Ask Paul: Is building a granny flat for my parents a bad idea?


Q. My wife and I have an investment property on the NSW south coast which we purchased for our retirement.

We are starting to prepare for semi-retirement in about one to two years and plan to move down there. The existing house is old and we intend to do a knockdown and rebuild.

Here is the kicker. I would like to have my parents come with us and live on the same property.

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As part of the new construction we would need separate accommodation - a granny flat - for them. What is the best way to achieve this without my parents forgoing their Centrelink benefits?

My parents are in their early eighties and own their own home but are starting to struggle a bit.

They also have four children so I know the inheritance may become an issue.

I do not wish to upset the other siblings on the money side of things, and my parents are not wealthy.

Can you suggest a course of action for both the Centrelink benefits, with the sale of their home etc, and also perhaps a contractual agreement with the other siblings regarding the inheritance so they know our intentions are genuine? - David

A. My goodness David, here we need to tiptoe through a minefield.

You tell me your parents own a home but I suspect not much more as they are receiving Centrelink benefits. Fortunately, Centrelink is not really the bit I am concerned about.

Now to the minefield. Clearly your heart is in the right place. But many a family has been torn apart due to "who gets what" from their parents' estate.

If you plan to build and pay for the separate accommodation for your parents, then it is pretty simple: you are spending your money, so the value of the improvement to your property belongs to you.

But what could get interesting is if their money is needed to pay to build. How is this to be treated in their estate? Where does money come from if aged care is needed?

Transparency and communication are the start. You need a family meeting while your parents have the mental capacity.

In my opinion the result of this needs to be documented by a solicitor and signed by you and your siblings.

It is really important that you think through the ageing process. I know we all want to die at home but it may not be possible and money is a key here to better care.


Paul Clitheroe AM is a respected financial adviser and Money's founder and editorial adviser. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
Graham Brewster
September 22, 2019 11.48am


I have my mum coming to live in my house, she will under the granny flat rule gift me 120k

My question is when my mum passes on will the 120k be mine or will my brother ask for the 120k be taken from my house by his Solicitor.


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