The estate planning device of Mutual Wills has been around since the 1700s.
They are a good way to deal with parties who have had more than one spouse and who have children from prior relationships – “yours, mine and ours” as they say.
Whilst mutual wills do not have any particular form and do not require any particular formality, Owen Hodge Lawyers always recommends that mutual wills, when required, are put in place by way of deed. A deed gives certainty to not only each spouse but also to their corresponding beneficiaries.
A deed of mutual wills can ensure that your beneficiaries do not have to go to court to get their inheritance and more importantly, it can ensure that your beneficiaries do not miss out on their inheritance altogether.
Take Ann and Lynn for example, the children of Mr and Mrs Clark in Legg v Burton [2017] EWHC 2088. Whilst this case did not involve second marriages, the principles ring loud and clear.
Ann and Lynn learnt the hard way. In 2000, Mr and Mrs Clark executed uncomplicated wills with minor terms. Each gifted their modest estate to the other but if the other had already died, then to their two daughters Ann and Lynn.
Mr Clark died only a few months later. Between 2000 and 2016 (when Mrs Clark died), Mrs Clark executed 13 other wills, the last one giving the lion’s share of her estate to her two grandsons.
Ann and Lynn sued the executors (who were the two grandsons and one of their partners) and after an enormous legal battle, the court declared that the executors of Mrs Clark’s estate were to hold the estate, not on the terms of her last will, but in accordance with the terms of the 2000 will.
The court accepted the daughters’ evidence that their father wanted the wills “set in stone” so they could not be changed subsequently and that their mother had said at the time she signed her 2000 will , “I bloody won’t change it.”
Ann and Lynn knew they had an up-hill battle. Not only was there no written confirmation in either will that they were intended to be “mutual” but there was no reference to this intent in any agreement or deed and in addition, the two star witnesses (being Mr Clark and Mrs Clark) were both deceased!
The lawyer for Ann and Lynn had correctly advised them that in such circumstances, their oral testimony would have to not only meet the civil burden of proof “on the balance of probabilities” (that is, what circumstances are more probable or likely to have occurred?). Their testimony would also have to successfully cope with the concept of “weight of evidence”.
“Weight of evidence” is a legal principle to the effect that where a thing is inherently improbable, it takes more clear, logical and convincing evidence to persuade a court to find that the balance of probabilities does indeed lie in that direction.
Historically, courts used to start from the perspective that it is inherently improbable that a testator should be prepared to give up the possibility of changing his or her will in the future.
But the in Legg case, the court said that this point of view was outdated. The court said that the nature of our tax laws and the public’s heightened awareness of the nature of family provision legislation (by which wills can be challenged) meant that it was no longer appropriate to class as “inherently improbable” that a testator should be prepared to give up their right to change their will in the future.
The court gave an example of inheritance taxes as a type of tax that could and does stymie the opportunity for testators to change their wills. The Legg case was heard in the English High Court. Inheritance Taxes per se do not exist in Australia. However, it has frequently been said that our capital gains tax (CGT) operates as a de facto inheritance tax. The only way to stop CGT operating in families is for the applicable asset to be passed down from generation to generation. However, once that asset is sold to someone outside the family, CGT will apply.
So the court re-wrote the law in this area, reflecting a modern-day perspective.
But what of Ann and Lynn? Their court battle was won but the cost of the victory was huge having regard to the size of the legal bill when compared to the modest size of the estate. And does this case mean that the safer way of approaching mutual wills (ie. by using a deed) should be dropped?
We don’t think so. As we all know, one swallow does not make a summer and our clients prefer the safe-haven of certainty moving forward, rather than running the risk that the judge in the next court case may disagree with the Legg case.
Qualified Estate Lawyer Leigh Adams has drafted many Deeds of Mutual Wills. Call him if you have any queries on 02 9570 7544.