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 a Contractual Agreement for 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. He leaves everything to his second wife
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.
The process to build a Contractual Will agreement
- Build your two Wills, first.
- Print two copies of each of your Wills.
- One copy to sign; and
- an ‘unsigned copy‘ to attach to your Contractual Will Agreement.
- Sign your Wills, first.
- Build the Contractual Will Agreement
- The only information the Contractual Will Agreement requires is:
- your name and address
- your spouse’s name and address
- Print out the Contractual Will Agreement.
- Staple the unsigned copy of each of your Wills to the Contractual Will Agreement.
- Sign the Contractual Will Agreement.
- Scan the Contractual Will Agreement and email it to each other so that you each have a permanent copy of the agreement. (You may wish to email it to family members.)
One child of the current Marriage. And a child from a former relationship
Q: I have two children…
- Jake 15 years old (previous marriage).
- Lisa 4 months (current marriage).
If I die first, I want my 100% share to go to my current wife Melanie. And when she dies I want Jake and Lisa to get 50% each.
But, Jake is not her child. How can I make sure that Melanie, ‘honours’ my wishes.
If Melanie dies first, everything goes to me. But how can my current wife Melaine be confident that upon my death my Will continues to give half to my son Jake and the other half to our joint daughter Lisa?
A: This is the exact reason you need a Contractual Will Agreement.
It is right and proper that you leave everything to Melanie. She may need all of your wealth to live a good end of life experience. Quality nursing homes and the like. And the same for you. You need all of Melanie’s money so that you can live a wonderful life with high quality nursing and hospital support.
Mums and dads need every cent they have to get a good end-of-life experience.
In Singapore, you get 3 or 4 servants in your home for less than AUS$50k per year. In Australia, such ‘extravagance’ sets you back AUS$300k per year.
Servants and 24-hour nursing staff in your home, or in a 5-star nursing home are expensive.
This is how you achieve what you want:
- Build a 3-Generation Testamentary Bundle.
- In those Wills, everything goes to each other. And when you are both dead everything goes equally to the two children.
- And then build a Contractual Will Agreement. This stops you and your current wife, Melanie, from changing your Wills.
Why do you only ask for our names and addresses to build a Contractual Will Agreement?
Q: We are building a Contractual Will Agreement. We filled in and saved the “you and your spouse details” section. But we cannot work out where to fill the actual details of the contract. The next step is “reference” then “summary” then “lock and build”.
A: That is correct. We do not need any more information. You are welcome to look at the full Sample. It shows in full both our covering letter and the Contractual Will Agreement. As you will see the agreement is basically saying:
Here is my unsigned Will. Here is your unsigned Will. I agree and you agree not to change those documents.
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 it too late to cancel your Contractual Will Agreement?
A Contractual Will Agreement can no longer be rescinded once:
a) one of the parties can no longer change the Will (e.g. unsound mind), or
b) one of the parties die
While your partner is able to change their Will, then you notify them that you no longer want to be bound by the Contractual Will Agreement. Provided your partner has time and the ability to do so then your partner is free to make a new Will. This is without the constraints of the Contractual Will Agreement.
So if your partner is in a coma then it is too late to renounce the Contractual Wills Agreement. You are bound by it. This is because your partner does not have the ability to change their Will. This is because your partner is in a coma.
If your partner is dead then you obviously cannot revoke the Contractual Will Agreement. And you cannot change your Will either.
If your partner is of unsound mind then they cannot make a new Will. Therefore, you cannot renounce the Contractual Will Agreement.
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:
- 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 - Sign the Wills. (Stage one complete.)
- Secondly, build this Contractual Will Agreement and print out two copies.
- Staple unsigned copies of the Wills to the back of the Contractual Will Agreement.
- Sign the Contractual Will Agreement. (Stage two complete.)
- 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
We use the expression “Mutual Will” and “Mirror Will” interchangeable. They are the same thing. E.g.
- 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
- 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).
- 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.
- 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.
- 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 an implied 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. [Italics by Legal Consolidated.]
(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 you die (or get dementia) your partner 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.
Are Contraual Wills binding on Australian Courts?
The courts are committed to the position that the right to change one’s will is limited by a contractual arrangement with your spouse. Therefore, the contractual Will agreement is irrevocable and binding on the other party when you die.
But where is the ‘consideration’ in a Contractual Will Agreement?
A Contractual Will Agreement is a ‘contract’. An Australian contract needs a number of conditions. These include being over 18 years of age, acting with free will and knowledge etc…
Another requirement is ‘consideration’. There must be a ‘bargain’. I am giving something up to get something. You are giving something up to get something.
A Contractual Will Agreement is a mutual promise. The parties ‘give up’ the right to change their Will. They get a promise from the other for the other to also not change their Will. This is adequate consideration.
Further, to put the matter beyond doubt, Legal Consolidated structures your Contractual Will Agreement as a “Deed”. A Deed does not require consideration.
Can Mutual Wills or Mirror Wills themselves be contractual binding – not to change the intent of the Wills
It may come down to terminology.
As my article suggests to ensure there is a binding agreement you need a “Contractual Will Agreement”. This is sometimes called by other lawyers “Mutual Wills”. Either way, you need an ‘agreement’. Or an ‘understanding’ that you can not change your Will, or at least the intent of the Will.
In contrast ‘leaving everything to each other then everything to the same people’ is not, in my view, automatically a contractual agreement. Other things would need to happen, perhaps an exchange of emails or a statement may make it a verbal contract.
As my article further states even a Contractual Will Agreement can be annulled if one party tells the other they are no longer bound – this is provided the other party can now change their Will (ie. has mental capacity). So as to your actual example, I do not think it was a contract between the Will makers. But even if it was it would be annulled by a change of circumstances.
Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
National Australian law firm
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