The guys situation is quite similar to mine. I have spent time with both a family lawyer and much more time with estate lawyers. I agree you are correct a person in the fellows shoes who did not see the problems he was leaving is a bit hard to believe. Tim is showing tax consequences but in reality Family Law would create war here. I have a co-hab that outlines the rights of my partner of now 12 years in the event of death. I am told even it is not iron clad but I certainly did what I could. 

Without the co-hab the wife would stand a reasonable chance of 50% of all asset value gain since the date which it is decided the co-hab started. The son who received the business shares would be worst off as it would somehow have to be valued on the date of the cohabitation with the second wife.....extremely costly unless of course the guy started it after they cohabitated in which case the son likely has a new 50% partner.

They better hope the wife stays friendly or things will explode.