Intergenerational Families Living Under One (Large) Roof
Increasingly we are seeing intergenerational families (that’s parents, grandparents and children) living together under one (large) roof, and it’s not just families where once such living arrangements might have been expected to be part of their cultural heritage.
It’s hard to know if this trend is a response to sky high house prices (especially in Sydney and Melbourne), ailing grandparents needing a viable alternative to moving into an expensive aged care home, or children being locked out of the property market due to their inability to save for that all important house deposit and / or job uncertainty due to the pandemic, or maybe they just miss the family lifestyle of living at home and sharing all the domestic activities.
But are these new and complex living arrangements being properly documented? Are everyone’s needs being considered? Does it affect estate planning arrangements?
In a situation where you have three generations of a family living together here are just a few of the potential issues that might arise:
1. For the parents who own the home:
(a) If one child has moved back home whilst the other children have not, how does that affect how the parents should treat their children in their Wills? After both of them are gone, if they just divide everything between all the children equally, will that be seen as fair by those children who did not move back home? Is ‘fairness’ important under our law?
- One approach to this issue is to ask the child who moves back home to pay board or rent for their occupancy. Having this put into a written agreement would make the arrangement “official” and transparent to all the children.
- Alternatively (or as well), the parents’ Wills could include an equalisation clause to recognise the benefit received by the child who lived at home and make an appropriate adjustment in the shares of the estate between the children.
(b) What about the partner (legal or de facto) of the child who lives at home with the parents? Does he or she become a dependant of the parents (like an extra child) and need to be taken into account in their Wills? Could that person make a claim on their estates?
- Again, having a written agreement between the parents and the partner of that child can assist greatly in showing that the relationship is not one of financial or other interdependency (which could give rise to an entitlement to make a claim on the parents’ estates) – especially if the partner is also required to make a contribution in the form of board or rent or perhaps even services like gardening, mowing, home maintenance etc in return for the accommodation.
2. For the grandparent who is living with their child and the child’s partner:
(a) If the child with whom they are living is not their only child, should they make an adjustment in their Will so as to recognise the value of living with and being cared for by their child (and indeed by the child’s partner), as compared to the gifts they leave to their other children who they are not living with?
(b) Has the grandparent in fact made a financial contribution to their child for the right to live with them (such as a so-called granny flat arrangement), and will that contribution be recognised in the event that the grandparent one day has to leave the house, perhaps because they need to move into aged care due to having advanced dementia? What about if the child gets divorced from their partner and the house needs to be sold as part of the property settlement? What if their child dies and the house is inherited solely by their surviving partner – will he or she still allow their in-law to live there with them?
- All these issues can and should be dealt with in a suitable formal legal agreement to deal with each of these scenarios so as to ensure that the grandparent is not financially exposed and / or left homeless as a result.
3. For the children of the parents:
(a) Whilst the child is living with their parents, it may be that their relationship becomes one of financial dependency between child and parent, or there is an interdependency relationship between them.
(b) It might be assumed that the child is living at home because they do not have any material assets of their own (hence the fact they cannot buy their own place, right?) However, if the child is working, they will have superannuation, and it is very possible or even likely that their superannuation account has attached to it a life insurance policy which may give rise to a significant death benefit on the child’s untimely demise. To whom does the child wish to leave their death benefit? It cannot automatically be assumed that they would leave it all (or even partly) to their partner, especially if the relationship has not been very longstanding.
- In this situation, the child might wish to leave some or all of the superannuation death benefit to their parents – or perhaps divide it between their surviving partner and their parents. Can they nominate this to their superannuation fund? Can their parents receive a death benefit directly from the fund (this is where the ability to prove financial dependency between child and parent, or that there is an interdependency relationship between them, may be of great importance)?
- If such a relationship cannot be proven, then another course of action is for the child to nominate their estate to receive the superannuation death benefit, and then to put into place a valid Will that directs the death benefit according to their wishes. This is another area where expert superannuation and estate planning advice becomes important – a DIY Will is definitely not an option here!
Farming families can be particularly affected by these issues, especially where the child who lives with their parents actually works the farm and has contributed significantly to the success of the farm business but may have not been properly remunerated by the parents for their efforts over the years. The situation is made more complex where the child has actually made a significant financial contribution to the parents’ farm – for instance, by paying for the construction of their own dwelling on the farm land. How can these issues be dealt with in the parents’ Wills, and / or in any agreement between the parents and their child?
A further complication is where the farm is the major asset of the parents’ estate, and there are other off-farm children who have not made any significant contribution to the farm, but nonetheless expect to be treated equally with their on-farm sibling when their parents pass away. What if the parents want their on-farm child to continue to live on and work the farm (as may be his or her expectation) after they are both gone – how can they treat their off-farm children equally (or perhaps more to the point, “fairly”) in this situation?
Of course, these issues are not exhaustive – one need only have a look at the re-runs of “Packed to the Rafters” to appreciate this! But whatever the situation, it is important for the respective family members to consider the issues and take them into account as much as possible in their estate planning.
For expert legal advice and assistance with all types of Wills and with issues such as those considered in this article, please contact Townsends Business & Corporate Lawyers.
For more information about the above article, please contact:
Brian Hor
Special Counsel – Estate Planning & Superannuation
SUPERCentral
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