Mutual Wills vs Life Interest Trust Wills

Blended families, where parents, partners, and children from different relationships come together, are now increasingly common, forming around one in three households. In these families, individuals often want to ensure their spouse or partner benefits after their death, while also making sure their assets eventually pass to their biological children.

This can be achieved through Mutual Wills or Life Interest Trust Wills. In this article, we will explore the risks associated with Mutual Wills and explain how Life Interest Trust Wills can provide a more flexible solution.

What Are Mutual Wills?

Mutual Wills are legally binding agreements, typically between spouses, in which both parties agree not to change their Wills without the other's consent.

Key points:

• They require a contractually binding agreement to be effective.
• After one spouse dies, the surviving spouse is restricted from altering the distribution of assets set out in the Mutual Wills.
• The main appeal is preventing the surviving spouse from changing the Will, for example, if they remarry.

On the surface, this might seem ideal for securing assets for children, but there are significant drawbacks.

Risks of Mutual Wills

Limited control for the surviving spouse:
The primary issue with Mutual Wills is their inflexibility. After the first spouse's death, the surviving spouse is often unable to freely manage the assets left to them. For example, they might want to amend their Will due to changing circumstances, but Mutual Wills prevent this, leading to potential disputes over asset distribution. This could result in costly and emotionally draining legal battles.

Complex estate administration:
Additionally, the survivor's ability to use or dispose of the inherited assets is often restricted, as the terms of the Mutual Wills bind them. This can create complexities in estate administration and increase costs, as the survivor is often required to manage the estate according to rigid terms.

Vulnerability to legal challenges:
Importantly, Mutual Wills can be vulnerable to legal challenges. Recent court cases, such as McLean v McLean [2023] EWHC 1863, highlight the risks involved. In this case, the court ruled that the Wills, despite being described as Mutual, imposed only a moral obligation on the survivor, rather than a legally binding one. This illustrates the potential for Mutual Wills to be overturned in court, even when both parties initially intended to create a binding agreement.

Life Interest Trust Wills – A Flexible Alternative

For more flexibility, Mirror Wills with Life Interest Trusts offer a reliable alternative:

• Mirror Wills: Each spouse leaves their estate to the survivor but retains the right to amend their Will independently.
   
• Life Interest Trust Wills: Protects the first spouse’s share by placing it in a Trust.
  • The surviving spouse can live in the home or sell it, but cannot dispose of the assets in a way that conflicts with the Trust’s terms.
  • Ensures assets eventually pass to the intended beneficiaries (e.g., children).
  • Provides protection from potential creditors, including local authorities or a future spouse.

Life Interest Trust Wills are more secure than Mutual Wills, as they are legally binding as long as they comply with the formalities required for valid Wills. When drafted by a legal professional, these Wills are far less likely to be overturned in court.

Key Takeaways

Mutual Wills may offer initial certainty, but they restrict the survivor's ability to manage assets and may lead to costly disputes if challenged in court. The risk that such Wills may not be upheld as contractually binding is also significant.

Life Interest Trust Wills provide a more flexible and secure alternative. They allow the surviving spouse to amend their Will while ensuring that the first spouse's assets are protected and passed to the intended beneficiaries. These Wills are also more likely to withstand legal scrutiny if drafted by a professional.

Get in touch

If you're considering creating a Will or are unsure about which option is best for your circumstances, please don't hesitate to contact our Private Client team for expert advice. Contact us on 01329 222075 or email enquiries@warnergoodman.co.uk.