Contractual Will Agreement: ‘We promise not a change our Wills after one of us dies’

What is a Contractual Will Agreement?

A Contractual Will Agreement is not a Will. It is a contract between two living people not to change their Wills.

1. Example of Mutual Wills: Mike leaves everything in his Will to his second wife, Carol. She also has children. When Mike dies, Carol gets everything. What if she cuts out Mike’s children from her Will? Mike loves his second wife. However, the fear of the unknown keeps him up at night. Fortunately, there is a way to put Mike’s mind at rest. Mike and Carol need a Contactual Will Agreement.

Gloria & Jay have children from previous marriages. They leave everything to each other. When the last dies everything goes to all the children equally. A Contractual Will Agreement contractually protects this.

They build Wills. Whoever dies last leaves half to Mike’s children and half to Carol’s children. They then take the extra precaution of signing a Contractual Will Agreement. The Contractual Will Agreement stops them from cutting out the other’s children. The Contractual Will Agreement stops both of them changing their Will.

Mike now dies.

Carol lives another 30 years. Mike’s fear that Carol would cut out his children is justified. After Mike died Carol redid her Will. Carol leaves everything to her own children. She leaves nothing to Mike’s children.

Mike’s children enforce the Contractual Will Agreement. The Court gives half of dead Carol’s assets to Mike’s children. Mike’s children also get back all their legal costs.

2. Example of two single Wills leaving nothing to spouse: Mike leaves nothing to his second wife. He leaves everything to his children of the first relationship. Carol, his second wife does the same.

3. Example of two single Wills leaving a bit to the second spouse: Mike leaves 25% to his new wife, Carol. The rest goes to his children. Carol leaves 1/3rd to Mike, 1/3rd to her favourite charity and 1/3rd equally to her two children.

As you can see, you can ‘cut the cake’ as you see fit. Whatever your Wills state can not now be challenged by your spouse, once both of you have attached the two Wills to the Contractual Wills Agreement. And the Contractual Will Agreement is signed by both of you.

Second marriage – both are wealthy

Let’s say the Will maker is currently married or in a de facto relationship. But they have children from a prior relationship. In this instance, their Will presents a challenge.

If they are independently wealthy, there may be no problem in each of them leaving their assets to their respective children and leaving nothing to the surviving spouse. This is because the surviving spouse has sufficient assets to provide for themselves during their lifetime.

In that case, they each build their own single 3-Generation Testamentary Trusts Will along those lines. (All to their own children.) They then attach these Wills to a Contractual Will Agreement. Neither can now challenge the Will when the first dies.

Second marriage – both are NOT wealthy

However, what if your second spouse lacks sufficient wealth to live comfortably after you die? You are obliged to make proper and adequate provision from your estate. The obligation gets greater the longer you are together.

If you fail to provide then your estate risks a family provision application in the Courts. This is where you Will is rewritten by the Court.

A Contractual Will Agreement stops your spouse from challenging your Will. A ‘Considered Person Clause‘ should also be put in your Will.

How does a Contractual Will Agreement work?

This Agreement is a document between two people. This is often a husband and wife who each have children from prior relationships. They make Wills and want to ensure that their partner who survives them keeps their part of the bargain.

The courts honour these Agreements:

“a contract between persons to make corresponding wills gives rise to equitable obligations when one acts on the faith of such an agreement and dies leaving his will unrevoked so that the other takes property under its dispositions. It operates to impose upon the survivor an obligation regarded as specifically enforceable. It is true that he cannot be compelled to make and leave unrevoked a testamentary document and if he dies leaving a last will containing provisions inconsistent with his agreement it is nevertheless valid as a testamentary act. But the doctrines of equity attach the obligation to the property. The effect is, I think, that the survivor becomes a constructive trustee and the terms of the trust are those of the will which he undertook would be his last will.” Birmingham v Renfrew [1937] HCA 52

How restricted is the surviving partner?

The surviving partner is allowed to consume the assets but can’t give them away or waste them. They can’t act with the intention of defeating the agreement.

Is the Contractual Will Agreement a ‘Will’ in itself? Or is it just an agreement not to change your Will

Your Contractual Will Agreement is not a Will. It is an agreement that you sign to say that you won’t change your Will. You merely staple your and your spouses unsigned copies of your Wills to the back of a Contractual Will Agreement.

Another difference is that a Will only comes into effect at the moment of your death. In contrast, your Contractual Will Agreement comes into effect the moment that you sign it – while you are still alive.

When is a Contractual Will Agreement binding?

A Contractual Will Agreement is binding when:

a) one of the parties can no longer change the Will, or
b) one of the parties die

What if the last to die changes their Will?

If the surviving party changes their Will following the death of the first Will maker then they commit fraud and breach of contract. They accepted the benefit of the contract. But they did not accept the burden attached to the contract.

What happens if you change your Will in breach of the Contractual Will Agreement? The beneficiaries under the original Will (e.g. your stepchildren) bring an action against you, the surviving party. This is to enforce the Contractual Will Agreement.

Contractual Will Agreement v’s challenging a Will

A couple marries who both have been married before. Each of them has two adult children. They contractually agree that in their wills, they leave their estate to each other and the survivor leaves his or her estate to the four children equally.

One dies and the deceased’s children challenge the Will under the Family Provisions Legislation. Which prevails: the Contractual Will Agreement or the court challenge?

In Dillon v Public Trustee of New Zealand in 1941, the Court decided that property the subject of such a contract was available to meet an order under such legislation. But in Schaefer v Schuhmann in 1972, the Court decided that it was not. In Barns v Barns in 2003, the High Court of Australia decided to reject Schaefer and to follow Dillon. So challenging a Will can, currently, override the Contractual Will Agreement. However, these Wills did not have a Considered Person Clause in the Wills. If they had the outcome may have been different.

Can I have two single Wills (instead of Mutual Wills)?

Yes. You can have two single Wills or Mutual Wills. Both work.

Example One – two single Wills: Mavis leaves everything to her children of her first relationship. Her second husband John is leaving everything to his child, also of a previous relationship. They build two separate single Wills to reflect that. They attach those two separate Wills to the Contractual Will Agreement.

Example Two – Mutual Wills: By definition mutual Wills leave everything to each other, in the first instance. Ken and Muriel, after they both die, are leaving 50% to Ken’s children and the other 50% to Muriel’s children. Mutual Wills are two Wills that are mirror images of each other. They attach those mutual Wills to the Contractual Will Agreement.

How to complete a Contractual Will Agreement

For a Contactual Will Agreement:

1. Firstly, build your 3-Generation Testamentary Trust Wills:
   *  leaving everything to each other in the first instance? Build Mutual Wills here
   *  not leaving everything to each other? Build two separate single Wills here
2. Sign the Wills. (Stage one complete.)
3. Secondly, build this Contractual Will Agreement and print out two copies.
4. Staple unsigned copies of the Wills to the back of the Contractual Will Agreement.
5. Sign the Contractual Will Agreement. (Stage two complete.)
6. Congratulations.

Why not attach copies of the signed Wills to the Contractual Will Agreement?

Question: Instead of the ‘unsigned’ Wills, why can’t we just make a copy of the signed Wills and staple them to the Contractual Will Agreement?
Answer: You can do that. That is equally as legal. However, there are two problems that may come about. Firstly, if you start writing with a pen on the copies of the signed Wills it may be argued that they are now the new Wills. Secondly, people sometimes wrongly staple the actual original Will to the Contractual Will Agreement! This damages the original Wills and may render them void.) It is simpler and less chance for error if you just staple unsigned copies of your Wills to the Contractual Will agreement.

What is a blended family?

A blended family for estate planning is one in which a Will maker or the spouse of the Will maker was involved in a previous relationship. And a child or children are born of that previous relationship.

Examples of blended families:

• husband and wife marry for the second (or subsequent)
  time, both have children from their first marriages and then
  they have two more children
• widow, with children, marries for a second (or
  subsequent) time and has another child with her new
  husband
• husband and wife do not divorce, but the husband
  enters into a de facto relationship and has a child outside
  the marriage

Mutual Wills vs Mirror Wills vs Contractual Will Agreement

A “Mutual Will” is the same a “Mirror Will”. They are the same thing. E.g.

1. Same children from same marriage: Mum leaves everything to Dad. Dad leaves everything to Mum. After they both die they leave everything to their children
2. Children from previous relationships: Mum leaves everything to Dad. Dad leaves everything to Mum. After they both die they leave everything equally to their combined children. (Dad had 2 children, from a previous relationship. Mum had 3 children from a previous relationship. And Mum and Dad had 1 child from their own relationship. Six children in all get everything equally).
3. Blended families, but one child benefits more: Mum leaves everything to Dad. Dad leaves everything to Mum. After they both die they leave 20% to the mixed children. And 80% goes to the child of their union. They take the course of action because they believe the older children already have enough. And the younger child (of their union) needs more.
4. Aunties: One sister leaves everything to the other sister. The other sister does the same. Once they are both dead they leave 25% to their nephews and nieces and 75% to the local church.
5. Same-sex with no children: They each leave everything to each other in the first instance. Once they are both dead they leave half to each side of their family (e.g. siblings or nephews and nieces).

Can you see the pattern? They each leave everything to each other in the first instance. If you are not doing that then you do not have ‘Mutual’ or ‘Mirror’ Wills.

Whether you use the expression Mirror Wills or Mutual Wills, you need a specific agreement that the terms of the Wills are binding on the parties. And that the intent of the Wills can not be changed.

With these types of Wills there is a lot of trust that the last to die, with ‘do the right thing’ and not change the intent of the Wills. To help that ‘trust’ build and sign a Contractual Will Agreement.

Do ‘Mutual Wills’ contain an implied promise to not change the Will after the first person dies?

You may argue that ‘Mutual Wills’ contain a promise. But that is not correct. Instead, sign a “Contractual Will Agreement” to protect the intent of the Wills.

Hussey v Bauer [2011] QCA 91 shows that Mutual Wills can, sadly, be changed after the first person dies:

“The characteristics of Mutual Wills and the means of proving their existence have been the subject of consideration in many courts. It is
possible to draw from those authorities the following principals:

(a) Mutual Wills arise when two persons agree to make Wills in particular terms and agree that those Wills are irrevocable and that they will remain unaltered.

(b) Substantially similar, even identical, Wills are not Mutual Wills unless there is an agreement that they not be revoked.

(c) The mere making of Wills simultaneously and the similarity of their terms are not enough taken by themselves to establish the necessary agreement.”

The case confirms that you need an actual contract. This is called a Contractual Will Agreement. It is not a Will. It is merely a contract not to change your Will after the first person dies (or gets dementia) so that they can no longer change their Will. 

How to stop your partner from changing their Will

A Contractual Will Agreement is not a Will. It is a legally binding contract between two people where: 

• the Will makers are happy with each other Wills
• they agree not to revoke or amend their Will without the agreement of the other. Therefore, following the death of the first person (or their dementia), both Wills are irrevocable and the intent of the Wills can no longer be changed.

The Contractual Will Agreement guarantees that property flows to the agreed and intended beneficiaries. For say a blended family, the surviving Will maker cannot disinherit their step-children following the death of the first spouse. For example, if half goes to your children and half goes to your stepchildren then that is now set in concrete.

Telephone us for help on building online the Contractual Will Agreement.

Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
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