Family agreements

113       A specific type of financial abuse has been recognised in the context of family agreements. A ‘family agreement’ is one name for arrangements made between an older person and a family member (usually intergenerational), or other trusted person such as a friend or carer, where the older person transfers title to their property, or proceeds from the sale of their property, or other assets, to the trusted person—who may use the funds to discharge a mortgage or purchase another property—in exchange for the trusted person promising to provide ongoing care, support and housing. The older person may enter into the arrangement in preference to formal assisted residential care. Other names for such an agreement include: an ‘assets for care’ arrangement, independent or private care agreement, personal services contract, and lifetime care contract. These terms may be preferable as they signify that the agreement is not confined to ‘family’.

114       Such an agreement can be a written document but more typically it is made orally, with limited legal advice having been obtained so there is little detail as to the terms, and without all of the relevant issues having been discussed and agreed.

115       Other than writing requirements for contracts concerning interests in land, there is no Commonwealth, state or territory legislation specifically governing or regulating these family agreements. This section uses family agreements to illustrate the application of the common law and equitable doctrines (together referred to as ‘common law doctrines’, as distinct from statute law) that may be of use to an older person who seeks to commence civil litigation to obtain redress for financial abuse.

Risk for the older person

116       A family agreement is not an inherent form of financial abuse. Rather, such agreements recognise the reality that these arrangements can be mutually beneficial in facilitating a caring relationship. Further, many adult children or other trusted persons cannot afford to take on such caring responsibilities without financial compensation.

117       While such arrangements can fulfil a useful social purpose, there can be serious consequences for the older person if the promise of ongoing care is not fulfilled or the relationship otherwise breaks down. The existing legal regime may inadequately protect the rights of an older person where the arrangement breaks down.

118       It may be difficult to establish that a contract was intended, and what its terms were. The trusted person is likely the registered proprietor of the property, and it may be difficult to establish a specific interest in the land.

Question 27        What evidence is there that older people face difficulty in protecting their interests when family agreements break down?

The role of lawyers

119       In recognition of the role that lawyers can play in helping prevent financial abuse of older Australians, Seniors Rights Victoria (SRV) produced Assets for Care: A Guide for Lawyers to Assist Older Clients at Risk of Financial Abuse, which includes a checklist of points to consider when drafting an agreement. SRV also includes a sample family agreement on its website which lawyers are permitted to use.

120       Families may be reluctant to consult lawyers in respect of family agreements before entering into such arrangements, considering lawyers to be unnecessary and/or costly. Rather, lawyers are more likely to be consulted once relations have broken down.

Existing redress

121       The main form of redress is by way of civil litigation. Pursuing litigation in these cases, however, may be prohibitively costly, unsatisfactorily lengthy and stressful for the older person. Proof, presumptions and remedies also pose significant issues in such cases.

122       A tribunal may be a preferable forum to hear and determine disputes about family agreements as tribunals are considered to be less expensive, more expedient, and less formal than courts. The Victorian Civil and Administrative Tribunal (VCAT), for example, has jurisdiction to hear disputes in its Joint Property List about co-owned land and goods and has a range of orders available to it.

Reform suggestions

123       Social security laws recognise that family agreements may be entered into to support older people. Generally, there are limits to the amount of assets that can be given by a person without reducing the entitlement to receive, or rate of payment for, the Age Pension. ‘Granny flat interest rules’ reduce the effect of these rules.

124       It is recommended, but not required, that the existence of a ‘granny flat interest’ is documented in writing for social security purposes. Requiring some form of documentation of such an interest for Age Pension purposes may prompt a person to seek professional advice about such an arrangement, and provide a safeguard for older persons if agreements break down.

125       In its 2007 report, Older People and the Law, the House of Representatives Standing Committee on Legal and Constitutional Affairs concluded that family agreements warranted a greater deal of formalisation and some form of regulation. The Committee recommended that there be an investigation of legislation to regulate family agreements—such as the desirability of formalisation, registration, and courts being able to dissolve family agreements and grant appropriate relief—and also that guidelines and model clauses be developed.[23] The Australian Government accepted these recommendations in principle.[24]

126       Some commentators have called for specific legislation to:

  • define the type of agreement broadly;
  • include a standard form agreement; and
  • provide for appropriate remedies and penalties.[25]

Question 28        What changes should be made to laws or legal frameworks to better safeguard the interests of older people when family agreements break down?