Families living together to provide support and care for one another is not a foreign concept, however as the need for assisted care increases so do the associated costs, conversely the ability to ‘age at home’ decreases.
In Australia a classic example of political demography in action is the ageing population dilemma. Australia’s aged care system has been under mounting pressure in recent years due to a rapidly ageing population, to paint a clear picture, consider this; between 1995 and 2015 the proportion of Australia’s population aged 85 and over almost doubled. A combination of the rising cost of living, ageing population and low fertility rates have merged into a perfect storm of Centrelink dependence for Australia’s elderly putting unnecessary pressure on our rather archaic welfare system.
A survey revealed that more than 60% of Australian’s aged 60 years and older possessed a preference to ‘ageing at home’, to retain their independence by staying at home connected to their family and community and as such we have witnessed a steady rise in the use of granny flat interests.
The Federal Government has responded to observable demographic shifts by understanding both the needs and wants of the general electorate. The mode in which the Federal Government has sought to instigate change is through the new aged care reforms, making it easier for elderly Australians to remain at home.
An effective solution that could cater for the majority of ageing Australians involves the use of a granny flat interest. The government has realised that ultimately people want to stay living in their own homes as opposed to moving into aged care and thus have released a whole new range of home care packages covering things from basic domestic assistance and up to a more hands on high-level care.
A common misconception around the use of granny flats is that it involves building a shed in the backyard for granny to live in. However Centrelink have a much broader definition of granny flat. From their perspective there is no issue regarding what building the granny flat is in. It’s just that ‘granny’ has the right to reside in a particular private residence which is then regarded as granny’s principle home.
An example of a granny flat could be the following:
- If the parents wishing to take on home aged care transfer the property title of their home to their children while retaining the right to reside on the property until their deaths
- If the parents transfer assets, such as money, for the right to reside on a property until their deaths.
In both instances the parents have transferred assets to their children, whilst altering their Centrelink positions, and engaged the services of Australia’s home care packages to cater for their needs.
The use of granny flats certainly creates interesting estate planning opportunities but can be disastrous if done incorrectly so a word of caution is needed. It is essential to engage the use of a financial advisor in these matters regarding granny flat interests, especially when navigating the dangerous waters of aged care reforms, Centrelink policy interpretation and to ensure effective estate and Centrelink planning for individuals. We at The IF Group TM are always happy to assist clients in overcoming any estate planning concerns, use our knowledge and expertise today for a better tomorrow.