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Mutual Wills are Wills made by two individuals (typically husband and wife) pursuant to a contract by which they agree to make Wills in agreed terms and not to alter their respective Wills during each of their lives and after the death of one of them.
While both parties are alive, any changes to a mutual Will by one party must be with either the consent of the other, or with prior notice to the other who must then have the opportunity to change his or her Will.
As mutual Wills are binding, the key purpose of such Wills is to ensure that property flows to intended, agreed beneficiaries. They are generally used to ensure that a testator’s property can be enjoyed by another during his or her lifetime, but then passes to a third party, the “ultimate beneficiary”. They may also be used to ensure that a testator’s interest in jointly owned property passes to a third party beneficiary, not the other joint owner.
A mutual Will can be sought for persons who remarry and have children from a previous marriage. In such circumstances they may wish to make provision for their new spouse, but also intend for some of their property to ultimately flow to the children of the first marriage. They might therefore decide that they wish their new spouse to enjoy the testator’s property or his or her interest in joint property during the new spouse’s lifetime.
The testator may wish that his or her property pass to his or her children once the new spouse dies. Subject to the surviving spouse not breaching the mutual wills agreement, mutual Wills can be used to ensure that the testator’s children from the previous marriage are the ultimate beneficiaries of such property.
The testator may wish that his or her estate pass on to the testator’s children from the previous marriage without conferring any interest on the new spouse. A testator may wish that their estate pass to a particular beneficiary, rather than their spouse or a joint tenant.
The main advantage of mutual Wills is that they can leave the survivor of the makers of the mutual Wills free to deal with assets during their lifetime. One alternative to mutual Wills is the granting of a legal or equitable life interest only to the spouse, with an interest in remainder to the ultimate beneficiaries. There are, however, significant limitations on the ways in which assets the subject of a life interest can be dealt with, as well as a need to balance the interests of the life tenant with the interests of the beneficiary. With mutual Wills, depending on their terms, the survivor can be given freedom to dispose of or mortgage assets without fear of action by the ultimate intended beneficiaries.
The major disadvantage of mutual Wills is that if you want to change your Will, the other person will need to agree, and sign their agreement to the change. If the other person does not agree to the changes, the Will cannot be changed. If the other person has passed away it can be incredibly difficult to dispose of assets or change a Will. In these circumstances the consent of all of the ultimate beneficiaries is required.
If you would like further advice on will preparation and estate planning, please don’t hesitate to contact us on 9375 3411 to make an appointment.