Blended families and the risks involved with ‘mutual wills’

JOHN and Sandra are married.

They each have two children from a previous relationship.

They attend an appointment with a solicitor regarding their estate planning with a view to making arrangements that provide for each other whilst ensuring that ultimately, all of their children receive equal shares of their estates.

The solicitor advises them that they can make “mutual wills” and enter into an agreement, not to change their wills.

They proceed with executing wills that leave the whole of their estates to each other when the first of them passes and when the last of them passes away, their estate is distributed between all four children.

They sign a separate document, stating that they agree not to change their wills which includes a provision that states that apart from meeting their ordinary living expenses, they will not intentionally diminish their estates.

When John passes away, he has $300,000 in his bank account.

John’s son, Peter is concerned that if Sandra receives the money, he will not receive a share. He is concerned that Sandra may make a new will, waste the money or give it away to her children.

He is of the view that if Sandra does not honour the terms of her agreement with John, there will be insufficient funds in her name to warrant taking her to court.

Peter commences action in the Supreme Court, challenging the provisions of John’s will, seeking an immediate lump sum.

The Court states that there is no evidence of a real risk that Sandra would change her will and given the relatively small size of the estate, dismisses Peter’s claim.

However, Peter’s concerns were valid and the present approach to estate planning in blended family situations is to avoid mutual wills in favour of establishing flexible life interests.

If YOU would like a particular issue addressed, please email me at manny@tblaw.net.au or call me on (02) 66 487 487.

 

By Manny WOOD, Solicitor