Love, Law and the Loot– another thought provoking blog by  Brian Herd!

At 83 and 87 respectively, Bob and Beryl had lived in a defacto relationship for some 10 years after the breakdown of their previous marriages.

Bob had been a successful businessman and accumulated significant wealth and 3 children during his marriage. Beryl, on the other hand, had been a stay at home mum for her 5 children and her underachieving husband. Even after her divorce, financially, she had little to show for her efforts when she first met Bob. When they moved in together they made a pact that they would keep their finances separate and make Wills giving everything, not to each other, but to their respective children. However Bob, who owned the house they lived in, agreed to meet their daily living expenses.

Recently, one of those later life events occurred which turned their worlds upside down. Beryl had a stroke, had lost the capacity to make her own decisions and Bob was just not able to keep looking after her at home. There was no alternative but for Beryl to go into residential aged care.

The closest facility was only a few kilometres away from their home and perfect for Bob to visit her and, as well, they had a place available immediately for Beryl. Trouble was they wanted her to pay an up-front refundable accommodation deposit of $400,000.00 (previously called an accommodation bond). Beryl didn’t have that sort of money but Bob did.

Bob was about to pay the money on behalf of Beryl when one of his daughters suggested he come and have a talk to us before he paid the money. We told him about a little known law that would create a real conundrum for him:

  • Under the law, when Beryl died, the $400,000 would have to be repaid to her estate
  • It could not be repaid to Bob even though he had provided the money
  • Even if she didn’t die in the facility but simply left and went somewhere else, it would have to be repaid to Beryl, not Bob

Bob was taken aback because this threw a very large spanner into the pact they had made particularly their intentions in relation to their Wills. In reality, the $400,000, when it was repaid to Beryl’s estate, would end up in the hands of Beryl’s children, not his.

You can imagine the moral dilemma for Bob. It was almost Shakespearean – ‘To pay or not to pay – that is the question’. His head and heart were in turmoil. He and Beryl had had a good life together and he really did love her. He had always met Beryl’s financial needs in their life together but nothing of this magnitude or with the unintended consequences. He didn’t particularly like his step children and his own children were aghast that he would contemplate effectively disinheriting them of $400,000.

I won’t tell you what he decided to do. What would you do if you were Bob?

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