Making a Will is typically the most fundamental part of estate planning. It allows you to dictate who receives your assets after you're gone. But what if you wanted to make a legally binding promise with another about your Will? That's where the concept of mutual wills comes in.
What Are Mutual Wills Agreements?
A mutual will agreement is essentially a contract between two people (often, but not always, spouses or partners) where they agree to make Wills with specific terms and, crucially, agree not to revoke or alter those Wills during their lifetimes without the consent of the other party.
Mutual will agreements are referred to as "a contract between two or more will-makers to draft their wills with certain dispositions and then, when the first of them dies, to not change those dispositions by the surviving party."
Think of it this way: You and your partner agree to leave everything to your children in your Wills, and you both promise not to change those Wills later, even if circumstances change.
Why Consider a Mutual Will Agreement?
Mutual Wills can be useful in specific situations, such as:
- Blended Families: Ensuring children from a previous relationship are provided for, even if the surviving spouse remarries.
- Protecting Family Assets: Guaranteeing that specific assets stay within a particular family line. This can be especially relevant when one party has contributed significant wealth to the relationship.
- Providing for Common Children: Parents may want to ensure their children benefit in a legally enforceable way.
Key Considerations and Challenges
While Mutual Wills might sound appealing, they come with significant complexities and potential pitfalls:
1. Proving the Agreement
The biggest hurdle is proving that a legally binding agreement actually existed. Arrangements regarding Wills are often made between family members based on trust and moral responsibility, without the intention of creating a legally enforceable contract. Simply making "mirror image" Wills at the same time might not be sufficient to establish a Mutual Will agreement.
2. The Importance of Documentation
Given the difficulties in proving an agreement, documenting it explicitly is crucial. Ideally, the Wills themselves should reference the mutual agreement.
3. Restriction on Freedom
Mutual Wills restrict the surviving party’s ability to adapt their Will to changing circumstances. What happens if a beneficiary dies or falls into financial hardship? A Mutual Will agreement may prevent the survivor from making necessary adjustments.
4. Legal Formalities
Because a Mutual Will requires a legally enforceable contract, any applicable legal formalities must be observed unless an exception is identified.
5. Enforcement Challenges
Mutual will agreements do not physically prevent the survivor from dealing with their property, but they provide a later right for beneficiaries to enforce the original agreement. If the survivor breaches the contract, a case for fraud may arise, potentially resulting in a constructive trust over assets.
6. Potential for Litigation
While a mutual will agreement provides clear direction, it may not prevent potential litigation if a new Will is made or assets are disposed of. Additionally, these agreements do not prevent family provision claims, as they bind the will-makers but not the beneficiaries (or future potential beneficiaries, such as later spouses).
7. The Need for Legal Advice
Given the complexities and potential for disputes, seeking expert legal advice before entering into a Mutual Will agreement is crucial. It may be appropriate for each will-maker to receive independent legal advice to ensure they fully understand the implications and are entering the agreement willingly.
Mutual Wills are a powerful tool, but they’re not suitable for everyone. They impose significant restrictions on your testamentary freedom and can lead to complex legal disputes if not properly documented.
Before committing to a Mutual Will agreement, consider the pros and cons carefully. Explore alternative estate planning strategies that might better suit your needs and seek professional legal advice to ensure your estate plan aligns with your long-term goals.
If you’re considering a mutual will agreement or need guidance on estate planning otherwise, reach out to one of our legal experts on (03) 9822 8588 or supportteam@burkelawyers.com.au who can help tailor a plan that best protects your interests and your loved ones’ futures.
