Mutual wills are sometimes mistaken for mirror wills that married couples commonly create. The distinction between the two is that the doctrine of mutual wills requires both parties to enter into a contract that specifies the form of their wills, usually in favour of the same ultimate beneficiaries. The parties must agree that the surviving partner cannot revoke their Will.
For this agreement to be valid, it must be a legally binding contract, with the consideration for which being the making of the Will in the agreed format and not revoking it without notice. Typically, this contract provides that when one of the parties dies, the survivor will enjoy all of the property. After the survivor’s death, it will go to the ultimate beneficiaries.
Gummow and Hayne JJ provided a concise summary of the key points about mutual Wills
“(i) it is the disposition of the property by the first party under a will in the agreed form and upon the faith of the survivor carrying out the obligation of the contract which attracts the intervention of equity in favour of the survivor; (ii) that intervention is by the imposition of a trust of a particular character; (iii) the subject matter is the “property passing [to the survivor] under the will of the first party dying”; (iv) that which passes to the survivor is identified after due administration by the legal personal representative at which point “the dispositions of the will become operative”; (v) there is a “floating obligation” over that property which has passed to the survivor; it is suspended during the lifetime of the survivor and “crystallises” into a trust upon the assets of the survivor at death.”
Barns v Barns (2003) 214 CLR 169 at 199
If both parties’ wills made under the mutual wills agreement remain unrevoked during their joint lives, including the survivor, there should be no issues. However, if the survivor makes a different will containing provisions that conflict with the agreement and dies, it would violate the agreement and their equitable obligations. In such a case, relief will be in the form of a constructive trust that requires the survivor’s executor to hold the property for the beneficiaries entitled to it under the agreement.
Several issues can arise with mutual wills, including:
- Proof of a legally binding agreement.
- The application of the Statute of Frauds.
- The effect of revocation of the Will by one party before either party dies.
- The effect of revocation after the death of the first party.
- The effect of a mutual wills agreement on a testator’s family maintenance claim.
Practitioners should take note of Re Miglic [2024] VSC 20, as an example of the Court’s approach and willingness to scrutinise evidence. The court assessed and considered a large amount of evidence, both oral and documentary. Despite significant obstacles, the plaintiffs successfully proved an oral agreement.
The matter
In the Trusts, Equity & Probate Division of the Supreme Court of Victoria, Gorton J delivered a judgment on 8 February 2024 that primarily relied on proving the existence of a 30-year-old verbal agreement that affected the wills of a husband and wife. The plaintiffs successfully proved the existence of a mutual wills agreement in the case of Re Miglic.
The case is noteworthy because mutual Will cases are relatively uncommon. The agreement was oral over 30 years ago, and both parties are deceased. Therefore, the case is a valuable examination of the principles that the Court will apply in assessing evidence. Re Miglic has broad relevance, with the potential to apply to any case that concerns the evaluation of evidence regarding the existence of an agreement, the challenges associated with evidence of recollections over a long period, rules of evidence where there is hearsay in respect of deceased people, and whether recollection of the substance of communications rather than precise words used is enough to establish an agreement.
The case had several other significant and intriguing elements, including a tracing counterclaim, intentional waiver of privilege, and solicitor’s evidence. Re Miglic will have broad application with the potential to apply to any case that concerns:
- the weighing up of evidence about the existence of an agreement;
- the difficulties associated with evidence of recollections over a long period;
- rules of evidence where there is hearsay in respect of deceased people and
- whether recollection of the substance of communications rather than precise words is sufficient to establish an agreement.
Background
Kurt and Marilyn Miglic created Wills in 1993, which were quite similar. The Wills stated that they would gift the entirety of their estates to each other, leaving minor differences and the whole of the survivor’s estate to Kurt’s daughters (the plaintiffs), who were Marilyn’s stepdaughters. Kurt had married Marilyn when the plaintiffs were very young, Marilyn had no children.
When Marilyn made two Wills while Kurt had dementia, they departed from the earlier 1993 Will. After Kurt died in 2007, Marilyn made three more Wills, each of which left more of her estate to her nieces and nephew (the defendants).
The plaintiffs claimed that Kurt and Marilyn had entered into a binding agreement in 1993 that one could not change their 1993 Will without the other’s approval. The main issue in the case was whether Marilyn was legally bound never to change her 1993 Will.
As a matter of principle, when establishing a mutual will agreement, the terms of the Wills made according to that agreement are imposed over the survivor’s estate and any later or conflicting Wills. Therefore, the plaintiffs sought a ruling that Marilyn’s entire estate was held on trust for them under the 1993 will, rather than any of Marilyn’s later wills.
If their claim is valid, their equitable interest takes priority over any trust created by mutual Wills agreement. During the hearing, the defendants introduced a counterclaim seeking a declaration that $4.25 million, or such other sum as the Court deems fair, is not part of Marilyn’s estate and is instead held in trust for them. The administrator of Marilyn’s estate was aware of this argument but chose not to make submissions and indicated that she would abide by the Court’s decision.
Marilyn’s mother, Gertrude Cottrell, passed away in 1977. Marilyn and her brother, Gavin, were appointed trustees of Gertrude’s estate under her Will. As trustees, they held the income of Gertrude’s estate for themselves during their lifetime and then for Gertrude’s grandchildren (the defendants ), who argue that Marilyn’s estate included a significant amount of money inherited from Gertrude that Marilyn held in trust for them, while the plaintiffs deny this claim.
The decision
The plaintiffs argued that there should be no declaration because there is no evidence to prove that Marilyn had repaid the debt owed to Gertrude’s estate before her death. However, there is equally no evidence that the Marilyn repaid the debt. Although using the word “debt” is not accurate, it is unlikely that Marilyn had repaid the sum. Moreover, even if Marilyn had repaid the debt, it should have been paid to the plaintiffs as the beneficiaries. Still, they were never given any money as trustees. Therefore, I can assume that Marilyn still had the trust money she received at the time of her death.
The defendants did not convince the Court that Marilyn used the money received from Gertrude to purchase shares or property or mixed it with her funds and spread it across all her investments. There is no evidence to support tracing the initial asset into other assets. In this case, to conclude that there was capital growth and to identify the dimension of any capital growth would involve speculation, which is not permissible. Therefore, the Court concluded that the defendants have not provided enough evidence to suggest that Marilyn held any amount on trust other than the $60,000 she received from Gertrude.
Based on these findings, the Court held that the defendants are entitled to a declaration that $60,000 of Marilyn’s estate is held on trust. Similarly, Marilyn’s estate is held for the plaintiffs on trust by the first defendant. However, it is subject to an order that gives effect to the Will she made in 1993. The parties have been given the opportunity to present their arguments on the precise form of the order and the allocation of costs.