Should you and your partner consider a contract for wills?
Johnston Withers Lawyers explains one method of estate planning in a blended family.
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It is normal to feel overwhelmed when thinking about your will and how to divide your estate between your loved ones, especially if you are part of a blended family.
Balancing the interests for example your current spouse, your children and your spouse’s children can be difficult.
Many couples with step-children or blended families are often faced with the dilemma of wanting to leave their estate to their partner but wanting to ensure that their partner will also make provision for their children – who they don’t share – when they die.
Contract for wills
One solution in these circumstances is a contract for wills, which records the parties’ agreement on how to divide their estate.
The contract between the parties is entered into during their lifetime and creates legal obligations about the content of their will and its non-revocation.
Contracts for wills commonly, but not always, record that each party will enter into a mirror will where they agree to leave their estate to their spouse and, if their spouse does not survive them, then to their combined children in agreed shares.
The purpose of a contract for mutual wills is to prevent the surviving spouse from altering their will to disinherit the other spouse’s children – their step-children – after death or without their knowledge.
If a spouse does not honour this agreement and changes their will, either without the consent of their spouse during their lifetime or after their spouse has lost capacity or died, it does not invalidate their new will.
The contract, however, remains enforceable against the spouse who altered their will or against the executor of the second will – if the spouse has died – and they can be compelled to abide by the terms of the contract.
Contracts for wills are complex and are not suitable for all blended families, and specialist legal advice should be sort before entering into such contract.
What can a contract for wills include?
A contract for wills needs to be carefully drafted and tailored to your specific circumstances and the agreement you have reached.
Some things to consider are:
What you would like your will to record? Consider who you want your executors to be, any items you would like gifted, how you would like your residue dealt with. See “What to consider when preparing your will”.
Is the agreement for your partner to enter into a will at the same time, or has consideration – such as a monetary sum or a promise to marry – been made?
What you would like your partner to agree not to alter in their will – is it the whole will or just part?
What would you agree not to alter in your will?
Would you and your spouse like to be able to alter your wills, either with permission of the other or by notice (which can only occur during both of your lifetime and whilst you both have capacity)?
Would you like restrictions put in place on the surviving spouse from spending or gifting away the assets after the first spouse passes in order to preserve the estate?
Are there any other special considerations you would like included?
It is important that these matters are carefully thought out and drafted into the contract.
Complications with contracts for wills
Contract for wills are not without their complications and issues.
Commonly, the contract is drafted in a manner obliging the surviving spouse to preserve the estate assets and not diminish the estate except for the purpose of meeting ordinary living expenses.
The idea of this is to prevent the surviving spouse from spending all of the assets or gifting them away with the intention of disinheriting or reducing the inheritance of the deceased spouse’s children.
Whilst this achieves the purpose of the contract, it can affect how the surviving spouse chooses to live their life and use the assets.
A contract for wills also does not prevent claimants from making a claim for further provision from the estate under the Inheritance Family Provision Act.
This proceeding, if successful, does affect the ultimate distribution of the estate.
A contract for wills is not for everyone and should not be entered into without careful consideration and specialist advice.
Johnston Withers Lawyers: experienced lawyers in estate planning
Johnston Withers Lawyers are experienced in providing advice on estate planning for blended families.
If you’d like advice from one of our will and estate lawyers, please contact us on 8231 1110, or get in touch online.
Photo: Johnston Withers Lawyers.