Mutual Wills are created when two or more testators, have made an agreement regarding the distribution of their property through Wills and each testator has, in accordance with the said agreement, executed a Will.
The requirements of establishing Mutual Wills are:
- There must be a definite agreement showing the intention between the testators that such agreement is mutually binding and not subject to revocation or alteration without the consent of the other testator(s); and
- There must be a binding event.
Wills as mutually binding agreements
The distinctive feature of Mutual Wills is that there must be a mutually binding agreement and the said agreement must be clear and unequivocal as to the disposal of the property and the irrevocability of the agreement (except as provided for under the agreement). This means that a mere understanding, expectation, desire, engagement or an arrangement between the testators that the Wills are binding is not sufficient to create Mutual Wills.
The agreement can be incorporated in the Mutual Wills. In fact, it is not uncommon to have a clause in the Mutual Wills expressly establishing the existence of such agreement. However, it is not required to record the agreement in the Mutual Wills, nor is it necessary to have the agreement to be evidenced in writing. It can be proved by extrinsic evidence (e.g. a separate agreement executed between the testators not to revoke or vary the terms of their Mutual Wills, proof of family discussions or contemporaneous evidence from solicitors assisting in executing the testator’s wishes) or an oral agreement. Nevertheless, it is always good practice to have the agreement evidenced in writing documenting the agreed terms as to the disposal of the property and the irrevocability of such agreement.
Often Mutual Wills contain terms that are similar to those of Mirror Wills. However, it is essential to highlight that just because mirror terms are used in Wills does not qualify them as Mutual Wills. The requirement of a mutually binding agreement must be satisfied.
The death of the testator becomes the binding event
The binding event of the Mutual Wills is the death of the first testator. Upon the death of the first testator, the Mutual Wills are from that point irrevocable, and the surviving testator is bound by a constructive trust to carry out the agreement. This also means that the personal representatives of the surviving testator (e.g. executor(s) or administrator(s) if the surviving testator then passes away) will be required to hold the estate on trust for the intended beneficiaries.
When are Mutual Wills normally used?
Mutual Wills are commonly used by spouses or partners who have remarried and have children from a previous marriage with the intention to ensure that all children are being taken care of fairly or that certain extended family members are provided for after their deaths.
Mutual Wills, however, are not restricted only to spouses or partners. They can be made between any two or more people who intend to bind each other to an estate plan.
How do Mutual Wills protect the intended beneficiaries?
To explain how Mutual Wills ensure your estate passes to the intended beneficiaries within the family, a simple example is used below to explain how this mechanism operates.
A married couple who each had a child (“Children”) from a previous marriage. They made Mutual Wills whereby they agreed to leave all of their estate to each other and with the estate of the survivor of them to their Children in equal shares. The husband passes away. In such a situation, the husband’s Estate then passes to the wife, and from the time of the husband’s death, the wife holds the husband’s Estate on a constructive trust for their Children in equal shares. Despite the wife has control over the assets, she cannot dispose the assets that would prevent or exclude the intended beneficiaries i.e. the Children from benefiting under the Mutual Wills and therefore defeat the agreement. For example, she cannot name the child that she had from a previous marriage or any other persons as the beneficiaries under a new Will or dispose the assets to a trust.
It is clear that Mutual Wills are indeed “agreement-based”. Therefore, in the event that if the surviving testator creates a new Will that disinherits the intended beneficiaries under the Mutual Wills following the death of the first testator, the intended beneficiaries under the Mutual Wills can bring an action against the surviving testator to enforce the Mutual Wills in pursuant to the agreement.
Takeaways
Young married couples or partners may find Mutual Wills not an attractive estate planning tool. The reason is that if at a very early stage of their marriage, one spouse passes away, the surviving spouse may remarry and therefore would want to provide for their new spouse under the new Will. However, if Mutual Wills were executed between the deceased spouse and the surviving spouse, the surviving spouse is then prohibited from varying his or her Will to accommodate the new marriage.
On the other hand, married couples or partners in the later stages of their lives may find Mutual Wills a better suited estate planning tool, because it is less likely that they will come across any major life-changing events following the death of the first spouse and they may be more comfortable in renouncing their rights to make changes of their estate plans.
Therefore, whether or not Mutual Wills are the suitable tool for your own Estate Planning depends upon your circumstances.
If you want to know more about how to benefit from a thorough estate plan for your family in Hong Kong, get in touch with our Private Client team of solicitors.
This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.
