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The Cautionary Tale of Mutual Wills

Estate planning deals with often complex family situations, including the needs of blended families with complicated personal relationships. The goal of estate planning is to ensure your intentions for your loved ones are carried out.

There are several ways to address blended family and second marriage situations so that the children of a prior marriage are provided for. Most common is the use of a trust. Many practitioners have reservations about the use of another technique, “mutual wills”, which are further explained below, given their questionable legal basis.

Firstly, it is important to understand the difference between “mirror” wills and mutual wills. Mirror wills create parallel provisions and are usually used by spouses, for example, each will leaves everything to each other, with a gift over to their children upon the surviving spouse’s death. However, with an outright distribution, upon the first spouse dying, the surviving spouse has the ability to change their will. This is a common structure that spouses use as it gives the survivor maximum control and ownership.

A mutual will is similar to that of a mirror will in that the spouses’ wills “mirror” each other, but differs in that upon the first spouse’s death, the surviving spouse is not entitled to change their will except as may be agreed upon. Creating mutual wills entails an agreement between the spouses to not revoke or vary their wills, except as provided by the agreement, including after their spouses’ death. While case law supports that such an agreement can be made in writing or orally, agreements made orally are problematic and best practice supports that both spouses’ intentions, scope of the property, and each other’s rights and obligations are expressly outlined in a written agreement.

Why would you want to create such an obligation? The purpose of a mutual will can be for various reasons, but usually is used in a second marriage where one or both parties have children from their prior relationship, and want to ensure if they predecease their spouse, the survivor will leave benefits to their own children. A mutual will can be a useful tool for spouses who have agreed on how to deal with their property on both of their deaths and are comfortable waiving their right to make changes in the future, except as agreed upon.

While there is a growing body of case law on mutual wills, they can be contentious. Courts generally use the equitable remedy of a constructive trust to address a spouse’s breach of the agreement between them, and to ensure that the surviving spouse’s promise is enforced and that he or she is not allowed to deviate or withdraw from the agreement after the first spouse’s death.

A constructive trust was imposed in Hall v. McLaughlin Estate[1], where two spouses executed wills simultaneously leaving everything to the survivor of them, followed by the residue being divided equally among their four children (each spouse having two children from a prior marriage). The wife died, leaving everything to her spouse, and upon the husband’s death, the wife’s children claimed the husband was in breach of his mutual wills agreement after leaving the majority of his estate to his two children. The court found that there was clear evidence to support that the couple intended to enter into an agreement that the survivor would divide the residue of their estate into two equal shares, with one share going to his children and one going to her children. The court imposed a constructive trust on one half of the net value of the husband’s estate for the benefit of the wife’s two daughters, in equal shares.

A concern with the use of mutual wills is that spouses may not realize that they are “locked” into their will structure, creating inflexibility in the future if they remarry, or have other obligations. As well, if it is unclear whether a mutual will was intended, if both spouses are deceased, courts may be unwilling to interfere and will be inclined to respect the survivor’s testamentary freedom where there is a lack of clear evidence of an agreement.

Where spouses wish to use mutual wills, including entering into an agreement as how their estates will be distributed with the objective of creating binding legal obligations on the surviving spouse, it is important to seek expert legal advice to discuss the potential issues and complications that may result. The tried and true method to ensure capital succession on a survivor’s death is the use of a trust. However, where spouses do not wish to have the restrictions of a trust, the use of mutual wills is an option, but requires careful and cautionary consideration.

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.

[1] 2006 CarswellOnt 4284.