I know she’ll do the right thing....
Thelma and Walter Bauer were married for twenty five years and each had children from previous relationships. Walter Bauer died in 1992 and Thelma died in 2007. When Walter died, he left everything to his wife. After he died, Thelma did two more wills, and when she died, she left everything to her children. Isn’t this normal?
Walter’s children from his first marriage didn’t think so and challenged the will. The Queensland Supreme Court held that the couple had entered into an agreement for mutual wills; a term of which was that the estate of the last to die would flow equally between Thelma and Walter’s children. The Court of Appeal upheld the decision.
What is a mutual will?
An agreement for mutual wills is essentially that a couple make certain wills on the understanding and expectation that the last spouse to die will not change his or her will. The agreement will in most instances leave the assets they own to each other in the first instance, and then to any dependents.
Usually this agreement is entered into without benefit of legal advice, and is done so because the couple want to make sure the other is comfortable as the surviving spouse. This agreement is often not made in writing, but something agreed upon at the kitchen table and which sounds reasonable at the time. It’s possible that nobody else knows about the existence of this agreement.
That sounds good in theory but....
Mutual wills most often become tricky when there are blended relationships, and the spouses have children from previous marriages. There is no obligation for the surviving spouse to keep the agreement and will often leave the estate to their own children, cutting off their spouse’s children completely.
Litigation in this specific area of succession law arises because the children of the first spouse to die have received nothing under the will of their step-parent. As in the case of the Bauer’s, the court found that the estate should have been split equally between both groups of children.
Litigation can usually only occur when there is some evidence that such an agreement took place, often because the children were present at the kitchen table when the agreement was reached.
In the case of the Bauer’s, the children had been told by Walter and Thelma that the assets they owned would be split equally among the five children. This constituted verbal evidence and assisted the court to make judgement in favour of the plaintiffs, Walter’s children.
When should mutual wills be used?
Bryan Mitchell says only as a last resort, because a) there is no other option, or b) the clients insist upon it (whether we like it or not). They are most often entered into by spouses with children from previous relationships who are concerned that their own children will not receive their due inheritance. There are other ways of ameliorating this concern.
Other solutions exist that include:
- Direct provision to children from a previous relationship, rather than giving it all to the spouse
- Flexible life interest/right to reside agreements
- Using a discretionary trust
No matter which vehicle is used, Bryan Mitchell suggests that ensuring your wishes are completed in writing under the advice of a wills and trusts specialist is vastly superior to a verbal kitchen-table agreement that may or may not be upheld once you pass away.
If a client continues to insist upon mutual wills, they should be:
- In writing
- Drafted thoughtfully
As always, it’s important to remember that good estate planning consists of more than a will and that often there are factors which may impact your estate of which you aren’t aware.
Bryan Mitchell, Accredited Specialist in Succession Law (wills and estates including estate planning). Mitchells Solicitors, Brisbane.