Estate Planning Newsletter – August 2017

WHAT IS A CONTRACT WILL AND WHAT CONSIDERATION SUPPORTS IT?

In the case of In Re:  Estate of Ina Ruth Brown, the Tennessee Supreme Court dealt with the issue of a contract to make mutual wills and what consideration is necessary to support a contract to make a mutual will.  The facts in the Brown case were that Roy and Ina Brown married in the 1980’s.  Both Mr. and Mrs. Brown had previous marriages that ended in divorce and each of them had children from prior marriages.  In 1999, Mr. and Mrs. Brown signed a contract to make mutual wills “to insure the inheritance rights of all of their issue after the death of the survivor of the two of them.”  At the same time, each of them executed a Mutual Will.  (As an aside, another way of accomplishing the same task is to do contract wills between spouses (permitted under TCA §32-3-107)).  In 2002, Mr. and Mrs. Brown completed the same process.  In their contract, they agreed that in the event of the death of one of them, the surviving party would have no right to change his or her Mutual Will nor would the surviving spouse have the right to dispose of any property, except as permitted under the terms of the Mutual Wills.  Approximately one week after the Mutual Wills were signed, Mr. Brown died.  Approximately two weeks later, Mrs. Brown did another Will leaving her entire estate to one of her sons.  None of the husband’s surviving children were aware that Mrs. Brown executed another Will.

Mrs. Brown died in 2003, and her son probated her Will signed after Mr. Brown died.  Several months later, Mr. Brown’s children attempted to probate the Mutual Will, and at that time they discovered that Mrs. Brown executed another Will after the Mutual Will.  At that time, Mr. Brown’s children filed a Complaint to contest the new Will and sought a declaratory judgment that the Mutual Will was valid and enforceable.

Both the Trial Court and the Court of Appeals upheld the Complaint that the contract to make Mutual Wills was enforceable and supported by adequate consideration.  Mrs. Brown’s new Will done after her husband’s death was null and void.

The Tennessee Supreme Court affirmed both lower courts and set forth what constitutes adequate consideration to make a mutual will or contract will.  The Tennessee Supreme Court wrote that all contracts in writing signed by the party to be bound are prima facie evidence of the consideration.  Consideration is measured at the time the parties enter into a contract.  Both Mr. and Mrs. Brown contracted away their right to alter their respective Wills once the other died, as well as their right to dispose of their property in any method other than permitted under their Mutual Wills.  The economic import of Mrs. Brown’s decision is not for the Court to examine because the evidence demonstrated there was a mutual exchange of promises between Mr. and Mrs. Brown that was fairly and deliberately made.

MY RECOMMENDATION:   The situation of contract or mutual wills most often arises in second marriages when the spouses want to protect their respective children as being able to inherit after the second spouse dies.  Contract and/or mutual wills have a place in estate planning, but they need to be used with caution and thorough analysis of their ramifications.

Yours very truly,

RAINEY, KIZER, REVIERE & BELL, P.L.C.

William C. Bell, Jr., Attorney at Law