We are seeing increasing numbers of clients who are embarking on 2nd marriages early in life. Often each of the parties to the relationship has children from a prior marriage. In these situations two families are merging into one new blended family. This new blended family presents all new estate planning needs and concerns.
Here are some common questions of concern to blended families:
What will the children of each partner receive from the joint marital assets?
What will happen to real estate owned as joint tenants?
What happens if one of the parties to the relationship dies and then re-partners? Are the children of the deceased spouse forgotten?
A useful estate planning tool in these situations is a Mutual Will Agreement. In a Mutual Will Agreement, both parties to the relationship create Wills with terms that are known to the other partner. They also enter into a separate agreement that neither of them can make a new Will without the express consent of the other, even in cases where one of them predeceases the other. The effect of entering into such an agreement is that it becomes a contract to which the Will beneficiaries (the children) have a right of enforcement.
Mike Brady marries Carol Brady. Mike and Carol each have 3 children – all of whom are over the age of 18, financially self-sufficient and living independently. Mike and Carol each bring into the marriage their individual assets, which they combine with the intention of growing their joint asset pool. Planning for their future, Mike and Carol each have Wills made which leave their entire estate to each other and then to all six of their children in equal shares.
Twenty years pass and Mike and Carol’s joint asset pool has grown substantially because of Mike’s architecture business. Mike then gets quite ill and dies unexpectedly. What happens in this situation? The answers vary based on what protections Mike and Carol have put in place.
Without a Mutual Will Agreement – Carol would receive 100% of Mike’s estate per the terms of his Will. Now in charge of the entire Brady fortune, Carol would be free to change her Will at any time after Mike’s passing and leave all of the joint Brady asset pool to her own children exclusively. Mike’s children would receive nothing from Carol’s new Will and they would likely have no recourse against Carol or Carol’s estate upon her death.
With a Mutual Will Agreement – Carol would still receive 100% of Mike’s estate per the terms of his Will. Carol would not be free to change her Will without the prior consent of Mike. Assuming that such consent was not given because of his unexpected death, any variation of the Will by Carol would be unauthorised. A Mutual Will Agreement cannot stop Carol from physically changing her Will, but it would give Mike’s children standing to sue her estate for breaching the contractual terms granting them an interest in the Estate.
Mutual Will agreements are a great way to plan for those in blended families or for those providing financial planning or succession advice to clients in blended families. To learn more about Mutual Will Agreements or other estate planning tools, contact the Estate Planning team at Watkins Tapsell.