Legal Considerations for Later-Life Relationships.
When going through a change of life situation, this is the ideal time to review your core legal documents.
In the following scenario, we delve into Tom and Cathy’s story, highlighting the importance of legal foresight and communication in navigating the complexities of later-life relationships.
Tom’s wife had died a couple of years ago. While he had no real intention of partnering up again, he had recently met a lovely lady at his golf club. He and Cathy hit it off straight away. They had a lot in common, mainly golf, but also going out to nice restaurants and walking along the beach.
Tom and Cathy’s relationship progressed, and they decided that they would like to live together. They each had their own homes. Toms was the more modern of the two and was in a trust with his other investment assets. He was very happy living there, but Cathy wasn’t keen on living in the house Tom had lived in with his wife and thought they should look for something together.
Tom and Cathy looked at many houses, but in the end decided to move into a villa in a retirement village. The village suited them – everything was on one level and the villas were stand alone. Cathy also loved that it was totally re-furbished, so everything was as new.
They had some friends in the village and loved the idea of the social lifestyle.
Tom put his house on the market so that they could buy the occupation right in the village. Cathy didn’t have as many assets as Tom and wanted to keep her home as an investment property to provide her with some income. As Tom’s house was in a trust, he had to check that his co-trustee was agreeable to sell the home and invest the money into the occupation right of the villa. Tom’s co-trustee was his lawyer, who reminded him that one of the reasons for the trust was to protect the assets if Tom got into a new relationship. Tom’s lawyer also advised him that trusts generally cannot buy occupation rights in retirement villages, and it would need to be purchased in Tom’s name.
It was agreed that the trust would lend Tom the funds to buy into the village and that when he either moved out of the villa or died, then the balance of funds would be returned to the trust. Tom’s lawyer was concerned though that as Cathy wasn’t contributing to the villa, under the relationship property laws, she would be entitled to half of the value of the villa if she and Tom separated after three years. The same would be true if Tom died – Cathy would have a claim for half of the value of the occupation right.
Tom’s lawyer suggested that Tom and Cathy enter into a contracting out agreement, where they would each agree that the value of the villa would be Tom’s separate property and Cathy wouldn’t make a claim on it.
Tom also wanted to give Cathy some security, that if he died or had to leave the villa for the next level of care, Cathy wouldn’t need to move out of the villa.
His lawyer said that could be all included in the contracting out agreement.
Tom also reviewed his will and powers of attorney to make sure that they were all up to date with his change in circumstances. One of his children had recently moved overseas and it didn’t make sense anymore to have him as Tom’s attorney in relation to property. Also, he now wanted to make sure that Cathy would be consulted in relation to his health if he couldn’t make decisions for himself. He made a small change to his will to provide some of his personal savings to Cathy if he died. He wanted to make sure she would be ok financially.
The last piece of advice Tom’s lawyer gave him was to ensure he told his children what was happening. She said that the best way of keeping relationships positive was to be as transparent as possible. She said that because of family dynamics, this wasn’t always possible, but in Tom’s case, she thought transparency with his children would see the best outcome.
There are lots of twists and turns in life and while moving into the retirement village was the catalyst for Tom to go and see his lawyer, it’s important to review your core legal documents whenever there is a change in life circumstances – a new relationship is one of those changes.
If you feel you could use some specialist advice, don’t hesitate to contact the Trusts & Wealth Protection Team.
