Mutual Wills involve two parties entering into an agreement/contract to make reciprocal wills to leave assets firstly, to their surviving spouse/partner with a condition that the assets are secondly, distributed in a certain way after the survivor’s death. This normally involves a contractual promise that the assets are distributed in specific fashions to specific beneficiaries. The contract between the parties, binds them to make the wills in those agreed terms of the contract, and not to revoke those wills or not to revoke them without notice to the other party. This This means that where one party no longer has capacity or dies, the will is irrevocable (Low v Perpetual Trustees WA Ltd (1995); Charles Rowland (2009) Hutley’s ‘Australian Will and Precedents’ 7th edition).
Why is a mutual will not recommended?
Birmingham v Renfrew (1973) HCA – Equity and constructive trust
In the case of Birmingham v Renfrew, the facts are as follows:
The Wife executed a will whereby she left all of her estate to her husband on the contractual condition that the entirety of her estate be distributed to specific designated family members after his death.
The Husband’s will at the same time was drafted in the same fashion, with his consideration being that where he died first, his assets would firstly go to his Wife and then to beneficiaries he designated.
A binding legal agreement was established, and both parties were bound to that condition/promise. After the death of the wife, her husband revoked his will and named his own relatives as beneficiaries of his will. The finding of the court here was that the gift to the husband of the property/assets, constituted a trust. Justice Dixon held that the husband could still benefit from his wife’s gift during his life, and make inter vivos gifts (gifts whilst he was alive) but these gifts could not defeat the condition that the property/assets, be distributed as the parties had arranged.
The Court further held that the beneficiaries could not enforce the contract. Dixon J explained on page 690 of the ruling that he saw no difficulty in equity stepping in and attaching to those assets a constructive trust when the first party dies, meaning that whilst the survivor was alive, they had a fiduciary duty to hold the assets on trust for the deceased testator/testatrix’s beneficiaries. In this case, the beneficiaries who had been wrongly distributed the assets, which under the contract/agreement were to go to the deceased wife’s family, was to hold those assets on constructive trust for the wife’s beneficiaries.
Equity and constructive trust – a summary
Equity is the concept of the judicial assessment of fairness in relation to a legal issue. Some of the common known maxims include:
- Equity sees that as done what ought to be done,
- Equity will not suffer a wrong to be without a remedy, and
- He [or she] who comes into equity must come with clean hands.
For equity to protect a beneficiary under a mutual will, there must exist evidence that an agreement occurred which created interests which were intended to be irrevocable after the first party to die upon the surviving party (Re Cleaver [1981] 1 WLR 939).
A constructive trust is a type of equitable trust, which operates under circumstances where it would be unconscionable for the owner of a property to assert their own beneficial interest in that property and thereby deny the interest of another party.
Barns v barns [2003] HCA – Family provisions claims
In the case of Barns v Barns [2003] HCA, the Barns spouses had made mutual wills, but during her lifetime, Mrs. Barns revoked her will and was the first to die – Her husband had acted to his detriment by believing she would follow through with the agreement. It was held that the mutual will and agreement had been binding to both the In equity, she could be restrained from deviating from her promise. The ex-wife of their son, the sole beneficiary of their estate made a family provision claim. The counsel in this case tried to rely on a precedent case, being Schaefer v Schuhmann [1972] AC 572, and that a family provisions claim could be avoided by entering into a contract by a will. The Court departed from that precedent case and held that a mutual will or promise to distribute property in a certain way did not mean that another party could not make a family provisions claim. The legislation would prevail to give the judiciary discretion where an eligible person made a family provisions claim.
Albrow v Cunningham [2000] – Evidence of agreement
In this case, the plaintiff disputed the will of his step-father.
Around late 1990 it was conveyed to the plaintiff Chris that his parents had made agreement and mutual wills to the effect that the surviving spouse would receive the assets of the parties and that these would then be distributed to the plaintiff and his wife, Chris and Marlene when the surviving spouse passed away. Unfortunately, the adoptive mother, Ms Albrow died in 1991. The step-father, Mr. Crowley, over the years became dissatisfied with the beneficiaries, Chris and Marlene as had not seen him often, and eventually changed his will in 1996.
Further, the change in his will provided that instead, the estate was left to the daughter and son-in-law of his deceased wife, Ms. Albrow. AJ Davies at the time highlighted the factors and evidence to consider to establish an agreement. He explored the basic principle – that it wasn’t the wills being made in identical terms that protected them under equity, but rather, evidence of an agreement to create interests under the mutual wills which would be irrevocable after the first spouse dies (Re Cleaver [1981]). There must have further, been an intention to that effect. He conveyed the principles also explored by Justice Santow in Hubbard & Anor v Mason & Ors (unreported, 9 December 1997) that the court could consider, all surrounding circumstances, context, history and factual scenario to draw inferences and all extrinsic evidence to explore parties intentions.
His Honour also listed factors necessary to ascertain the intentions of the parties as follows where mutual wills are involved or alleged – and AJ Davies considered those:
- to how many people the statement was made;
- whether there is a statement in writing;
- the substantial consideration offered for the promise;
- the number of times the statement was made;
- the language used by the parties,
- the context, formal or informal, in which the promise was made;
- the nature of the relationship between the parties; and
- the certainty of the terms.
In this case, the spouses had conveyed to Chris and Marlene the agreement between them in 1991. Further the instructions were written at the same time, the handwriting was that of Mr. Crowley, with some additions made by Ms. Albrow – which indicated agreement between them. The fact that they had both gone before a lawyer and executed the wills also implied that there was an intention for the contract to be binding. Mrs. Albrow at the time of signing was eighty years old and not in good health – suggesting that – she intended that the entirety of her estate should pass to Chris and Marlene after the death of her husband. AJ Davies concluded that he was satisfied that the mutual wills were entered into by both Mr. Crowley and Mrs Albrow and they ‘both undertook impliedly, if not expressly, that the will of the survivor would not be revoked’. However, all beneficiaries had supported Mr. Crowley and were suffering both financially and by ailments in the family – the claims would not be put one over the other in equity. The property would be divided between them and costs paid out from the estate of the testator, Mr. Crowley.
Summary – Is a mutual will recommended?
Wills are drafted to convey the testamentary intentions of a testator or testatrix – which can be revoked and a new will drafted at any point. Mutual wills, instead have many downsides, contingencies and effects on the surviving testator, both during their lifetime and after they die.
Some of those downsides were within the above cases and are as follows:
- Lack of flexibility;
- Can cause confusion;
- Disputes are high;
- Issues with revoking/changing will (which would otherwise be done easily);
- By making the contract/agreement, the testators are losing the power to dispose of their own property freely, both inter vivos (whilst living by gift) and by will (after their death); and
- The party that dies first is relying on the party that survives them not to revoke and go back on their word. Where the surviving party does go back on their word, this opens up various legal issues of which beneficiaries may contest.
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