There are no substitutes for trust and people doing the decent thing, as a recent NSW Court of Appeal case reveals. The court will not do the decent thing for you. And there are some strong lessons about making effective wills and making sure your loved ones have made effective wills.
The facts of the case are brief. Derek and Gwendoline McDonnell, husband and wife in their late 60s, decided in 1986, to make their wills. Each had two children by previous marriages. It is a fairly common set-up these days. Lots of people find themselves dealing with children of previous marriages and are forever balancing the rights and expectations of children with the rights and expectations of the new spouse. It is one of the reasons for so much tension between step-children and new spouse.
Anyway, Derek and Gwendoline attempted to resolve the tension through their wills. Each left everything to the other, provided the other survived them by 30 days. (That is a common clause that avoids difficulties arising from people dying together in some catastrophe.) The next clause said something like, “”If my spouse predeceases me, then I leave everything to the four children (of the previous marriages) in equal shares.”
Derek died in 1992. A year later Gwendoline did the dirty. She changed her will leaving everything, including all she had inherited from Derek, to her own two children from the previous marriage. She left Derek’s children in the cold. She died three years later.
Derek’s children sued, urging the court to enforce the earlier mirror wills.
The Court of Appeal took a very legalistic approach. The mirroring of the wills and their reciprocal nature were not enough to enforce an obligation on the surviving spouse to uphold the wishes of the dead spouse.
The decent thing would demand it, maybe. Justice Handley went to far to say, “”Mrs McDonnell had, at the very least, a strong moral obligation to respect the arrangement she had made with her husband, whether or not it was legally binding.” But her desire to maximise the inheritance of her own children prevailed.
But would the courts uphold the moral obligation. No. There is no such thing as truth and justice; just law and evidence.
The court required proof of a legally binding contract between husband and wife. The court wanted either words in the will stating an agreement not to revoke the will after the death of the spouse before it would enforce the first will. Alternatively, it wanted some other evidence that the spouses agreed not to revoke.
The wills on there own were not enough. The strict legal approach was once Gwendoline had inherited Derek’s property it was hers to do what she liked with. She could give it away during her lifetime or on her death to whomever she liked.
So what do people in Derek’s position do to strike a more effective balance between wife and children of a previous marriage, if the courts will not enforce the morally decent thing?
If you look at the Court of Appeal judgment, you need to make a binding contract. Then the court will enforce what is called a constructive trust. The surviving spouse will be deemed to hold a share of the property in trust for the step-children.
But this is a very clumsy way of going about things. The dead spouse is attempting to rule the surviving spouse from his grave. Who knows how long the survivor might live and how circumstances might change? The surviving spouse is in the better position to adjust for them? If Derek wanted make sure his children got a fair share he should have left it to them directly. But often in these circumstances the main item of property is a dwelling – and it can be worth a lot of money. Derek would not want it to be sold to give his children an immediate share, throwing his widow on the street. He could give her a life estate in the house with a provision that she can sell and buy an equivalent value house if circumstances warrant it.
Given that blended families are on the increase, the case illustrates the importance of getting wills right in the first place and regularly updating them (see panel). In this case the wills were drafted by the Public Trustee who may or may not have alerted the McDonnell’s of the possibility of the survivor ratting.
Statute law has moved along a bit to take care of modern trends, but it is no substitute for a good will.
If you die without a will the estate is divided according to a schedule to the Administration and Probate Act. Roughly, the rule is that if the will-maker has no children, the spouse takes all. If there are children the spouse takes all the household chattels and the first $150,000 and half the rest if there is one child or a third of the rest if there is more than one. If the will-maker is separated and has been living with someone else for less than five years the spouse and de-facto split the spousal share (if more than five years the de-facto takes the whole spousal share).
Bear in mind marriage nullifies a will. Divorce does not nullify a will but it nullifies any gift to a spouse under the will and treats the estate as if the surviving spouse had pre-deceased the will-maker.
If you can, try to find a spouse who will do the decent thing after you die. There is no substitute for it.