March 14 2018
There comes a time in life where a certain amount of role reversal takes place between children and parents. Accidents, sickness and old age force children to take more responsibility and make crucial decisions about care. What happens if there are disagreements?
There are a number of legal implications to consider when this happens. In particular, if you hold an Enduring Power of Attorney, there are restrictions on the decisions you can make if you stand to benefit. There are also legal implications to consider if your parent needs to go into a care facility.
Choosing the best place for parents to live
Few people want to live alone. You have a number of options to consider when choosing the right place for your parent to live. The growth of retirement villages specifically designed for the elderly means there are many options available there. Buying a unit may not be possible or desirable, so your parent may have to stay with family. Obviously, this places a burden of care onto the family member who accepts this responsibility. You can save yourself problems at the outset if you carefully record these arrangements. Talk to family law specialists to get legal advice.
EPAs and the Vernon Case
It’s quite common that the child providing care holds an Enduring Power of Attorney. You are not to personally benefit from this power, as was demonstrated in the 2016 Vernon case. This case involved an elderly man living with his son and his son’s wife. The man’s money was almost entirely paid to the son and his family in less than two years. The son claimed he had his father’s approval. The court determined he had misused his power under the EPA for his own benefit and was ordered to pay back the money and meet some of the court costs.
Legitimate uses of money
There are situations where your parent can lend you money to help fund a building extension, such as an extra room, where the parent will live. In other cases, your parent might decide to pay for a separate relocatable unit. Again, it’s important to make arrangements with this kind of accommodation. Otherwise the structure will be the legal property of the person who owns the land. This is where written agreements can make matters clear for everyone concerned. Other matters you should include in your agreement are:
- What happens to the unit when the arrangement comes to an end?
- Is any money paid out to be considered a gift or a loan?
- If the money is a loan, does it attract interest and when should it be repaid?
- From the parent’s perspective, is it fair to favour the carer by paying for an extension without giving a similar gift to other children?
What happens if things don’t work out?
What happens if money has been spent on extensions but things aren’t working out? What happens if the parent wants their money back to move somewhere else? Also of utmost importance, the child needs to be able to prove the arrangement was fair and that they weren’t taking advantage of the parent. This is where you should seek family law specialists to provide independent legal advice and to document arrangements.
The pitfalls of long-term residential care
If your parent needs long-term care, you should be aware that government subsidies for care are asset tested. If money has been spent on your property as described above, it can be clawed back as if your parent still had the money. There are exemptions allowing you to hold onto a portion of the funds, so make sure you seek legal advice.
The residential care subsidy can be refused if money has been paid out to complete an extension or build a granny flat on the basis that it is a ‘deprivation of assets.’ If the money is a loan, you would be expected to pay it back to help meet the cost of care.
More on EPA attorneys benefiting from their own decisions
As we noted in the Vernon Case, EPA attorneys need to understand they are not entitled to receive any benefits from the decisions they make. The purpose of the position is to make the best possible decisions about the care and welfare of the parent, but there are allowances in Section 107 of the Protection of Personal and Property Rights Act 1988.
You can benefit if:
- The EPA allows this to happen.
- The court authorises you to receive a benefit.
- You are recovering out-of-pocket expenses.
- You are the spouse or partner and are dealing with jointly owned property.
- You make a loan or investment which a trustee would be allowed to make when looking after trust money.
- You are a professional, such as a lawyer or accountant, who charges fees for such professional work.
EPAs are specialised documents and can contain wording which overrides any of these last four exceptions. If you find yourself having to make decisions about the care of a parent, check their EPA and make sure you have all the financial arrangements documented. You’ll save everyone a headache. If in doubt, talk to our family law specialists for sound advice.