Mutual Wills date back to the 18th Century and have long been considered a good estate planning mechanism for couples who want to reach an agreement that effectively provides neither party will change their Will without the knowledge or approval of the other. However, a risk with creating Mutual Wills in today’s society arises due to the increase in the divorce rate and couples going into second and third marriages, or re-marrying after the death of a spouse.
What is are mutual wills?
A Mutual Will is not a “Mirror Will” and it is important to keep that in mind when doing your estate planning. An experienced and qualified solicitor will be able to help you address whether a Mutual Will is required for your situation.
A Mutual Will is a legally binding contract between you and your partner, and because of this, it needs to be properly documented. This means that upon your death, there is a legally enforceable document that ensures your spouse passes your assets to your intended beneficiaries.
What are the advantages of mutual wills?
Many people think when they go to a solicitor and create a Will they are creating a Mutual Will, when in fact, they are actually creating a Mirror Will (For example, they wish for their assets to pass to their spouse and then when their spouse dies, it will go to their children and vice versa). But what happens when you pass away and your spouse re-partners or remarries?
Unfortunately what is becoming common in blended families is that instead of the assets passing to your children as originally planned, the assets instead pass to the new spouse (and possibly new children) and your children miss out. A properly drafted Mutual Will ensures that your assets pass to your intended beneficiaries, regardless of future relationships.
What are the disadvantages of mutual wills?
The basic key element of a Will is that it should be able to be revoked or amended at any time. Unfortunately a Mutual Will takes away that right to a certain extent. Further, a Mutual Will may be completely useless where the intended beneficiaries are completely unaware of its existence (for example, they may have been minors at the time of signing the Will). In those instances, the intended beneficiaries may not be in a position to enforce it.
What are my other options?
There are alternative ways to ensure that your assets pass to your intended beneficiaries upon your death. These include:
- A testamentary discretionary trust;
- Transferring assets directly to intended beneficiaries; and
- Putting life insurance policies/superannuation in place for the benefit of your intended beneficiaries.
There is a lot of discussion and commentary about the advantages and disadvantages of entering into a Mutual Will. A Mutual Will should not be entered into lightly as they can become out of date easily and place a heavy burden on your loved one.
If you are considering entering into a Mutual Will, be sure to contact me. Our experienced solicitors can take you through the advantages and disadvantages and prepare the appropriate document that will protect you and your loved ones.