JULY 26, 2010 VOLUME 17, NUMBER 23
Imagine a couple, each married for the second time. Perhaps each has children from a first marriage. Perhaps the couple has been married for years — even decades. They think of all the children as “their” children, even though they fully understand that the other spouse’s children are stepchildren.
One of the spouses — let us say the husband — dies. He leaves his interest in the family home, together with all the couple’s accumulated wealth, to his widow; his will specifies that on the second death all of the children share the estate equally. His children remain in contact with their stepmother for the next decade, though that contact lessens over time. When she dies, what happens to the home, the bank accounts and the remaining wealth?
This scenario plays out again and again. Most often, the deceased husband’s will is irrelevant. If the property all passed to the wife without restrictions, she is free to change her will, to transfer the property into trust, to spend it or even to give it away. But that is not always the case.
Ralph and Elaine Lawson married in 1971. They owned 12 acres of Iowa land as “joint tenants with right of survivorship.” They had three children between them: Ralph’s son and daughter Roger and Le Ann, and Elaine’s son Lonnie. Just to complicate things further, Ralph later adopted Lonnie.
In 1987 Ralph and Elaine signed identical wills. Each left everything to the other. On the second death, the wills provided that fifty percent of the combined estate would go to Lonnie, twenty percent each to Roger and Le Ann, and ten percent to the couple’s church. The wills contained an unusual provision: each included language that indicated the couple had agreed “that neither will change our will” without the other’s consent.
Ralph died first. The property passed to Elaine automatically because of the joint tenancy title, so Ralph’s will was not filed with the Iowa probate courts.
A few years later Elaine changed her estate plan. First she transferred the acreage to her son Lonnie, reserving a life estate for herself. Then she signed a new will, leaving the same proportions of her estate to Lonnie (50%), Roger (20%) and Le Ann (20%), but changing the church which would receive the remaining 10%. Shortly after that, Elaine died.
Roger and Le Ann sued to enforce the terms of their father’s and stepmother’s original wills. They alleged that the wills amounted to a contract, that Elaine’s transfer of the property to Lonnie violated that contract, and that the court should impose a trust upon the property to secure its return to the original beneficiaries. The trial judge reviewed the two wills and agreed with Roger and Le Ann.
The Iowa Court of Appeals upheld that ruling, ordering the imposition of a trust on the 12 acres. The language of Ralph’s and Elaine’s wills made it clear, according to the appellate judges, that their intent was to prevent the survivor from changing the estate plan by a new will or by transferring property during lifetime.
Lonnie argued, unsuccessfully, that the reciprocal wills should not prevent transfers of the acreage because it did not come into Elaine’s estate by virtue of Ralph’s will. The court dismissed that objection, noting that the language of the wills was broad enough to encompass any estate planning technique, whether it might be a will, a gift, or a living trust. The appellate judges also rejected Lonnie’s argument that his parents’ wills should not have been admitted to the court proceeding; the wills were not being admitted to probate, said the judges, but were being admitted to prove a contract. Consequently, the standards and requirements for admission were those governing contract documents rather than wills. Cunningham v. Lawson, July 14, 2010.
Would Arizona courts reach the same result? It is not completely clear, since the law of reciprocal wills (sometimes called mutual or contractual wills) is not well developed. What is clear in Arizona law is that reciprocal wills can be enforceable; what is less clear is whether they might prevent lifetime transfers of property by the surviving spouse.
One reason that the law is less than clear is that truly reciprocal wills are uncommon. Arizona’s probate code makes clear that the mere fact that wills are identical does not mean they embody a contract not to change the terms; in order to make the agreement binding it must be expressly stated in the wills or in a contractual document. Because that is uncommon, there is little law interpreting such terms.
What is more clear is that the question we hear so often is usually easy to answer. “Does my stepmother [or stepfather] have the right to leave the house she inherited from my dad [or mom] to her kids from her prior marriage?” Absent a clear contract not to change the will, or a trust provision prohibiting the transfer, the answer is likely to be: “I’m sorry, but yes.”