Family Agreements - Back to the Future?
We all know that Australian society is ageing. This has created an interesting, almost “retro” legal development.
Consider the position of an elderly woman (65 years or older) with two adult children. Living independently but becoming physically frail and unable to cope on her own. She needs assistance with daily living activities. She has reached a care crossroads. She and her family must now decide on an aged care facility, community care or the family for her ongoing care. This is a common problem facing people in her position.
The family might decide that they do not want their mother to be placed into a facility (even if available) and may prefer to explore how the family unit could assist her in her later years. She may not wish to give up her independence.
It is often the case that one or more children suggest that some property (often the family home) be sold and the proceeds used to build accommodation or extension at the home of a child to accommodate the ageing parent. The child would then provide the necessary daily care for that parent. Other children may get anxious about this issue as it could result in part of their “inheritance‘’ being reduced to increase the value of an asset of a sibling. How then is a parent's care provided for without some feeling that a child is taking advantage of the situation?
Written Family Agreements have evolved. It involves the use of sale proceeds of the parents' home to build an extension or "granny flat" for the parent to live in. The monies would become a debt owing by the child to the estate of the parent on their death or transfer to an aged care facility. However, this debt would be reduced over time (for example, by the comparable community care rate) in recognition of the care provided by the child.
The care services to be fulfilled by the child would be comprehensively detailed in the Agreement.
These types of arrangements may impact on the pension entitlements of the parents and have tax implications for the child. This should be addressed and resolved prior to entry into a Family Agreement.
It is an agreed, transparent outline for the whole family, particularly the parent, specifying care and financial arrangements;
Other family members would be less fearful for their inheritance and the other child's potential enrichment;
Reduce conflict which could potentially destroy the family relationship;
There would be a legal, enforceable guarantee of personalised, responsive and quality care in a family environment.
It gives peace of mind to a parent at a time in their life, when they would certainly crave it.
The need for these types of arrangements evolved after the Second World War. In those times, families had to make whatever arrangements they could to care for ageing parents, which often involved moving in with an adult child. Also, life expectancy was lower and female adult children were generally not full-time workers and could be freed up for care duties of a parent.
After the War, the church and charitable sectors began establishing institutional care (nursing homes) and this coincided with the reduced ability of families to provide a caring role, as more females returned to full-time work.
Since the beginning of this century – with our ageing population, limited places available in aged care facilities and families often having a dislike for institutional care – the prevalence of families to once again retain the caring role can occur without children having to give up their job or business to do so.
This is the genesis of the Family Agreement – the transformation of a cultural duty into a legal principle and contractual obligation of care. It enables maintenance of independence as we age and become frail, but also enables us to remain within the family environment, which is often a critical ingredient for happiness for most older people.
Postscript: As recently as 5 January 2023 there was significant attention given in the print media to the lack of availability of care services for the Elderly.