have sufficient wealth to bring an action or be eligible for legal aid or benefit from pro bono legal representation.“
Somes’ research shows that in cases that do reach the Supreme Court, rulings are generally in the parent’s favour.
Tip of the iceberg
Somes believes the reported cases of failed agreements represent only the tip of the iceberg, and that many families are experiencing these problems without any satisfactory resolution.
“The cases that go to court are usually because of some acrimonious breakdown, and across all Australian jurisdictions judges are commenting that we are seeing increasing numbers of cases.
“What we suspect is there are probably a lot more that fail for some other reason that doesn’t involve a relationship issue.”
Somes says despite the acknowledgement from the judiciary, legal practitioners and the government that the issue is on the rise, there is little evidence of its actual extent.
In a bid to gain further insight, Somes and her Macquarie University Law School colleague Professor Therese McDermott are conducting further research to gather empirical data on failed agreements. The research will involve a survey of community legal centres, Legal Aid offices and law firms known to practice in the area.
“What we want to know is, how often are they seeing people with this particular problem? And things like, why did these people enter into the arrangement in the first place; why hasn’t it worked; what are they doing now and what do they want … do they want to pursue something? Would they pursue an action if it was cheaper, quicker and easier to do? Is it more important to keep the family unit together or do they just want their money back?”
The way ahead
Somes says while legally binding contracts to cover family agreements are a means to prevent bad outcomes for parents, the reality is that few families at present enter into them.
Turning to remedies, Somes in her PhD proposes a simpler and more cost-effective way for disputes to be resolved.
She argues for the introduction of a statutory cause of action so that cases don’t require an action being commenced on equitable grounds, along with these matters being heard by tribunals rather than the courts.
“This aims to enhance access to justice and allow a less adversarial pathway for people to take, so that family disputes have a better chance of resolution,” Somes says.
“More older people therefore will have a greater chance of having money or property returned to them. “