Specialist estate and family lawyers warn that the elderly are increasingly vulnerable to financial abuse from within the family, especially during the COVID-19 pandemic.

Specialist estate and family lawyers warn that the elderly are increasingly vulnerable to financial abuse from within the family, especially during the COVID-19 pandemic.

Andrew Simpson, national head of Maurice Blackburn Lawyers, says: “Children are under financial pressure because of loss of income and employment. This puts pressure on them to find income from other sources.”
Baby Boomers have largely benefited from a working life of near-full employment, strong long-term equity growth, rising property prices and generous tax breaks and concessions.
Few gains for younger generations
According to the Grattan Institute, households headed by someone aged between 65 and 74 have an average net wealth of $1 million, an increase of about 40 per cent in the past 12 years.
By comparison, younger generations have made few gains compared with a household of the same age 12 years ago.
Still, Simpson says, while lawyers are seeing a steady increase in the volume of alleged cases of elder psychological and financial abuse, it remains hard to detect.
“It is difficult to detect at the best of times and COVID is making it harder,” he says.
Older people are less able to get out of their homes and have contact with professionals, such as their GP or bank manager, in whom they might confide, he says.
The finances of parents and adult children have been more closely entwined since house prices boomed in capital cities, making it harder to get on the property ladder.
Some parents have helped their children buy houses a development dubbed the Bank of Mum and Dad. But such a move can set up older parents to lose out.
“Things often go wrong because people do not understand what they have got themselves into,” adds Anna Hacker, national manager of estate planning with Australian Unity Trustees. “To avoid trouble it is necessary to document everything. There should be no secrets.”
Here are some of the main ways that family finances can be connected and how to try to ensure that the experience is trouble free.
Gifting
This is a popular way for parents to help their children with deposits or other expenses. But Eileen Webb, a professor of law and ageing at the University of South Australia, says: “It is critical that the parties understand and agree whether the funds are, in fact, a gift or a loan.
“This is often a cause of consternation with the children regarding the funds as a gift, whereas the parents expect the money to be repaid.”
Webb adds: “To avoid disputes the agreement should, at the very least, be recorded in writing. It does not have to be too long.”
Ideally, both parties will document the transaction in case of future tax or legal issues. It should also be cross-referenced in the will.
Guarantees
Another area of potential friction is guarantees. Such agreements could make parents liable for the mortgage payment or settlement of any outstanding debt.
Eileen Webb, professor of law and ageing at the University of South Australia. 
At worst, it could jeopardise their financial security by putting their home at risk. In other cases, it might affect their future borrowing capacity as it needs to be declared as a liability on any loan application.
“Many parents do not realise how fraught with risk a guarantee can be,” says Webb. “If the child cannot pay the loan because of an interest rate rise or job loss, then it becomes the responsibility of the parent,” she says.
Agreements can include a term removing the parents from the loan when the child reaches a certain income level. Wills should also be updated to prevent problems, such as whether the contribution constitutes an early inheritance or is fair to other children in the family.
Loans
Regarding loans between family members, Maurice Blackburn’s Simpson says parents and children need to set out terms and conditions for repayment. Those terms should include the length of loan, repayment date, amount of repayments, what happens if there is a default and any other agreed terms.
Banks will assess a parental loan to be a financial liability when considering how much it will lend to the child. Registering a loan against a property turns an unsecured loan into a secured debt, which means the property could be sold to repay the debt.
Simpson says if the child is in a relationship that breaks down, it will be very hard to establish if there was a formal loan unless there is an agreement setting out terms and conditions for it to be paid back.
Joint ownership
Beware of potential capital gains implications and any impact on parents’ eligibility for social security from joint ownership.
A property purchased by home-owning parents will be considered their investment and subject to tax when sold. It could also force parents to postpone retirement unless they can prove to the lender that they can afford repayments from their retirement income.
Many lenders encourage parents to seek independent legal and financial advice before agreeing to such a loan.

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