I recently spoke at an educational seminar run by the Institute of Public Accountants. An interesting discussion evolved about estate planning for blended families and what controls can be implemented to ensure that a Willmaker’s wishes are carried out.
Blended families arise where a couple enters into a relationship and one, or both of them, have children from pre-existing relationships. Willmakers in this instance often want to leave all of their assets to each other in the event that one passes away, but they also wish to ensure that their respective children benefit from their estate after the surviving spouse passes away.
Without specific strategies in place, there is the risk that the surviving spouse could change their Will and leave everything in their estate to their own children. One way to manage this risk is to have mutual Wills.
Some key matters to be taken into account when considering mutual Wills include:
- A mutual Will exists when each spouse agree to leave his/her property to the survivor of the 2 of them, and then that survivor is to leave the property to the beneficiaries that have been mutually agreed – usually a child or children of both husband and wife (including children from previous relationships);
- A constructive trust actually arises in a true mutual Will;
- A Court must be satisfied that a constructive trust arises, and it is the constructive trust that beneficiaries can enforce;
- A Court must be satisfied that there was an agreement between the 2 parties not to revoke the Will without the knowledge of the other;
- An agreement to make mutual Wills is revocable by one party giving notice to the other of their intention to revoke the Will;
- Revocation of a Will by re-marriage does not impact on the constructive trust that is created in mutual Will. Divorce does however free the surviving spouse from any obligation;
- A mutual Will does not stop a beneficiary from making a family provision application if they have been left out of the Will;
- A family provision application can still be made after the death of the first party to the agreement.
It is imperative to obtain qualified and experienced advice or in considering preparing mutual Wills, as a number of considerations need to be discussed and thought through before the Wills can be properly implemented, and the risk properly managed. Please do not hesitate to contact me if you would like to discuss or enquire about mutual Wills.