By Angela Harry
What you need to consider and why independent legal advice is important!
It is quite common for families to arrange a transfer of property between an elderly relative and an adult family member for little or no consideration. Where an agreement has been entered into between family members to transfer a property, it is important to ensure that the transfer is fair and equitable and that the elderly relative is not at a disadvantage due to issues of capacity, undue influence or fraud.
There have been numerous cases before the Courts where such inter-family transfers have been set aside. The Courts have wide ranging powers in relation to such transactions and have developed a very sympathetic approach to the elderly and their vulnerability to influence and abuse by family members.
There are a myriad of issues which arise out of such inter-family transfers and the following short list should be considered :-
- Clear instructions from the elderly relative (‘the donor’) regarding their wishes and intentions should be obtained without the relative present.
- The capacity of the donor to give those instructions or to understand the nature of the transaction should be assessed. The donor must demonstrate they understand the transaction including the purpose, who benefits from the transfer and any viable alternative options. Where capacity is in doubt reports should be obtained from the donor’s treating health professionals.
- The arrangements which will accompany the transfer of the property should be discussed. For example, if the donor is to stay in the property with the relative how that occupation will be secured.
- The impact of the transfer on the donor’s will and other family members.
- The impact of the transfer on the donor’s pension entitlements and any Capital Gains tax.
- What might happen if the relative who is to receive the property dies, became bankrupt or whether they can take out a loan over the property.
- Whether the donor intends to remain on the title and, if so, the difference between a joint tenancy and a tenancy in common.
- If consideration is to be paid how it would be determined, when it would be paid, and if not paid at the date of transfer how it would be secured. It should also be clear who pays for the legal costs and stamp duty of the transaction.
If the issues outlined above are not properly considered and the elderly relative does not receive the appropriate independent legal advice then there is a possibility that the transfer could be set aside at a later date. One of the reoccurring factors in the Courts decisions to set aside an inter-family transfer is the lack of independent legal advice. Independent legal advice does not simply mean attending on another solicitor to have a signature ‘witnessed’ but involves a careful assessment of the transaction and appropriate advice.
In many cases, a formal agreement should be entered into so all parties are clear on what has been agreed to, including other family members.
If the recipient of the property being transferred also is the appointed Attorney of the Donor under an Enduring Power of Attorney, they must be careful not to approve a transaction where there is a conflict of interest.
For any advice concerning these matters, please contact Donna Tolley on 07 5506 8241 or email dtolley@attwoodmarshall.com.au.
