Providing for the competing interests in blended families is one of the most difficult considerations in estate planning. How do you balance the interests of children of a previous relationship with those of a new partner and children of a more recent relationship? The unfortunate realty is that the estates of blended families often provide fertile grounds for family disputes and family provision claims.
This is why it is so important for Wills & Estates practitioners to create a comprehensive and tailored estate plan that considers the unique personal, financial, and family situation of our clients.
Mutual wills can be used as one of the estate planning strategies for a couple with a blended family. In this article, we briefly cover the doctrine of mutual Wills, the pros and cons of mutual wills, and lastly, some of the practical tips which may be useful when considering if mutual wills are right for you.
What are Mutual Wills?
Historically, mutual wills were often used in blended families to provide some benefits for the surviving spouse, whilst ensuring that an inheritance also flows to other intended and agreed beneficiaries. One of the essential elements in mutual wills is the ‘agreement’ between the parties that the wills once made will not be amended or revoked without the knowledge and consent of the other party. Although it is a fundamental principle that a will may always be revoked (the flowing effect of which is to admit the last will of the will-maker), if such an agreement can be proved, mutual wills will give rise to a constructive trust (which should protect the interests of all intended beneficiaries).
The pros and cons of Mutual Wills
Pros of Mutual Wills
- Mutual wills may be a useful tool in the case of an elderly couple wishing to confirm that their affairs will be settled in the same way, and that the survivor of them will not change these plans after the first one passes away. Unlike young couples, older couples are less likely to remarry after the death of their spouse and to encounter many unknown future events. As long as the Will that is being prepared is intended to be their last Will, mutual wills may be appropriate for elderly couples.
- With mutual wills, there are a number of equitable remedies available if the promise not to revoke their Will is broken. As discussed above, since mutual wills create contractual rights between the parties, the breach will give rise to a claim for damages with equitable remedies. For instance, if the mutual wills were to leave a specific asset to a specific beneficiary, then equity would grant an injunction during the lifetime of the promisor, to prevent him/her from disposing of the property.
- A promise to leave the whole estate by will will survive through inter vivos transactions as well as re-marriage. Under the law, re-marriage would generally revoke a will. However, it was held in Re Goodchild [1996] 1 that although remarriage by the survivor revoked the will, the trust which was created on the death of the first-dying spouse survived the remarriage of the surviving spouse. This means that mutual wills afford a stronger protection to the inheritances of intended beneficiaries than may otherwise exist.
Cons of Mutual Wills
- Generally, mutual wills can cost more to prepare, are inflexible, and more complex to prepare than non-mutual wills.
- If beneficiaries are seeking to establish an agreement that the will-makers intended for their wills to be “mutual”, they will bear a heavy burden of proof. The court requires ‘clear and satisfactory evidence’ to prove that the wills were executed pursuant to an agreement or understanding that the property was to be dealt with in a particular way.
- Mutual wills cannot be used as a strategy for defeating a family provision claim. In Barns v Barns, the High Court held that the property that was subject of the agreement was still treated as part of the testator’s estate, and could therefore be re-distributed if that was required as part of a family provision claim.
Practical Tips and conclusion about Mutual Wills
When solicitors are taking Will instructions for blended families, it is critical for them to identify who may benefit from mutual wills. This involves consideration of the client’s personal and financial situations, such as the age of the clients, their relationships and the people who may be financially reliant upon them, the form of ownership of their assets, and so on. Also, it is important for solicitors to appreciate the client’s intentions, and to understand and ascertain whether the clients want their wills to be mutual.
It is vital that clients understand the pros and cons of doing mutual wills, and the practical effect of any deed of settlement or contract that is prepared to accompany their wills to support the existence of an agreement between the parties. At Burke Lawyers we see this as the minimum duty of care for our clients, so they are very clear on what is involved and why.
Where a mutual wills agreement is entered into, it may be useful that the ultimate beneficiaries, such as their children, know of the agreement. Prior knowledge, and full and open conversations about these arrangements in advance, can go a long way in preventing costly and stressful will disputes in the future.
Mutual wills are just one of the estate planning strategies for a couple with blended families to consider, but they are certainly not the only option. When it comes to preparing Wills for blended families, solicitors should consider all potential estate planning strategies such as creating a trust, considering the clients’ superannuation nominations or making gifting assets prior to death. It’s certainly food for thought which is why it’s so important to take the time to speak with your Wills and Estate Planning solicitor about your position, how you’re feeling, and any concerns you may have. By knowing this information your solicitor is then in the best possible position to provide the best and most suitable Estate Planning solution for you and your family.
If you’re considering what is most suitable for the Will you need to prepare or maybe you have a Will that you would like to update and you are considering whether Mutual Wills suits your circumstance contact our Wills and Estate Planning lawyers on +61 3 9822 8588.
