skip to Main Content
mirror wills
Print Friendly, PDF & Email

Beneficiaries, Second Marriages, and Mutual Will Agreements

A Review of Gefen v. Gaertner

The doctrine of “mutual wills” came into being centuries ago as a part of English equity, well before modern family law was developed. In essence, a “mutual will” really doesn’t refer to a particular will but rather to an agreement – an agreement not to make a later inconsistent will. To modern eyes, it looks like a form of domestic agreement and one could argue persuasively that that is a correct characterization in law. In any case, mutual wills are often used as part of a couple’s joint estate plan in respect of a blended family. However, as the doctrine is somewhat complicated, solicitors recommending the use of mutual wills should do so with care – used incorrectly, the estate plan will not achieve the clients’ goals and disappointed beneficiaries may well sue the drafting solicitor in negligence.

In this paper, we review the doctrine on point in the context of an interesting recent case, Gefen v Gartner.1 Here, two brothers – Harry and Yehuda – sued their mother Henia and their brother Harvey. Through a series of inter-vivos gifts to Harvey the mother reduced the value of her estate by half. Since her Will divided everything equally between her three sons, the effect of the gifts was to reduce the combined shares of Harry and Yehuda to 16.6% of the mother’s estate and to swell Harvey’s share. Harry and Yehuda framed their lawsuit with a number of different claims.2 For the purpose of this article, we will focus on the claim that Henia breached a mutual will agreement (“MWA”) with her late husband. But, that’s the middle of the story. Let’s start at the beginning with an explanation of the MWA doctrine.

The Rationale for the Doctrine

To properly apply the doctrine of MWA it might be helpful to understand its rationale. Tim Youdan describes  Laskin J.A.’s understanding of the origins of the doctrine in Re Gillespie3, 4

It is a peculiar feature of this branch of the law that contract is said to give rise to trust. There is no consistency of view either in the cases or in the books as to how and when this transformation takes place… Moreover, there appears to be a difference of opinion whether the trust is express or implied or constructive….

Understanding the theoretical basis of the MWA doctrine should help solicitors and their clients better understand its value in contemplating a MWA in the estate plan. It will also prove useful to those who are litigating the issue.

There is a belief held by some practitioners that a MWA is an excellent option to ensure that assets spouses have spent a lifetime earning together can go to the next generation as both spouses agree. This is often an issue with second marriages5 where each spouse brings children from previous marriages into the relationship. Arguably, The MWA can ensure that the estate plan is not revocable and is almost a foolproof way of ensuring that the mutual agreement is enforceable.6.

Requirements for a Valid MWA

In Edell v. Sitzer,7  Cullity J. explained the doctrine of mutual wills as follows:

[57] The doctrine of mutual wills has traditionally been applied in cases where individuals have made separate wills pursuant to an agreement with respect to their terms. Most commonly, they have agreed that each will obtain a benefit under the other’s will and that other specified individuals will receive the property of each of them on the death of the survivor. In some cases of this sort, the benefit obtained by the survivor under the other’s will has been a life interest; in other cases, it has taken the form of an outright gift. Where the requirements for the application of the doctrine are satisfied, the survivor will not be permitted to defeat the agreement by revoking his or her will after the death of the other. This result is achieved by the imposition of a constructive trust on the survivor’s estate for the benefit of those who were intended to benefit under the agreement.

Tim Youdan has argued that when two people make mutual wills, a trust is created.8 The beneficiary of that trust can enforce the agreement. Professor Oosteroff elaborates with respect to the survivor’s dealings with the property subject of the MWA:9

Thus, during his or her lifetime, the survivor can presumptively deal with the property received from the first to die as absolute owner. Of course, this is subject to the terms of the agreement. In any event, the survivor will not be allowed to defeat the agreement by making excessive inter vivos dispositions of the property.

Requirements for a Valid MWA

In Gefen v Gartner, Justice Kimmel explained:10

A mutual will agreement is more than a mirror will — it is an agreement that the wills not be changed and is a constraint on testamentary freedom. The testamentary intentions of the will-makers expressed in their mirror wills is not enough to establish that they had agreed that the survivor would not be able to vary such dispositions in the future11

An MWA is a binding contract between spouses not to revoke (or change or replace) their wills. More precisely, it is an agreement to dispose of their property in a particular way that equity enforces through the mechanism of a constructive trust after the first of the spouses has died, if the survivor does not abide by their agreement

As explained by Hoffstein and Weigle in their article12, many academics13 take the position that the mutual wills doctrine is limited to an agreement not to change or revoke their wills. The difficulty with that understanding of the doctrine is that it does not deal with inter-vivos transfers by the surviving spouse after the death of the first spouse. The surviving spouse could end-run the agreement by giving everything away to a favourite child and thwart the MWA with their late spouse to treat the other children equally. Perhaps it’s for that reason that Tim Youdan14, in one of his articles on mutual wills15 took the position that the doctrine should mean that two people, “….reciprocally agree that their property (or a part thereof) should devolve in a particular manner on their respective deaths…. it should be interpreted not as an agreement not to revoke wills but rather as an agreement that property devolves in a certain manner”.16 We suggest that anyone contemplating a MWA consider this factor in negotiating any such agreement.

Breach of MWA and Remedies

The nature of the obligation is important. Equity enforces the terms as agreed, but also considers whether inter vivos dealings by the survivor of his or her asset (inherited from the first to die or otherwise) will constitute a breach.

The MWA will be breached when the surviving spouse acts inconsistently with that agreement. For example, two people remarry bringing children from previous marriages into their blended family. Their MWA contemplates that upon the demise of the first spouse, the survivor will not change his or her will and each of the children from the previous marriage share equally in the residue of the survivor. Instead the surviving spouse makes inter-vivos gifts to her/her children and favours them over the children of their late spouse. Alternatively, the will is changed to only benefit the survivor’s children.  What legal options are open to the children of the first spouse?

As articulated by Nourse J. stated in Cleaver, Re17

The principle of all these cases is that a court of equity will not permit a person to whom property is transferred by way of gift, but on the faith of an agreement or clear understanding that it is to be dealt with in a particular way for the benefit of third person, to deal with that property inconsistently with that agreement or understanding. If he attempts to do so after having received the benefit of the gift equity will intervene by imposing a constructive trust on the property which is the subject matter of the agreement or understanding.

With that short legal introduction to mutual wills let’s review the relevant facts of this case.

The Doctrine Applied – Gefen v Gartner

Hernia and Elias Gefen were survivors of the Nazi Holocaust. They came to Canada in 1951 and were married for over 65 years until Elias died in 2011. They built up a sizable estate by investing in real estate.  They had three sons Harvey, Harry and Yehuda.

At paragraph 15 of the judgment Justice Kimmel explained:

The last wills Elias and Henia signed before Elias died were mirror wills dated October 17, 2007. These 2007 wills granted to the spouse who survived the other by 30 days the residue of the deceased spouse’s estate for their own use absolutely, with a contingent gift-over of the residue (if the spouse did not survive the other by 30 days) to their three sons, or their issue, in equal shares. These wills signed in October of 2007 will be referred to as the “2007 wills.

After Eilias’ death Henia inherited all of the estate absolutely. At the age of 96 years old Henia gave at least 50% of what she had to Harvey. In the ordinary course, under the doctrine of testamentary freedom Henia should have a right to do what she wanted with her money. There is no obligation for her to be fair or to treat her three sons equally. Even if her testamentary wishes were mean spirited or whimsical that would be her right. Unless, she and her late husband had a MWA under which they agreed to an equal division of their assets between their three children.

Harry and Yehuda relied on a document that Elias and Harvey signed dated August 17, 2011. In paragraph 31 of the judgment, Justice Kimmel reproduced several of the key paragraphs. I cite the paragraph relevant to the issue of whether there were mutual wills.

I further confirm that my latest will as prepared by Noah has not knowingly been changed by myself to date nor will it be changed during my life. My wife Henia has told me that she also will not change the will either and that our intentions that the estate be divided equally between our 3 sons after our death stands.

While Henia did not sign the August 17 document she testified that both at the time it was signed and prior to that time it was her intention to never change her will during her husband’s lifetime and that she wanted the residue of their estate to be divided equally between their three sons after her death. In addition to the August 17 document there was other corroborative evidence pointing to the existence of mutual wills including the admissions made by Henia and third party evidence that Elias stopped efforts to redo his wills based on assurances from his wife that the three sons would be treated equally. So does that mean there was a MWA?

Harvey and Henia argued that there was no MWA. They relied on evidence of the lawyer who drafted the 2007 wills. The lawyer testified that the effect of their 2007 wills was that the survivor could do with the estate whatever they wanted. But as the judge pointed out a MWA does not need to have been made at the time of the execution of the 2007 Wills. The MWA could have been made in August of 2011. The August 17 document included a statement by Elias that “I further confirm that my latest will as prepared by Noah has not knowingly been changed by myself to date nor will it be changed during my life. My wife Henia has told me that she also will not change the will either and that our intentions that the estate be divided equally between our 3 sons after our death stands.” Moreover, while Elias retained counsel to investigate the inter-vivos transfers and contemplated changing his will to ensure that the estate was divided equally between his three sons he signed the August 17 document based on his belief rooted in his wife’s assurances that she would not change the 2007 Wills nor would she transfer any of their assets during her lifetime to thwart those intentions.18 Nonetheless, the judge found that there was no MWA.

The court relied on the following factors:

  1. Elias and Henia understood that the grant and the terms of their 2007 wills left the survivor of them free to do what they wanted with their assets after the first of them died;
  2. no direct evidence that Henia agreed that she would never change or revoke her 2007 wills and that all of Gefen Family Assets would be distributed during her lifetime and upon her death in equal shares to her three sons;
  3. In August of 2011 Elias gave instructions to make a new will which is inconsistent with any understanding that there was a MWA.

Harvey’s and Henia’s lawyers raised another interesting argument. They argued that a MWA is a marriage contract as defined by section 52 of the Family Law Act, R.S.O. 1990, c. F.3 (FLA). S. 55 renders it unenforceable because it is not in writing.  The judge said this about that argument:

…[t]o find that the FLA precludes an oral MWA would be inconsistent with the earlier authorities in which an oral MWA was established and would have required me to find that they were wrongly decided. Nor has it been a factor in other Canadian cases that have considered and found that there was no MWA that it did not meet the in-writing requirements of the FLA (or the equivalent statutory requirements for in-writing marriage contracts in other provinces)…..The application of the FLA to the establishment of an MWA has not been directly considered by any case in Canada that I am aware of. Since I have found, for other reasons, that there was no MWA in this case, I do not need to decide this point of whether an MWA is a marriage contract within the meaning of the FLA that must comply with the FLA requirements to be enforceable. If and when the issue arises and must be decided in another case, I would observe that a relevant consideration might be that an MWA is considered an “equitable” agreement that imposes a trust, the terms of which may be implied, which suggests it is not necessarily to be viewed as a traditional contract or agreement intended to be covered by the FLA.19

Conclusions

When properly used an MWA may be a useful planning option. However, failure to properly document the instructions and intent of the parties can lead to friction and litigation between beneficiaries. Failure to address inter-vivos gifts may provide a ne’er do well with an avenue to comply with the terms of a MWA while still circumventing its intent.

For solicitors at the planning stage and litigators taking an MWA issue to trial, we underscore the following:

Proof. You do not need an agreement in writing to prove that a MWA existed. As pointed out by Justice Kimmel in paragraph 103 of her judgment the McLaughlin Estate20 and Rammage cases are examples in which courts found MWAs to have been made based on testimony from beneficiaries and inferences drawn from the family dynamics. But, proving the existence of an MWA can be daunting without proper proof. As demonstrated by this case the burden of proof rests with the party alleging the existence of an MWA. It is a heavy onus and they must establish, on a balance of probabilities, clear and cogent evidence that it was meant to be a binding agreement, in the nature of a contract in clear and unequivocal terms. The certainty in the proof is what dictates the outcome.21 Statements in the Will itself, a memorandum signed by both parties reflecting the terms of the MWA, independent legal advice for the agreement, and copious notes would avoid problems later. Moreover, whenever there are mirror wills and there is no intention to create a MWA, it would be advisable in the solicitor’s notes to document what everyone’s intentions.

MWA Terms should include terms that property (or a part thereof) should devolve in a particular manner on their respective deaths. If spouses insist on a MWA, drafting solicitors are well advised to ensure that terms be adopted to prevent the surviving spouse from making inter-vivos transfers to thwart the intention of the MWA.

Alternatives to MWA. Some clients who wish to protect their children’s inheritance set up a spousal trust as opposed to a MWA. It preserves the capital for the children and provides that only the spouse receives the income from the capital during their lifetime. The tax issues relating to trusts are complex and it behooves the solicitor to review the current law before decisions are made.22

For the layperson who is considering a second marriage and the blending of families this case demonstrates the importance of estate planning and exploring the various options to protect family. Documentation of intention is key as is the obtaining of proper legal advice.

For those litigating the issue of the existence of a MWA, it’s imperative to garner clear and cogent proof that establishes a certainty of evidence of a MWA. The plaintiff must show that: (a) the agreement must satisfy the requirements for a binding contract and not be “just some loose understanding or sense of moral obligation” [b] It must be proven by clear and satisfactory evidence; and (c) it must include an agreement not to revoke the wills.23

 

Footnotes
  1.   Gefen v. Gaertner, 2019 ONSC 6015 (S.C.J.).
     
  2.   Over and above the claim that their parents entered into a mutual will agreement Harry and Yehuda claimed that their father, Elias entered into a secret trust agreement with their brother Harvey that all assets received by Harvey were held by him in trust for his brother. They also claimed, through unconscionable procurement, that Harvey caused their mother, Hernia, to transfer her assets to Harvey and his daughter Ashley. They submitted these transactions should be declared void and unwound.
     
  3.   1968 CanLII 281 (Ont. C.A.).
     
  4.   T.G. Youdan, “Some Comments on Re Ohorodnyk and the Mutual Wills Doctrine” (1979), 4 E.T.R. 249.
     
  5.   See Family matters: New relationships after separation or divorce, Statistics Canada, The Daily released 2019-05-
    Given that an MWA is often considered in second marriages these stats are especially relevant:

    Of the 11 million people aged 35 to 64 who were in a couple relationship in 2017, 26% were in their second or subsequent marriage or common-law relationship, up from 23% in 2006.

    Furthermore, almost one-third (32%) of those who were now in a common-law union and over half (56%) of those who were now married had children with their current partner or spouse.
     

  6.   See page 10-36 of M. Elena Hoffstein and Corina S. Weigl for the 9th Annual Estates and Trusts Summit Day Two November 3, 2006 entitled “Potpourri of Six- Minute Issues”. The authors reference an article in the Lawyer’s Weekly by Patricia Daunais found at Vol. 26, No. 4, May 25, 2006
     
  7.   Edell v. Sitzer, (2001), 55 O.R. (3d) 198 at para. 57 (Ont. S.C.J.) paragraph 57.
     
  8.   T.L Youdan “The Mutual Wills Doctrine” (1979) 29 University of Toronto Law J. 390.
     
  9.   Albert Oosterhoff, “Mutual Wills” (2008), 27 Estates, Trusts and Pensions Journal 135, 142.
     
  10.    2019 ONSC 6015 at paras. 80- 82 (Ont. S.C.J.).
     
  11.   Justice Kimmel footnoted this definition relying on the following: Edell v. Sitzer (2001), 55 O.R. (3d) 198 (Ont. S.C.J.), at para. 73, aff’d (2004), 187 O.A.C. 189 (Ont. C.A.); leave to appeal to S.C.C. refused (2005), 204 O.A.C. 400 (note) (S.C.C.), citing Birmingham v. Renfrew, (1937) H.C.A. 52, 57 C.L.R. 666 (Australia H.C.).
     
  12.   See page 10-41 of M. Elena Hoffstein and Corina S. Weigl, “Potpourri of Six- Minute Issues” at page 10-41 (LSUC: 9th Annual Estates and Trusts Summit, Day Two, 3, 2006).
     
  13.   For example, Donovan Waters in his seminal text The Law of Trusts in Canada at p. 412; Philip H. Pettit, Equity and the Law of Trusts (3d ed. 1974) at p. 97; and Keeton and Sheridan, The Law of Trusts (10th ed, 1974) at 181.
     
  14.   Tim Youdan is a partner in the Private Client practice at Davies Ward Phillips & Vineberg LLP and is recognized by his colleagues as one of the finest authorities on trusts.
     
  15.   The Mutual Wills Doctrine, (1979) 29 University of Toronto Law Journal, 390 at 404. Another view is that a constructive trust arises upon breach; see Nelson v. Trottier, 2019 ONSC 1657 (Ont. S.C.J.).
     
  16.   Hoffstein and Weigl, supra, at fn.11.
     
  17.   (1980), (1981) 1 W.L.R. 939 (Eng. Ch. Div.), at page 947:
     
  18.   See paragraph 4 of Gefen v Gartner.
     
  19.   2019 ONSC 6015 at paras. 143-145 (S.C.J.).
     
  20.   Hall v. McLaughlin Estate (2006), 2006 CarswellOnt 4284; 25 E.T.R. (3d) 198 (Ont. S.C.J.) and Rammage v. Roussel Estate (2016), 2016 ONSC 1857, 2016 CarswellOnt 4034 (Ont. S.C.J.)
     
  21.   2019 ONSC 6015 at paras. 85-87 (S.C.J.).
     
  22.   See Canada: Estate and Trust Taxation: Important Considerations 18 February 2020 by O’Sullivan Estate Lawyers LLP found at https://www.mondaq.com/canada/capital-gains-tax/894580/estate-and-trust-taxation-important-considerations
     
  23.   This test was referenced by Justice Kimmel in Gefen v Gartner. It is a paraphrasing of how Cullity J. summarized the MWA doctrine in Edell v Sitzer Edell v. Sitzer (2001), 55 O.R. (3d) 198 (Ont. S.C.J.).
     
David Wagner and Charles Wagner

David Wagner and Charles Wagner

The authors of this blog are David Wagner and Charles Wagner of Wagner Sidlofsky LLP. Charles is a Certified Specialist by the LSO in Estates and Trusts and partner at Wagner Sidlofsky LLP. David is certified by STEP as a Trust and Estate Practitioner (TEP).

Related Posts and Articles
This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
Back To Top