Those are the instructions I was often given. It's what most couples want, sometimes with minor gifts to other people or organizations. (If there are no children they might leave their estate on the second death to friends, relatives, or charity, but the principles are the same.) But can the surviving spouse, having become the sole owner of the combined estate, spend it freely or give it, by will or during life, to anyone else — for instance, to comply with an obligation to support a second family?
The law distinguishes between mutual wills (which bind the survivor by establishing a trust) and mirror wills (which are in identical terms but do not establish a trust, leaving the survivor free to change his or her will). But is there to be a binding trust? If yes, on what terms? The first question can easily be answered by a statement of intent but the second is complex. Wills often fail to make the testators' intentions clear, and from time to time the inevitable disputes come before the courts.
I was alerted to the problem as an articled clerk when I represented a disappointed beneficiary, and for the next 30 years I warned clients of the difficulties, which I thought were all but insoluble. Invariably they opted for no-trust wills, giving the survivor freedom to use the money as they wished, relying on each other's goodwill to act fairly towards the ultimate beneficiaries.
But a possible solution recently came to mind. In the latter years of my career a particular type of flexible trust had been popular to reduce the inheritance tax at that time levied on the second death. (The law has since changed so that this device is no longer needed to save tax, but that doesn't affect the use of a similar trust for the different purpose I suggest here.) It occurred to me that that idea could be adapted to balance the interests of the surviving spouse and the children. This scheme is still more complicated than some people want but it does answer the questions.
I've written up the problem and my suggested solution in an article, Double Bind, published by the Society of Trust and Estate Practitioners, who have kindly agreed to supply a pdf copy to attach to this website (STEP journal, vol 23, issue 2 (March 2015).
Complementing the article is a specimen mutual will which, by agreement with STEP, appears only on this site.
To avoid doubt, and to ensure that all the matrimonial property is bound (except for any that the clients want to exclude), I have included in the trust any property that is owned either by the survivor alone or jointly between the testators. Although a testator cannot leave joint property by will I see no reason to exclude it from the trust which the survivor has agreed to honour. Does this take the scheme outside the doctrine of mutual wills? I don’t think so. In paragraph 38 of its 2008 judgement in Walters v. Olins the Court of Appeal approved Mr Justice Norris’s statement as the trial judge that:
… there is at least clear guidance on what must be established before the doctrine can be invoked. In my judgement its irreducible core is that there must be a contract between T1 and T2 that in return for T1 agreeing to make a will in form X and not to revoke it without notice to T2, then T2 will make a will in form Y and agree not to revoke it without notice to T1. If such facts are established then upon the death of T1 equity will impose upon T2 a form of constructive trust (shaped by the exact terms of the contract that T1 and T2 have made). The constructive trust is imposed because T1 has made a disposition of property on the faith of T2's promise to make a will in form Y, and with the object of preventing T1 from being defrauded.
The creation of an express rather than a constructive trust can only strengthen the argument in favour of enforcing it.
After I wrote the first drafts of the article and specimen will my attention was drawn to Richard Oerton’s similar, though not identical, approach in Butterworths Wills, Probate and Administration Service at clauses A(3.24/5), and I am grateful to him for his generous help and encouragement in developing the idea and for pointing to errors and possible sources of confusion. My thanks go also to Ian Macdonald of Wright, Johnston & Mackenzie for warning me of a tax trap. I hope that my patches are adequate and that I have not created new problems, but to avoid tainting my benefactors with blame for any remaining mistakes I have not asked them to approve the final drafts.
I am also grateful to the STEP journal for suggesting the title Double Bind.