Mutual Wills - Is the feeling mutual?

We sometimes hear from clients who are worried that World War three might break out between their kids and their new partner once they leave this world.

Lots of people are in this situation these days. Lets take Joe Bloggs for example. Joe wants Mary (Joe’s partner number two) to be taken care of, sure. But he doesn’t want his children to miss out and that is his big thing – his kids must come first.

So Joe is not going to leave everything to Mary and expect her to “do the right thing” by providing for his kids once she passes. Lets face it, Mary’s got kids of her own.

How can we give Joe peace of mind?

Well there are several things he could do, and we’ll discuss them with Joe:

1. Mutual Wills: Joe and Mary could sign mutual wills. Mutual wills are created by two people who agree not to change or revoke their wills without the other's consent. This agreement typically includes promises not to dispose of any property specified in the wills.

2. Mirror Wills: These may be an option. They are separate wills made by a couple that have identical or very similar terms. Unlike mutual wills, mirror wills are not legally binding, so Joe or Mary could change their will independently if circumstances change.

3. Trusts: Joe could form a Trust. A Trust can provide more control over how assets are managed and distributed after Joe’s death. A Trust can be tailored to meet specific objectives, such as providing for children from a previous relationship or protecting assets from creditors. Just beware that if you form a Trust once you are already in a relationship it will probably come unstuck unless you spell out otherwise in a Relationship Property Agreement (see below).

4. Life Interest Wills: A Life interest will might also work. Under a life interest will Joe would grant Mary the right to use certain assets (such as a home) during her lifetime, with the assets then passing to Joes children after Mary departs this earth. 

5. Enduring Powers of Attorney: EPAs allow Joe to appoint someone to make decisions on his behalf if he becomes incapacitated and thereby legally unable to do so. They are not Wills as such but instead can complement Joe’s estate planning by making sure his wishes are followed during his lifetime. 

6. Relationship Property Agreement: This is an agreement which Joe and Mary can put in place between them to spell out what is relationship property, and what is the separate property of each of them. Without this, what will happen if Joe and Mary go their separate ways after their relationship has lasted three years, is that they will walk away with half each. Not a good outcome for Joe if he has come to the relationship with a whole lot and Mary only had a little.

Each of these has pro’s and con’s so it's important to consider your specific circumstances and consult with us before deciding what’s best for you.

Lets focus on mutual wills for a moment. There are some key points regarding mutual wills:

1. The are binding between Joe and Mary, meaning neither party can unilaterally change their will without breaching the agreement.

2. They often include specific provisions about the disposition of property, ensuring that the agreed-upon distribution is followed after both parties have passed away.

3. If either Joe or Mary breaches the agreement by changing their will or disposing of property, the other party (or their estate) can seek legal remedies.

So mutual wills offer several benefits such as:

1. Mutual wills can ensure that Joe’s children (who are not Mary’s children) are provided for, preventing Mary from changing her will to exclude them. Mary would never do that, you say! Wake up. It happens.

2. They provide certainty that the agreed-upon distribution of assets will be honoured, giving peace of mind to both parties. And Joe’s kids.

3. The binding nature of mutual wills prevents one party from unilaterally changing their will, ensuring that the original agreement is maintained. 

4. By clearly outlining the distribution of assets, mutual wills can help avoid potential disputes among family members after Joe’s death. Such as a spat between Mary and Joe’s kids.

Of course there are also potential drawbacks to mutual wills:

1. Once one party passes away, the surviving party is bound by the terms of the mutual will and cannot change it, even if their circumstances change significantly.

2. If the surviving party breaches the agreement by altering their will or disposing of property, it can lead to complex and costly legal disputes.

3. Life circumstances, such as remarriage or changes in financial status, can make the terms of the mutual will less appropriate over time.

4. If the mutual will agreement is not clearly documented, it can be challenging to prove its existence and enforceability in court.

Mirror wills are also useful for couples who want to ensure their assets are distributed in a similar manner. Here's how they work:

1. Mirror wills are separate wills made by each partner that contain identical or very similar terms. They typically leave assets to each other and then to their children or other beneficiaries upon the death of the surviving partner.

2. Unlike mutual wills though, mirror wills are not legally binding. So either Joe or Mary can change their will at any time without needing the consent of the other. This flexibility can be beneficial if circumstances change, such as remarriage or changes in financial status.

3. The main risk with mirror wills is that the surviving partner can change his or her will after the first partner's death. This could potentially lead to the exclusion of certain beneficiaries, such as Joe’s children.

4. Mirror wills are commonly used by couples who remain together and trust each other to honour the original agreement. They are straightforward to set up and can be a good option for those who want to keep it simple. 

I wish it was as easy as having a chat to Joe and he then decides and we get the job done. But it isn’t. Wills can be challenged by people who might expect to be provided for under Joe’s Will. Such as his children. And Mary. Mary can claim that she was promised certain assets by Joe during his lifetime. Mary can claim under relationship property law if she and Joe were an item for three years or more. Trusts formed during the course of a relationship can be attacked.

The reality is that we need to be careful. We really encourage clients to consider all the tools available. Every client’s situation is slightly different.

So if you have any sort of trepidation about how things might play out once you’ve gone please contact us to discuss on phone 03-4500000 or russell@queenstownlaw.co.nz  

We want you to have peace of mind.