Drafting checklist

Initial considerations

  • It needs to be clear that the family agreement intends to create legal relations. (See Monro 2002, p. 68.)
  • Is it clear to all that there is no intention of a gift?
  • Has each party sought financial advice such as in relation to tax implications?
  • Have the Centrelink ramifications been identified and explained to the client?
  • Are there caveats that need to be lodged at the time of the agreement?

Planning the agreement

  • Have other members of the family endorsed the agreement? Are there arrangements to share information? All close family members need to sign off/acknowledge the family agreement.
  • Is there a clause in relation to the legal costs of creating the agreement?
  • Are there arrangements to commence and terminate the family agreement?
  • What is the frequency of review or update of the family agreement?
  • Is there a system to monitor the family agreement?
  • What is the security of tenure? (Tenant/licence?)
  • Have insurance and indemnity issues been considered?
  • Is there any concern about your client’s capacity? What if your client, or any party, loses capacity? (See Capacity.)
  • Have powers of attorney been arranged? Have conflicts of interest been avoided? (See Powers of Attorney.)
  • Have other appropriate referrals (e.g. social and medical) been considered?

Ensuring all contingencies have been explored

What if:

  • the older person’s care requirements become too great and they need residential aged care (for example, dementia worsens considerably, or they suffer a stroke or lose mobility or continence)? How will the fees be met?
  • there is a separation or divorce or bankruptcy of the carers?
  • the property is sold?
  • a party moves interstate or overseas?
  • a party dies or becomes ill?
  • the carers wish to change their lifestyle when their children are grown?
  • the older person remarries or re-partners?

Ensuring all care and lifestyle options have been explored

  • What care will be provided and by whom? What care will definitely not be provided?
  • What household tasks such as cooking and cleaning will the older person have to do or share?
  • How will the cost of food and utilities be shared?
  • What arrangements will there be for holidays? For respite for carers?
  • Will the older person share the space with children? Will they be expected to look after children as part of the arrangement?
  • Will the older person have access to a car, or be able to be driven when they need to go out?
  • Will they be able to have a social life separate from the family’s, including having people visit them when they choose?
  • Will their accommodation have a private entrance? Will their mail be delivered direct to them? Will they have a separate telephone or internet access?
  • Are there pets to be considered? Will they be able to have a pet?

How to structure the agreement

  • Is it a life interest, trust, loan etc.? (Specify to avoid a presumption of advancement.)
  • Does interest apply or not?
  • Should your client’s name be on the title as well as their family member’s/adult child’s?
  • Will compensation be paid for their contributions to the adult child’s property? How will it be calculated?
  • How will the agreement affect inheritance arrangements?
  • What care, support and accommodation will be provided? How will care arrangements be quantified? If there are other children involved or other persons with expectations regarding inheritance, the circumstances could easily give rise to discord unless some pre-agreed formula has been agreed.
  • Are there any ongoing payment obligations and what will they be?

Dealing with disputes

  • What happens if the relationships between the parties break down?
  • How will disputes be dealt with? (A dispute settlement clause is required.)
  • What happens if there is any default of the terms of the family agreement?



Case study

A mother plans to sell her unit and lend money to her daughter and son-in-law to build an extension to their home where she will live – family agreement options

Jean is 78 years old. She has four adult children. She has been living independently in a unit she owns. She is starting to become physically more frail and unable to cope on her own. She needs assistance with some daily living tasks.

Jean and her family are confronted by the need to consider an aged care facility (such as a nursing home or hostel), community care or the family itself as the vehicle for her ongoing care. However, the children do not want Jean to move into a facility. Jean herself does not want to give up her independence but wants to ‘keep it in the family’. One of the daughters, Bev, suggests that Jean sell her unit and lend part of the proceeds to Bev and her husband, Bob, to build an addition to their home where Jean will live. Bev says that she will provide her mother’s daily care. Jean’s other children are anxious about this and can see part of their inheritance going to Bev. Jean comes to you for advice.


Suggestions for advice and action:

See if Jean will consent to a family meeting to discuss the issues, risks and possible outcomes. If you do not attend the meeting, make sure that Jean knows beforehand what issues need to be canvassed.

Prepare a family agreement after the consultation. One suggested arrangement:

  • Jean sells her property.
  • Jean uses part of the sale proceeds to lend Bev the money to build an extension to her home.
  • Bev gives Jean a licence to occupy the unit for life.
  • In consideration of the loan and in acknowledgment of the increased capital improvement of the property, Bev agrees that she will care for Jean. (List details of care to be provided.)
  • The debt would be amortised over time by the comparable community care rate in recognition of the care provided by Bev.
  • The agreement outlines when the loan to Bev would become immediately due and payable, such as, if Jean is hospitalised for a lengthy period and needs to go into care, Bev’s circumstances change, the parties’ relationship deteriorates, or there is some other change. Jean can stay in the Unit until alternative accommodation is found for her.
  • The agreement outlines who is responsible for outgoings, what happens on holidays and respite periods.
  • If Bev breaches the agreement, the debt would become immediately due and payable together with interest.

As a self-funded independent retiree, this arrangement would have no impact on any pension entitlements of Jean, although it does have income tax implications for Bev.


See the Sample Family Agreement PDF.