When does the survivor under a mutual will agreement have trustee obligations?

A recent case has provided a detailed analysis of the law on mutual will agreements and its effectiveness as an estate planning tool in modern blended families.

Whilst the law is clear that a mutual will is not a trust, we now have a recent detailed analysis of the law on mutual will agreements (MWAs) by Her Honour Justice Ryan of the Queensland Supreme Court in Forster v Forster [2022] QSC 30.

In this recent case, Holding Redlich acted for the deceased’s surviving spouse (Respondent) which had an MWA between them. In the MWA, the deceased and the Respondent agreed to give their residuary estates to each other to allow the survivor to maintain a similar lifestyle. The survivor must maintain a will which ultimately gifted their residuary estate equally between the deceased’s children and the Respondent’s children. MWAs like this are a good estate planning tool used, particularly in blended family situations, to ensure that the residue of the joint estate of the spouses is available to the surviving spouse and ultimately left equally between the children of both spouses after the death of the surviving spouse. 

The applicant was one of the children of the deceased from a prior marriage (Applicant). As often occurs in blended families, the Applicant did not trust his stepmother, the Respondent. Despite having no grounds on which to require his stepmother to disclose all of her personal assets and liabilities, the Applicant was determined to force her to disclose her financial position both immediately and on a yearly basis. The Respondent refused to disclose her financial position and maintained that she would adhere to the terms of the MWA.

The Applicant was so determined to force the Respondent to disclose her assets, he brought a court application. He asked the court to make orders according to section 8 of the Trust Act 1973 (Qld) (Trusts Act) and the MWA that the Respondent disclose (as trustee of the trust in the MWA) her current assets and liabilities to the Applicant, provide an update to the Applicant annually of her assets and liabilities and notify the Applicant if she intended to transfer more than $50,000.

The Applicant argued that on the deceased’s death, the terms of the MWA created a constructive trust of which the Respondent was the trustee. He then relied on section 8 of the Trusts Act as the source of the court’s power to make the disclosure orders he sought.

The Respondent argued that the application was entirely misconceived and based on a misapprehension of the law of mutual will and constructive trusts. The MWA certainly imposed obligations on the Respondent, but it did not create a trust. The Respondent further submitted that a constructive trust is a remedy, imposed by equity, to prevent fraud (for example, a change to the surviving spouse’s will in breach of the terms of the MWA). It is not a construct of an express written agreement, like the MWA.  Trustee obligations will only arise for the surviving spouse if equity needs to intervene to prevent fraud.

Her Honour provided a detailed analysis of all the authorities on mutual wills. Her Honour did not find a single authority that supported the Applicant’s argument and refused the application. Her Honour is yet to make orders on costs.

In addition to a wonderfully detailed analysis of the law on mutual wills, this case also demonstrates that you can use the ancient doctrine of mutual wills to great effect in modern blended families.

Written by Laura Hanrahan & Kylie Wilson