Today’s blog was written by Douglas Buchmayer, partner with the Ottawa office of Gowling WLG (Canada) LLP

When deriving an estate plan, it can sometimes be difficult to balance the needs of one’s spouse or partner against the wish to benefit (and protect) the next generation. While perhaps less relevant or compelling when a couple is young or share the same children, the concern becomes more poignant when such spouse is not the parent of the children you wish to benefit and may even be indifferent or hostile towards them.

Where assets are modest or illiquid, a surviving spouse will often require access to the entire “family wealth” to maintain their life-style. So how then can the intended next generation’s benefit be protected?

There are numerous factors dictating which solution is the most appropriate for resolving this family succession dilemma, but the common denominator is usually control.

Most Wills drafted for couples are identical in nature and we refer to them as “Reciprocal Wills”. The entire estate of the first spouse to die is left to the survivor outright and upon the death of the second spouse both Wills then “gift over” the family wealth to their children or as otherwise agreed. Each spouse will similarly designate the other as the beneficiary of life insurance policies and registered plans and any assets that can be held jointly with right of survivorship will be. It matters not which spouse dies first, the gift over provisions are the same.

At play is an understanding between them that neither spouse will later wish to undermine these shared intentions. However, despite present inclinations, on the death of the first spouse the second spouse is free to change their Will should circumstances change. The hope is that the mutuality of their present intentions will continue to prevail, but such “understandings” are not legally binding, just morally persuasive, which provides peace of mind for some but falls short for others.

Where a couple wishes instead to impose a more tangible level of control (that is, a “legal obligation”), they can invoke what is known as the doctrine of Mutual Wills. This occurs when two persons enter into an agreement to dispose of their assets in a particular manner by Will. While both are living, the couple agrees not to change their Wills and other estate planning strategies without notice to the other. The parties further agree that the survivor will maintain the same Will and estate planning objectives after the death of the first spouse. The survivor is more or less free to deal with their own assets as well as the assets received from the first to die as absolute owner, but final disposition on death is controlled.

In addition to maintaining their Will, the survivor will not be allowed to defeat the agreement by making excessive gifts to others during life. If the survivor breaks the agreement, a constructive trust may be imposed on the estate of the survivor in favour of the initially agreed-to beneficiaries.

To make the doctrine work (and perhaps the most important factor), a formal agreement is signed by the couple prior to their signing of their Wills.

Mutual Wills can provide more certainty than Reciprocal Wills by providing a legally binding framework for ensuring the deceased spouse’s testamentary wishes will be respected after their death. However, it is by no means a perfect solution as it relies mostly on the integrity and cooperation of the surviving spouse which normally cannot be measured until after their death, by which time it may be too late to realistically enforce the original agreement, through equity or otherwise.

Many practitioners are cautious about recommending the use of Mutual Wills, owing mostly to adverse case law surrounding their usage, although most such cases deal with whether or not an agreement was in place rather than their enforceability generally.

While there may be other solutions worthy of exploration, such as testamentary or inter vivos spousal trusts, Mutual Wills nonetheless provide a useful estate planning tool worth considering for addressing the family succession dilemma, provided clients are properly advised of the pros and cons.