The Dilemma of Trust and Caution. What would you do?

William Rogers is seventy-nine years of age. His wife died almost thirty years ago, and he has one child – Sylvia – to whom he intends to leave his entire estate.

William’s estate consists of a substantial home in an inner suburb, which is valued at approximately $2.5million, shares valued at $75,000, $100,000 in an investment fund and $15,000 in a bank account.

William met Grace, a widow, at the local bowls club. Her husband, from whom she had been estranged for a number of years, had recently died and she was required to sell the family home to meet a range of debts left by the husband through bad investments.

Grace has one son, Benjamin, who has mental health issues requiring on-going care and lives in a public housing estate.

After socialising at the Club for a month or more, William and Grace decided that she would rent a room in his house. That way, it would reduce the exorbitant rent that Grace was paying, they would have company and would be able to assist each other as they grew older. Grace agreed to pay William $50 each week as rent.

Both William and Grace advised Centrelink of the arrangements and made it clear that the living arrangements were that of owner and tenant.

After this arrangement had been in place for about 12 months, it was evident that Grace was having financial difficulties as she was providing financial support to her son Benjamin, who needed specialised psychological care. Consequently, the arrangements concerning the payment of rent were set aside and William began assiting Grace with various sums of around $250 every fortnight or so to assist with
Benjamin’s needs.

Although William and Grace had separate bedrooms, they began to live socially active and intimate lives as a couple.

About three years after Grace had moved into the house, William was concerned to ensure that Grace’s future was secured. He decided to update his Will to give Grace a ‘life interest’ in the home, which would enable her to continue living in the house after his death, until she died or otherwise left the house permanently. The house would then go to his daughter Sylvia. William discussed his wishes with his lawyer and explained the arrangements he currently had with Grace.

The lawyer advised William that it appeared that he and Grace were living in a defacto relationship. If that were the case, there were some possible scenarios that would need to be examined. They were:

1. Grace could argue that as his de-facto wife she was entitled, not to a ‘life interest’ in the house, but to a more substantial part of his entire estate;
2. It would be necessary to look closely at whether Benjamin had a claim on the estate given his financial needs and the fact that William was continuing to provide financial support to him.

William was concerned at these possibilities but indicated to the lawyer that he did not think that such eventualities would occur. Nevertheless, he asked the lawyer to prepare a document setting out what options he should take to ensure that his entire estate went to his daughter Sylvia.

In anticipation of receiving the document from the lawyer William met with Grace and advised her of the matters raised by the lawyer. Grace was upset and concerned that William would even consider that she would try to ‘take advantage of him’ and was adamant that Benjamin would not be able to fully understand the legal issues that had been raised.

Grace told William she would feel much better if William left his Will in its current form, apart from the ‘life interest’, so there was a clear sense of trust between everyone. William accepted her views and contacted the lawyer to advise him not to proceed with the advice concerning his options, and to only amend the Will to provide a ‘life interest’ to Grace.

If you were William, what would you do?