When a parent moves into aged care, the first question is whether the parent can still make the decision. If they can, the house is theirs to sell, keep or rent, and the family’s role is to support them. If they have lost capacity, decisions about the house can only be made by the attorney appointed under a financial enduring power of attorney, or, if there is none, by an administrator appointed by the Victorian Civil and Administrative Tribunal (VCAT). Whoever decides must act in the parent’s interests, not in the interests of the children who expect to inherit. This article uses Victoria as the example.
Who can decide about the house?
Families often assume that the eldest child, or the child who does the caring, has the final say. The law is more precise.
| Situation | Who decides | Points to note |
|---|
| The parent still has decision-making capacity | The parent | Children can advise and help but cannot sign for the parent. Capacity is decision-specific: a parent may be unable to manage an investment portfolio yet still able to decide whether to sell the home. |
| The parent has lost capacity and made a financial enduring power of attorney | The attorney named in the document | The attorney must work within any conditions or limits. If the power starts only on incapacity, medical evidence is usually needed. |
| The parent has lost capacity and there is no valid enduring power | An administrator appointed by VCAT | May be a family member or an organisation such as State Trustees. |
| Where the parent lives, and which facility | A personal matters attorney, medical treatment decision maker or VCAT-appointed guardian | Where a person lives is a personal matter; what happens to the house is a financial matter. They are separate decisions. |
Victorian law presumes that an adult has capacity unless there is evidence otherwise. Age, poor memory or an inability to use internet banking does not by itself mean a parent has lost legal capacity. Where there is doubt, ask the GP or a geriatrician to assess capacity for the specific decision.
The attorney’s duties under a Victorian enduring power
Enduring powers of attorney in Victoria are governed by the Powers of Attorney Act 2014 (Vic). An attorney has wide authority but is bound by strict duties. In summary, an attorney must:
- Act honestly, diligently and in good faith, with reasonable skill and care, giving effect to the principal’s wishes and preferences as far as practicable and supporting the principal to take part in decisions (s 63).
- Avoid conflict transactions: an attorney must not enter into a transaction where their duty to the principal conflicts with their own interests, or those of their relative, business associate or close friend, unless the enduring power expressly authorises it or VCAT authorises or ratifies it (ss 64 and 65).
- Keep the principal’s property separate from the attorney’s own, except in limited cases such as jointly owned property (s 69). Moving a parent’s savings into a child’s account “for safekeeping” is a common breach.
- Keep accurate records and accounts of every dealing. Siblings, VCAT and later the executor may ask to see them.
- Make gifts only within narrow limits: broadly, reasonable gifts to a relative or close friend on a seasonal or special occasion, and reasonable donations of a kind the principal made or could be expected to make (s 67). Transferring the house to a child, or “advancing” inheritances from the sale proceeds, is generally not an authorised gift.
The consequences of breach are real. VCAT can review an enduring power, order that accounts be produced, revoke the appointment and order compensation for loss. Dishonestly obtaining or using an enduring power of attorney is an indictable offence in Victoria carrying up to five years’ imprisonment.
Sell, rent or keep?
There is no standard answer. The question for the attorney is which option best serves the parent’s needs and reflects the parent’s wishes. Relevant factors include:
- Aged care costs: residential aged care accommodation may be paid as a lump sum refundable accommodation deposit (RAD), a daily accommodation payment (DAP), or a combination. Whether the house must be sold depends on the parent’s other assets and cash flow.
- Age Pension and aged care means testing: how the former home is assessed depends on whether a spouse or another protected person still lives there, how long the parent has been in care, and whether the home is sold or rented. In general, the former home is exempt from the pension assets test only for a limited period (generally two years) after entering care. Services Australia’s Financial Information Service or an aged care financial adviser can model the options.
- The parent’s wishes: many parents want the house kept even if they are unlikely to return. An attorney must give real weight to wishes the parent expressed while they had capacity.
- Tax: if the home is rented out after the parent moves, the capital gains tax main residence exemption can sometimes continue for a period under the absence rules. The rules are technical, and advice from an accountant or tax adviser should be obtained.
- Vacancy: check the insurance policy’s conditions for unoccupied homes, and keep up maintenance and security.
If the house is let, the rent is the parent’s income. It should be paid into the parent’s account and reported for tax.
What if the Will leaves the house to a particular child?
This is often the family’s biggest worry. Under the general law, if a Will makes a specific gift of a property and the property no longer exists in the estate at death, the gift fails (known as ademption). The named beneficiary would ordinarily receive nothing, and the sale proceeds would fall into the residue.
Victoria has statutory protection. Where an attorney under an enduring power sells property, the beneficiary has the same interest in any money or other property arising from the sale as they would have had in the property itself (Powers of Attorney Act 2014 (Vic) s 83A). A similar rule applies to sales by a VCAT-appointed administrator (Guardianship and Administration Act 2019 (Vic) s 76). If the operation of these rules produces an unjust advantage or disadvantage, the Supreme Court can make orders to remedy it under s 50 of the Administration and Probate Act 1958 (Vic).
In practice:
- The proceeds must be traceable. If they are mixed with other savings and spent on aged care fees, what the beneficiary can claim may shrink and the accounting becomes contentious. Holding the sale proceeds in a separate account in the parent’s name, with clear records, avoids most arguments.
- Attorney-beneficiaries face scrutiny. If the attorney is also a beneficiary, any decision to sell or keep may be challenged as self-interested. Consulting the family before major decisions, and seeking VCAT directions where needed, provides protection.
- The attorney cannot rewrite the Will. An attorney cannot make or change a Will for the parent, and cannot “rebalance” the inheritance because the house was sold.
No enduring power? VCAT administration orders
If a parent has lost capacity and never made a valid financial enduring power, the family will usually need to apply to VCAT for an administration order under the Guardianship and Administration Act 2019 (Vic). VCAT must be satisfied that the person, because of a disability (which includes dementia and acquired brain injury), does not have capacity to make decisions about their financial matters; that they need an administrator; that the order will promote their personal and social wellbeing; and that there is no less restrictive option.
Any concerned person may apply, usually with a report from a doctor or social worker. VCAT may appoint a family member or an organisation such as State Trustees. Where siblings do not trust one another, VCAT may prefer an independent administrator. An administrator, like an attorney, must give effect to the person’s will and preferences where possible and keep proper records.
The process takes time and brings external oversight. The better course is for parents to sign an enduring power and a Will while they are well.
Common family disputes
A child living rent-free in the parent’s house
Some adult children have always lived with their parents and stay on rent-free after the parent moves into care. That is not necessarily improper, particularly if the parent agreed to it. But where the child in occupation is also the attorney and the parent needs funds for care, continuing rent-free can be a conflict transaction. It is also a frequent source of resentment among siblings. Recording the arrangement (for example, the occupant pays outgoings, insurance and maintenance) and seeking VCAT authorisation where there is a conflict is the safer path. After the parent dies the house belongs to the estate and different rules apply; see beneficiaries in occupation of estate property.
Siblings who disagree
One wants to sell, one wants to keep, and one overseas asks only how much they will receive. Legally the attorney decides, but other family members can apply to VCAT to review the enduring power or to require accounts. Many disputes are resolved before that point through mediation, where a neutral mediator helps the family set out the care costs, the options for the house and the parent’s wishes. We conduct family mediations in English and Mandarin. For disputes after a parent’s death, see disputes between siblings in estate administration.
Family loans and caveats
Sometimes a child contributed to the mortgage or renovations years ago with nothing in writing, and only when the house is to be sold says “that was a loan” or “part of the house is mine”. In some circumstances a person who claims an interest in land can lodge a caveat on the title to stop a sale, but a person who lodges a caveat without reasonable cause can be ordered to pay compensation. If there are family loans or contributions, document them while the parent still has capacity, for example with a loan agreement or by reflecting contributions on title.
Warning signs of elder financial abuse
Seniors Rights Victoria identifies warning signs including:
- money being used without the older person’s knowledge or agreement;
- legal documents being signed on their behalf, or signed under pressure;
- property being sold or disposed of without permission;
- loans to family not being repaid, or household costs not being shared;
- misuse of powers under an enduring power of attorney.
Concerns can be raised confidentially with the Seniors Rights Victoria helpline on 1300 368 821, or the national line 1800ELDERHelp (1800 353 374), which connects callers to the service in their state. In an emergency, call 000.
Cross-border families
- Attorneys living overseas: there is no prohibition, but signing documents and dealing with the facility and banks from abroad is difficult. Consider appointing joint or alternate attorneys, at least one of whom lives in Australia.
- Documents made in Asia: a power of attorney or notarial document made in mainland China, Hong Kong, Taiwan, Singapore or Malaysia generally cannot be used as a Victorian enduring power, and an ordinary power of attorney may cease to operate when the principal loses capacity. A parent with Australian property should sign a Victorian enduring power.
- Moving money offshore: an attorney who lives overseas cannot transfer the parent’s sale proceeds to their own foreign account. The parent’s money stays in the parent’s name and is used for the parent’s needs.
- Overseas assets: a parent’s property and accounts in Asia are governed by local law, and an Australian enduring power may not be recognised there.
What happens to the house after death
An enduring power ends on the parent’s death, and the executor takes over. For the executor’s tasks, see our executor duties checklist. Whether the house forms part of the estate depends on how title is held: a property held as joint tenants passes automatically to the surviving owner, as explained in joint names or your Will?
For duty, land tax and capital gains tax on inherited property, see do you pay tax on inherited property in Australia? If the house was the parent’s main residence, a beneficiary who sells within a set period may qualify for a full CGT exemption; see inherited property and the 2-year rule. How the house was used while the parent was in care, such as being rented out, can affect the outcome, so tax advice should be obtained.
Practical points
- Sign financial and personal enduring powers of attorney and a Will while the parent has capacity, and tell the family where they are kept.
- Attorneys should keep records from day one and use accounts in the parent’s name for all of the parent’s money.
- Before selling, consider aged care fees, pension, tax and any specific gift of the house in the Will.
- Where the attorney is also a beneficiary or lives in the house, disclose it to the family and seek VCAT authorisation or directions if needed.
- Where the family disagrees, consider mediation early, before relationships break down.
How we can assist
We advise attorneys, administrators and family members on the powers and duties under an enduring power of attorney, selling or renting a parent’s home, specific gifts and sale proceeds, VCAT applications, family loans and caveats, and negotiation and mediation between siblings. We work alongside accountants and aged care financial advisers and can coordinate with family members in mainland China, Hong Kong, Taiwan and Southeast Asia.
Related reading
Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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