Mutual wills are a distinctive estate planning tool designed to ensure that assets are distributed according to a shared plan. However, it is crucial for individuals to fully understand the significant implications and constraints of mutual wills before committing to them.
Unlike standard wills, mutual wills involve a binding agreement between two or more parties, typically spouses or partners, to make identical or similar wills. Under this agreement, each person executes a will in a particular form and, most importantly, agrees not to revoke it without the other’s consent.
The court in Edell v Sitzer, 2001 CanLII 27989 described the requirements of a mutual will’s agreement:
The agreement must satisfy the requirements for a binding contract and not be just some loose understanding or sense of moral obligation; it must be proven by clear and satisfactory evidence; and it must include an agreement not to revoke the wills.
Mutual wills may be appropriate for couples who have children from previous relationships and wish to ensure that their respective children inherit specific assets. Mutual wills can also be suitable for couples who want to ensure that their estate is distributed in a particular way, regardless of future changes in circumstances. However, it is crucial to understand the legal implications and constraints associated with mutual wills.
The legal implications of a mutual wills agreement are significant. Once one party passes away, the surviving party is generally bound by the terms of the mutual wills agreement. This means that the surviving party cannot unilaterally alter the distribution of assets, even if their circumstances change.
In Canadian law, the common law has recognized and emphasized the importance of testamentary freedom. As stated by Justice Cronk in Spence v BMO Trust Co. 2016 ONCA 196:
The freedom of an owner of property to dispose of his or her property as he or she chooses is an important social interest that has long been recognized in our society and is firmly rooted in our law.
Accordingly, it is a fundamental principle that no will is inherently irrevocable. However, when parties have executed a mutual wills agreement, any subsequent attempt by the surviving party to alter the existing will or to create a new one, may lead to the imposition of a constructive trust on the survivor’s estate. This equitable remedy serves to uphold the survivor’s commitment to the deceased, ensuring that the estate benefits those designated in the mutual wills agreement.
Professor Oosterhoff in his article, Mutual Wills, explains that:
A will is, by its nature, ambulatory or revocable. Hence, a testator who has made an agreement to which the mutual wills doctrine applies can revoke it and make a new will…However, the constructive trust will attach to the property and be binding on the persons who are entitled to the testator’s estate under a new will made by the testator or on his or her intestacy.
In Re Ohorodnyk, 1979 CanLII 2113, the Ontario Superior Court held that:
No will under English or Canadian law is actually irrevocable for it is of the nature of a will that it may be revoked but if by contract for good consideration a will is declared to be irrevocable, the person who benefits from the revocation may be held to receive the benefits of it as trustee for the person who had the benefit under contract. The same applies whether the first will is declared to be irrevocable or not if the survivor receives property which he had bound himself by a valid contract to deal with in a certain manner.
Therefore, individuals must exercise considerable caution when entering into mutual wills agreements. Although a mutual will is technically revocable, once one party passes away, the agreement becomes enforceable by the beneficiaries under the mutual will, who may invoke contract law remedies to protect their interests.
Thanks for reading!
David Morgan Smith and Emily Adamo (student-at-law)