I had a conversation yesterday about the difficulty faced when you create a mutual will. We have previously discussed the doctrine of mutual wills – which originated with a court case regarding a joint Will created in November 1745. Under those wills, a married couple provided a gift to one another of a life interest in each other’s property with common provisions in the will of how the estate was to be distributed upon the death of the survivor. The doctrine has three main elements:
- Two or more persons make an agreement as to the disposal of some or all of their property on death and execute wills pursuant to the agreement.
- The parties agree that the survivor shall be bound by the arrangement. This requirement normally takes the form of an agreement by the parties not to revoke their mutual wills.
- The agreement becomes binding. The agreement becomes binding when the first party dies leaving his or her mutual will unrevoked.
Frank and Thelma Kenneth married in 1947 and had two children, Bruce and Pamela. Frank’s daughter from an earlier marriage, Barbara, was raised with the two children of the marriage.
Frank died in 1992, having accumulated substantial assets during the marriage including a large property at Kenmore and a beach house at Caloundra. Frank made a will in 1981 that left all of his assets to Thelma and, if she predeceased him, equally to his three children.
Frank & Thelma jointly owned the properties therefore they passed to Thelma by way of survivorship. She inherited an extensive share portfolio and cash deposits pursuant to the 1981 will.
Thelma died in 2001 with an estate valued at $2.3 million. Thelma had made her final Will shortly before she died, in which she left the Caloundra property to Pamela. The residue was left to Pamela, Bruce and Barbara equally. As a result Pamela inherited about $1.5 million in assets, while Barbara and Bruce inherited less than $400,000 each.
The court accepted Bruce’s submission that Thelma and Frank had made an oral agreement in 1974. Bruce recalled that his father and Thelma agreed to be bound by the terms of their Wills. Therefore, the existence of the wills in mirror form and of the evidence of the oral agreement was enough for the court to find that the doctrine of mutual wills applied.
Thelma was bound by the agreement she had entered into with Frank. However if she had understood the nature of the Will she had made why did she make a later will contradicting the one that bound Her and Frank?
It is ill advised to enter into mutual Wills – importantly if you wish to direct your estate in this way your solicitor must explain your obligations clearly. Thelma may not have entered into a mutual will agreement if she had known its full binding effect. Similarly if you had to divest yourself of an asset that was covered in the mutual Will – your home in order to purchase a nursing home bond should you require residential care in your later years. However in this case as there was not evidence outlining advice from the solicitors to the contrary Pamela missed out on a greater proportion of Thelma’s estate.
heirs & successes 