With blended families becoming more and more common, we are often asked how to provide for step siblings in a way that is fair to all beneficiaries.
Why is Making a Will Expensive?
It’s too expensive!
These are often the famous last words of regular people when advised to seek the services of a lawyer to draft a will. Yet a recent case handed down by the Supreme Court of Queensland highlights exactly why a specialist succession lawyer is a vital part of any estate plan.
Fernando Masci and Elizabeth Masci were married later in life, after previous marriages and each had children of their own. They did not have any children together. Mr Masci died in 2012. Mr and Mrs Masci decided to draft a will together in 2006, on a pre-printed form. In the document, they appointed Mr Masci’s son and Mrs Masci’s daughter as co-executors of the will. The will was short and not very clear, but appeared to give each other the right to reside in the family home until both had died, whereupon the proceeds of the home and other assets would be equally split between the couple’s children.
Problem 1.
Mr Masci’s son, Graham and Mrs Masci’s daughter, Susan, named co-executors of the will, could not agree on how to administer the will. Graham asked for Susan to be removed as executor from the will as part of his application, while Susan asked that they both be removed as executors and a solicitor be appointed as administrator instead.
Problem 2.
Because the will was homemade and it’s intentions not clear, the court was required to make sense of it in order to grant probate. Justice Dalton remarked that: “the drafting of the will in this case is so poor that I wondered whether or not I could sensibly give any effect to it.”
Problem 3.
Was the will executed together by the Masci’s considered a mutual will? A mutual will is when a couple make a certain will on the understanding and expectation that the last person to die will not change their will. In most instances, the agreement is that the assets will pass to the surviving spouse first, then to the beneficiaries. Mutual wills become most tricky when, as in this case, there are children from previous relationships. If the court finds that it was a mutual will, the beneficiaries are afforded some legal protections in the event that the surviving spouse does not honour the mutual will.
The Court’s Findings
Problem 1.
Justice Dalton agreed that it was impossible for Graham and Susan to continue as co-executors and considered whether to remove both as executors and appoint a solicitor to take over the task. However Justice Dalton remarks: “a paid administrator would be a significant imposition on what will remain of the funds of the estate…..I am conscious that even if an unpaid executor is left in charge….they will need to consult lawyers because of the complexity of the problems still to be dealt with, and that legal costs will therefore necessarily be incurred in any event.” Justice Dalton eventually appointed Graham as sole executor. However, the message here is clear: the inability of the executors to agree has and will continue to cost the estate dearly.
Problem 2.
Justice Dalton was required to interpret the will, given it was unclear, in order to grant probate. He agreed to grant probate, after considering the intentions of the will-makers. However there was a great deal of argument over the wording contained in the will. The executors could not agree on what the term “stay in the house” or “handle all monies” meant or how it should be handled. It’s imperative to understand at this point that it is prohibitively expensive to have the court determine what these terms mean, rather than having a specialist succession lawyer draw up wills which clearly deal with these matters.
Problem 3.
Justice Dalton had to answer the question as to whether the will could be construed as a mutual will. The question of whether it is or isn’t revolves around whether the will-makers agreed not to revoke their wills without giving the other notice. There does not have to be an express declaration of this, but is implied in the making of a joint will. Justice Dalton found this to be the case and this decision gives some protection to Mr Masci’s beneficiaries. Mrs Masci is conscience-bound by the mutual will to ensure that Mr Masci’s beneficiaries receive an inheritance as he intended.
What can we learn from this case?
· Homemade wills invariably do not save money. Whilst in the short term, it is tempting not to spend money on receiving expert advice, in the long term, estate litigation is much more expensive. In this case, to such an extent that even the judge urged the parties to reach agreement or “none of them will have any of the benefit which their parents intended for them.”
· Homemade wills are often unclear or lead to confusion. No matter the purity of the will-maker’s intentions, it may be difficult to interpret what they mean after they've passed away. This is especially true when no legal advice has been sought by the will-maker, and they haven’t known what they should cover in the document. In this case, while Mr & Mrs Masci probably thought the term “all monies” was clear, the co-executors couldn't agree on its meaning to the extent that they required the court to decide the meaning. This is a very expensive exercise.
· Blended families bring a level of complexity to estate planning. If ever there was a situation that requires careful thought and planning, it’s a blended family situation. A specialist succession lawyer can provide the protection of beneficiaries and flexibility required to cover many of the possibilities that could arise.This situation is very complex and requires specialist advice from a lawyer experienced in Succession Law.
Bryan Mitchell, Accredited Specialist in Succession Law (wills and estates including estate planning). Mitchells Solicitors, Brisbane.
Will Your Spouse Do the Right Thing?
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.