Asset planning and structuring for the future can be a complex endeavour, particularly for blended families where one or both partners have children from previous relationships.
Here we share a scenario that explores how will structures and health outcomes can bring about uncertainties, especially when balancing the needs and expectations of all family members.
Family Background And Wills.
Gus and Jan had been married for thirty years, but it was second time round for them both, with children from previous marriages. They had set their wills up so that if one of them died, the other received all of the assets and then when they both died, half of the assets would go to Gus’ children and the other half would go to Jan’s. They also had enduring powers of attorney in place, each appointing their eldest child for both property and personal care and welfare.
Declining Health And Care Decisions.
Gus’ health had started to decline. It was getting to the point where Jan could no longer manage him at home. It wasn’t just his physical capacity, but his mental capacity was reducing rapidly. Jan talked to Gus’ eldest daughter who held his power of attorney. They agreed that it was time for Gus to go into care.
They made an appointment with the GP to have Gus’ capacity assessed. They also started to look at potential places for him to go to.
Financial Considerations For Residential Care.
Gus and Jan owned their own home jointly and had some funds on term deposit. The income from the term deposit was used to supplement their pension. After attending a meeting at WINZ, Jan realised that Gus wouldn’t qualify for the residential care subsidy as they had too much money in the bank. She would need to pay for Gus’ care form their savings. But within 18 months of paying for his care, he would likely qualify for the government subsidy as their funds would be depleted to the allowable minimum by then. However, even when receiving the government subsidy, to receive the level of care that Gus’ daughter wanted for him, there would need to be a significant top up of funds from Gus and Jan’s savings.
Jan discussed the situation with her own children. Her middle son, Matt, raised concerns. He thought it wasn’t fair that if most of Jan and Gus’ savings went to pay for Gus’ care, Gus’s children would still get a half share of the remaining assets when Jan and Gus both died. He wanted Jan to change her will so that Gus’ children would get a smaller portion of what was left when they both died. There was also a concern that if all the savings were used to pay for Gus’ care, what would happen then? Would Jan have to sell the family home and buy something cheaper? Or perhaps she could get a reverse equity mortgage to stay in the home and pay the money back when the property was sold?
Matt thought that both options would make things even more unfair for him and his siblings. The conversation left Jan feeling unsettled.
She and Gus had worked hard to ensure that there was harmony between their two sets of children.
Mutual Wills And Legal Limitations.
Jan worried for the future but to pacify Matt she went to see her lawyer about changing her will. She wanted to ensure that her children would get a greater share of the joint assets once she and Gus both died. Her lawyer explained that when she and Gus made the wills, they had made “mutual wills”. This meant they had agreed that they would not change their wills without the consent of the other. If Jan did change her will, Gus’ children would likely have a strong claim to challenge it.
Planning For Uncertainty.
Jan and Gus’ situation highlights the uncertainties that can arise as we age. Gus and Jan thought they had all their key documents sorted – wills and powers of attorney. While we cannot plan for every eventuality the twists and turns of life can mean that the best laid plans can go awry.
If you feel you could use some specialist advice for your personal situation contact our Trusts & Wealth Protection Team.