Blended families (put simply, a family where children and step-children are involved) are commonplace these days. A high frequency of estate disputes involve blended families.
With the intermingling of assets between parents of blended families and the complex family dynamics in these relationships, often no amount of ‘estate planning’ will avoid an estate dispute where a blended family is concerned.
While many claims are justifiable and have a valid legal basis, sometimes they’re made based on a simple misunderstanding of the law.
Fully understanding your rights before bringing a claim is paramount, as demonstrated in the recent Supreme Court case of Forster v Forster  QSC 30.
The case involved a child attempting to enforce what he considered his rights against his step-mother, based on her ‘Mutual Will Agreement’ with his father.
Mutual Will Agreement
Briefly, a husband and wife each had children of their own from separate relationships.
The couple agreed to each make Wills so that:
- when the first spouse died, the deceased’s estate would pass to the surviving spouse; and
- when the surviving spouse died, the entire estate would pass to all of their children and step-children in equal shares.
A fairly straight-forward and pragmatic agreement.
The husband died first and all of his estate went to the wife, in accordance with the Mutual Will Agreement.
Unfortunately, she had a very poor relationship with one step-child, in particular, James.
Although James was set to benefit from his step-mother’s estate on her passing (along with his other siblings and step-siblings) as per the Mutual Will Agreement, James wanted his money “now”.
James did not trust the step-mother and suspected that she had or would breach the Mutual Will Agreement.
James attempted to persuade (if not force) his step-mother to mediation. When that did not work, James was determined to force her to provide full disclosure of her financial position and provide “ongoing disclosure”.
The step-mother refused to disclose her financial position to James but repeatedly promised to abide by the Mutual Will Agreement.
So, James commenced proceedings against the step-mother seeking orders that she be required to disclose her financial position to James every year until she died. James argued that, due to the Mutual Will Agreement, the step-mother held property she inherited (and her own property) on constructive trust for him and so the Court had the power to make the orders he sought under section 8 of the Trusts Act 1973 (Qld).
Put simply, James failed in every aspect of his application.
After a careful and thorough analysis of the cases relied on by James, the Judge held as follows:
- The step-mother did not hold any property on trust for James during her lifetime.
- The step-mother was entitled to the full enjoyment of the estate she inherited and, while she was alive, she had a floating obligation to deal with that property as per the Mutual Will Agreement.
- The step-mother would have no obligation to disclose her financial position to James during her lifetime (even if there was a constructive trust) because there was no fraud by her.
The Judge was particularly critical of James noting that he failed to directly address the key issues, demonstrated a misapprehension of certain laws and appeared to have misplaced confidence in the strength of his case.
James was ordered to pay the wife’s legal costs. (Some might say he was fortunate not to have been ordered to pay the wife’s costs on the ‘indemnity basis’ which would have meant he would have needed to pay a lot more towards her legal costs.)
Mutual Will Agreements create a contractual agreement between two people but that does not automatically create any ‘constructive trust’ in favour of an anticipated beneficiary.
A person bound by a Mutual Will Agreement must comply with any promises made but that does not automatically give rise to an obligation to disclose their financial position to an anticipated beneficiary.
If you’d like to learn more about this article, please contact Charlie Young.
Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).