Mutual trusts: clear as mud
Many private client lawyers will be familiar with the doctrine of mutual wills. But only three cases in the last 80 years have resulted in a finding in favour of mutual wills and judgment in the third and most recent case was only handed down in August of this year. Charles & Ors v Fraser  EWHC 2124 (Ch) is a rare opportunity to understand how the doctrine operates in the absence of express evidence of the terms of the ‘mutual’ agreement.
It was the claimants’ case that cohabiting sisters, Mabel Cook and Ethel Willson, agreed as to the disposal of their property and executed wills in substantially identical terms that were not to be revoked pursuant to that agreement.
Mabel died first aged 83 in 1995 without having revoked her will. Ethel received an inheritance under Mabel’s will (circa GBP75,000) and then lived alone for a further 11 years.
Only three cases in the last 80 years have resulted in a finding in favour of mutual wills
The claimants were most surprised to learn that Ethel had made a will in 2006, barely two months before her death, leaving the bulk of the sisters’ joint estates to her hairdresser, Mrs Jill Fraser, 72 (the defendant). The question was whether the claimants who would have been the beneficiaries under Ethel’s original will can claim that her estate should be held on the trusts of that will and not her final will, which instead benefited the defendant.
Both sisters had been widowed in the 1970’s. Neither had children but they both had an extended family, cousins, nieces and nephews, God-children and lifelong friends.
In the mid 1980’s the sisters both sold their former marital homes and brought a house together in Stoneleigh, Surrey. The house was held as joint tenants.
In January 1991 the sisters made reciprocal wills with solicitors. They were both in their late 70’s with no suggestion of poor health. The present senior partner of the firm in question gave evidence and described the sisters as ‘two peas in a pod’ and recalled that they did everything together, evidence that was supported by almost all of the other witnesses.
The initial clauses of the wills are straightforward. Previous wills were revoked, funeral wishes were expressed and they each appointed the other, in the first instance, to act as executors and trustees. The entire estate of the first to die was left to the survivor. Both wills then appointed Mabel’s sister-in-law and a lifelong friend to be executors and trustees upon the second death. The residuary estate of the survivor was left to be divided into 40 shares, which were then allocated to 15 beneficiaries. The beneficiaries were carefully chosen and consisted of relatives of the sisters and mutual friends. In an equal fashion, some were chosen by Mabel and some by Ethel, while others were chosen together. If a beneficiary predeceased the surviving sister then their share(s) would be redistributed among the surviving beneficiaries proportionately.
Neither will contained an express declaration of mutuality.
In 1993 each sister executed a codicil, which added an additional executor to act upon the second death. Mabel died in 1995.
In 2003 Ethel made a new will with a different firm of solicitors. The new will updated addresses, altered the appointment of executors, removed residuary legatees who had predeceased and, most significantly, added three new residuary legatees who each received two shares of her estate. Two of these new legatees were Mrs Fraser and her partner, John Rose. Ethel told witnesses that she was ‘updating the will’.
It is beyond doubt that Mrs Fraser and her partner had shown Ethel great kindness. They would take her shopping, Mrs Fraser would do her hair and Mr Rose would help out with DIY around the house. Similarly the claimants kept in touch with Ethel visiting her or telephoning regularly.
In May 2005, Ethel had a fall. On her return from hospital she needed full-time care and a full-time carer was provided.
In August 2006, Ethel gave instructions for a short new will to be prepared, which revoked all former wills, appointed Mrs Fraser as sole executrix and left the residue of her estate to Mrs Fraser.
The solicitor knew that his firm had prepared a previous will, but in the light of what he felt to be clear instructions from Ethel, he did not think it necessary to look at the 2003 will. The 1991 will was not discussed. The new will was signed on 21 September 2006. Thereafter, a further discussion took place and Ethel gave instructions for a GBP10,000 legacy to her carer and for a further provision so that if Mrs Fraser predeceased her, then her children would inherit the residuary instead. This will, Ethel’s last will, was signed on 26 September 2006.
Ethel died on 11 November 2006. Her net estate amounted to circa GBP400,000 after inheritance tax and liabilities had been paid together with the legacy to Ethel’s carer. Probate was granted to Mrs Fraser in April 2009.
For the doctrine of mutual wills to apply, two or more persons must agree to make wills disposing of their property in a particular way
For the doctrine of mutual wills to apply, two or more persons must agree to make wills disposing of their property in a particular way. The terms of the wills are normally, but not necessarily, identical, and confer reciprocal benefits. This, in itself, is not sufficient to constitute a mutual will. There must be an arrangement or agreement to make such wills and not to revoke them without the consent of the other(s).
If there is an agreement to execute a mutual will and the first to die has revoked or altered their will, the survivor is released from their obligation not to revoke their will. If the wills remain unrevoked at the date of the first death, a constructive trust will arise and thereafter any changes to the will that affect the agreement (including revocation) would constitute an enforceable breach of trust.
The evidence in favour of mutual wills
All evidence was extrinsic as there was no express statement in the will concerning the purported agreement reached and the will file had long since been destroyed. Furthermore, the legal executive who prepared the 1991 wills had died before a formal statement could be taken from him.
Mabel’s niece and God-daughter and a beneficiary under the 1991 wills, told the court that the two sisters were extremely talkative. The subject of their wills was a regular topic of conversation, always at their instigation. She explained that she knew that the surviving sister would inherit the estate of the first to die and would be able to use it for her care and upon her death it would be distributed in accordance with the will. The phrase ‘the will’ was used so much by the sisters that some witnesses believed that they had a single joint will.
Another witness, who was not a beneficiary under 1991 wills, told the court that the sisters often remarked that the wills must‘never be touched or altered in any way’. This was very important to them.
Shortly before her death, Mabel went to great pains, knowing that she was dying, to reassure certain beneficiaries that although they would not inherit directly from her estate, they would receive their inheritance upon Ethel’s death.
The defendant rightly asserted that the claimants bore the burden of establishing that there was an agreement between the two sisters and that an element of that agreement was that the will of the survivor was to be irrevocable. Further, the defendant observed that the mere reciprocal nature of the 1991 wills was not significant or sufficient evidence of a binding ‘mutual’ agreement. Of course, significance attaches, and thus the doctrine applies, only when the mutuality is reinforced by an agreement that the wills (or the specific dispositions in question) shall not be revoked.
The defendant alleged that Ethel’s actions in 2003, when she changed her 1991 will, made it plain that she did not regard herself as having made an agreement not to revoke that will.
Judge Jonathan Gaunt QC accepted the following factors as evidence for the finding of mutually irrevocable wills:
- The wills themselves suggested that they had been the subject of negotiation and agreement;
- The careful division of the residuary estate amongst both sisters’ chosen beneficiaries;
- The existence of an agreement was attested by several witnesses whose evidence was consistent and largely unshaken in cross-examination and was given in a ‘convincing, frank and open manner’. The weight given to this evidence was high and could only be rejected in the light of strong evidence; and
- In respect of Ethel’s 2003 will, on balance, she had either forgotten, or perhaps no longer appreciated, the full force and effect of the agreement and may have thought it was in order to change ‘her part’.
Judge Gaunt QC acknowledged that many of the witnesses had a financial interest in the outcome of the case, but felt that the evidence given by those witnesses was given honestly and scrupulously
He also made it clear that it was the duty of any solicitor or draftsman faced with will-makers wanting to make a mutually binding agreement to (1) ascertain their intentions as to revocation; (2) advise appropriately and (3) clearly and accurately record that agreement.
Although Ethel was bedridden and described as being frail and vague by the time she made the disputed will in 2006, the claimants had not sought to question that she was not mentally competent to make a will. The solicitor who prepared Ethel’s 2006 will have observed that she was prone to lose focus and at times became disorientated.
As a matter of good practice, the solicitor obtained a medical report from a consultant psychiatrist. The psychiatrist identified mild dementia, probably of a vascular type, but clearly stated that she still had testamentary capacity.
Speaking of her capacity, Judge Gaunt QC was surprised by the contents of the psychiatrist’s report as it was plain to him from the solicitor’s contemporaneous attendance note that Ethel was losing her memory and could scarcely recall the names of the claimants. He wondered whether it can really be said that one has testamentary capacity when one cannot understand the claims of those who might expect to benefit from their will.
The claimants successfully argued that the 2006 will contradicted and sought to overturn the binding terms of the identical wills made by the sisters in 1991.
It was held that Mrs Fraser holds the proceeds of Ethel’s estate on trust to give effect to the provisions of Ethel’s 1991 will.
The agreement to make mutual wills need not be in writing, but anyone preparing such wills is likely to be criticised if they allow clients to rely upon an agreement that is not evidenced in writing upon the face of the wills. An express statement in the wills (preferably reciting the full terms of the agreement) should make the agreement clearly visible to any later solicitor or draftsman who is instructed to assist a testator with altering or the making of a new will.
Many draftsman refuse to recommend mutual wills as an option for clients preferring to achieve the same result through the medium of more formal testamentary trusts. That said, as family structures continue to become more diverse, testators may wish to bind themselves in respect of the ultimate destination of their estates and accordingly practitioners must be alive to the options open to clients and the substantial and complex legal issues involved.
NB: Clifton Ingram acted for the successful claimants.
The content displayed here is subject to our disclaimer. Read more