Mutual Wills under the microscope

In the recent decision of Forster v Forster, the Queensland Supreme Court has considered mutual wills in the context of whether there is any duty from the surviving party to keep the ultimate beneficiaries informed of the status of their expectancy.

It is easier to step this out:

  1. mutual wills are wills usually (but not always) used between husband and wife in which there is an obligation not to change the will without notifying the other party (to give them the opportunity to change their will);
  2. this notification cannot be given after the other party dies or loses capacity to make a new will;
  3. the idea is that in the mutual will each party is giving their estate in a certain way in reliance on the promise of the other that if they will give their estate in a certain way;
  4. a typical example is where there is a blended family. For example Timothy and Annabel get married. Each have assets that they have introduced to the marriage. Timothy has three children, Annabel has two.
  5. while Timothy and Annabel want each other to benefit from their assets if they die, they are worried about what might happen if there is another remarriage or a falling out with the stepchildren, after all one would usually prefer their blood relations;
  6. so in the mutual wills, Timothy would give his estate to Annabel but if she predeceased him, to all 5 children. Annabel would do likewise.
  7. this is similar to the facts in Forster, with a few assumptions made. Timothy dies, Annabel inherited his estate.
  8. What happened though is that one of Timothy’s blood children expressed concerns that Annabel might diminish her estate (eg by gifts or transfers to her blood children. Timothy brought an application seeking orders that Annabel disclose her assets and liabilities each year, and give notice of any transfer of property worth more than $50,000. The basis of the argument was that Annabel held the property as trustee for the children.

After and exhaustive analysis of the relevant authorities the Court found that no such trust existed, as a result of which the application entirely failed. The Court went on to say however that if there was a trust relationship, then in the absence of fraud there was no obligation to account (provide information).

Mutual wills are sometimes used in estate planning however they do have their own challenges. The fact that a party can be locked in to a will for decades which may have become problematic due to subsequent events means that caution must be used, and in our view parties should be independently represented if they decide to use them.