Sounds like a typical bureaucracy to me. This kid's case was probably handled by some geeky, officious type who's all impressed with proper forms, quoting the most obscure regs and such. This sort of person tends to completely lose sight of the human dimension to what they do for a living.
This man's situation was CREATED by a human being. Nothing in the rules says we are supposed to strip our dead and wounded GIs of their accumulated wealth.