Mutual Wills

Frequently, when drawing Wills that a person will want to give a gift to their spouse, but then on the death of the spouse, it goes to a child   This is more frequent in second marriages, but it does also happen in first marriages where the will maker has a concern that the spouse might remarry and the family assets will then go to the new spouse.

The desire to control what happens to the gift upon the death of the survivor goes against the fundamental issue that once a gift is given, it is absolute and the Will maker cannot dictate what happens afterward.  Essentially if the gift is given then once the Will maker dies, then the spouse owns the subject matter of the gift, and they are at liberty to give it – during their lifetime or in their Will – to whoever they want.

This is where Mutual Wills come in.  Essentially, a Mutual Will is a contractual arrangement between two Will makers where they each agree to give property in a specific way.  The Wills cannot be revoked by a Will maker without notice to the other party (which can only be given while the other party has capacity to make their own new Will) and cannot be revoked after the death or incapacity of one of the Will makers.

Example:

Tyler has a grown son, Brad.  He recently married Marla who has her own child, Helena.  Marla and Brad do not get along.  Tyler wants to give his prized property “The Paper Street House” to Marla on the proviso that she leaves it to Brad when she dies.  He is concerned that because Marla and Brad don’t get along, she will rewrite her Will after he dies and leave everything to Helena.

If Tyler has a standard Will, then even if Marla at the same time makes a Will which leaves The Paper Street House to Brad, she is at liberty to change that whenever she wants and without Tyler’s knowledge.  If however Tyler and Marla have Mutual Wills, then Marla:

• Cannot change her Will without giving Tyler knowledge (in which case he could change his own Will to leave The Paper Street House to Brad); and
• Would be prevented from changing her Will after Tyler’s death or after such point in time as he ceased to have capacity to make his own Will.

Dangers of Mutual Wills

Mutual Wills can be dangerous for a number of reasons including:

• Once “locked in” by death or incapacity, they cannot be changed to take into account different circumstances. The surviving spouse is potentially tied to an outdated and inappropriate Will for many years;
• They could be the product of one party to a relationship exerting pressure on the other;
• They don’t allow for changes which might come about from aggressive or other disentitling conduct by a residual beneficiary;
• The survivor might be unable to change their will even if the beneficiary was bankrupted, meaning that the estate would be given to the trustee in bankruptcy;
• They can affect the rights of claimants in family provision applications;
• Their effectiveness can be undermined by the surviving spouse taking steps to deplete the asset pool.

What are some alternatives to Mutual Wills?

Alternatives to Mutual Wills include for the Will maker to leave their estate to a trust which allows the use of the estate, but keeps the substance of it for the benefit of the children.  Another alternative would be to consider simply taking out life insurance for the benefit of the children so that the estate can be given without the restriction.

Are Mutual Wills a good idea?

Yes and no.  In some cases a Mutual Will might be an ideal solution, however it would be critical for both parties to the relationship to take independent legal advice so that they properly understood just what they were agreeing to.  Given that lawyers cannot act for both parties in a Binding Financial Agreement in matrimonial proceedings, there should be no reason to think that a lawyer could adequately advise both parties to a marriage in something that will potentially tie up a person’s ability to freely gift their estate for decades.

Given the prospect for circumstances to change, it would be the recommendation of our Wills and Estates lawyers that Mutual Wills are used only when absolutely necessary.

For all questions concerning estate planning and Mutual Wills, please contact us on 5574 0111 or contact Peter Muller peterm@qbmlaw.com.au