Mutual Wills (Qld)

Mutual wills are a useful estate planning strategy for testators concerned about asset protection. Their primary aim is to make sure that assets of the deceased estate are kept “in the family”. Typically, blended families use mutual wills to provide for a surviving spouse while ensuring that property ultimately passes to the testator’s own children. Whilst this can be an excellent method of estate planning in some circumstances, the inflexibility of this arrangement can cause problems in the future. This article defines mutual wills and explains how a testator can use this testamentary contract to protect their family interests.

What are Mutual Wills?

The doctrine of mutual wills is centuries old, originating with the English case of Dufour v Pereira (1769). A mutual wills contract is a legally binding contract between two contracting parties. The testators agree to the terms contained in each other’s wills and agree to only make testamentary changes with the other party’s permission.

Mutual wills differ from other types of testamentary wills in two main ways.

1. Both parties have to consent to the covenants contained in the mutual wills. This is in stark contrast to a traditional will, which contains the independent testamentary wishes of one testator.
2. A major feature of a mutual will is that it can only be changed or revoked with the permission of the other contracting party. When one party passes away, the mutual wills are irrevocable. This is a variation to the standard provisions of probate law, which dictates that a will is always revocable.

Who Uses Mutual Wills?

Any two people can agree to sign mutual wills to enforce a deceased estate plan. This is often done by spouses with children from a previous relationship. The parties can use this testamentary instrument to ensure that their assets flow to their chosen beneficiaries. In this way, a surviving spouse cannot disinherit a stepchild after their spouse passes away.

Mutual wills effectively bind two parties to an estate plan, but they do not provide flexibility. For instance, they cannot account for what could happen if one spouse dies decades before the other spouse. For that reason, they are a more suitable choice for an older couple who are less likely to remarry or have children after their spouse passes away.

Advantages And Disadvantages

Couples will often discuss their testamentary arrangements and agree to respect each other’s wishes after their death. Even if the surviving spouse has a moral obligation to abide by the deceased’s wishes, there might be reasons why they do not keep their word. A mutual will can attach a legal obligation to the surviving party, forcing them to uphold their agreement.

There are other advantages to making mutual wills. For instance, the parties can choose who will receive jointly owned assets in the future. This might be particularly important in the case of family-owned businesses such as farms.

When a mutual will provides the surviving spouse with the entire estate, they can act as the absolute owner of the property in the estate. They enjoy full ownership and then pass on the remainder of the estate in an agreed-upon manner. In some ways, it is a better choice for a surviving party than a life interest in the asset.

However, mutual wills are not the appropriate choice for everyone. For example, they are usually not recommended for a young couple to lock themselves into inflexible estate planning. If a spouse dies at a young age, the other spouse will have limited choices in the future. Unless the mutual will gives permission, the surviving spouse cannot provide for a new spouse or child in their will.

A mutual wills contract imposes an equitable legal obligation on the surviving party to leave their estate in an agreed-upon manner. When someone passes away assuming that the agreement is in place, the other party must take the estate according to the dispositions in the mutual will. However, the surviving spouse can deplete the asset pool in their lifetime, defeating the deceased’s purpose in making the mutual will. A testator can account for this by including a testamentary trust in the will to dictate how the surviving party uses the estate assets.

Implied Mutual Wills

In the Queensland Court of Appeal case of Masci v Masci [2015], the judge found that a couple’s wills were effectively mutual wills. Even though the couple themselves did not label their wills as mutual wills, the court ordered that the surviving spouse could not revoke her will. A major factor in the decision was that the contracting parties were a blended family and made joint wills to benefit their respective family members.

Can One Party Make Changes Without Consent?

A beneficiary of the original will can obtain an injunction to restrain someone from dealing with estate property in breach of the mutual will agreement. The Supreme Court of Queensland confirmed this legal principle in the case of Bigg v Queensland Trustees Ltd [1990]. If the survivor makes gifts during their lifetime, the court can force the gift recipient to disgorge (e.g. return) the gift.

Ultimately, the power of the surviving party to deal with the property depends on the promises contained in the mutual will. The survivor might have considerable leeway to deal with the property in their lifetime with the proviso that the survivor leaves whatever remains to the chosen beneficiary.

There are circumstances when mutual wills are the appropriate choice. However, given the rise in third and fourth marriages, it can be the wrong choice for those who need flexibility. Contact the Armstrong Legal team today with any questions about mutual wills. Please call 1300 038 223 for any legal advice or representation.