Legal Ground: Mutual wills - what are they?

Why should you bother making a will? Is it worth the time, trouble and expense?

By HAIM KATZ, SAM KATZ
A REPLICA of Marco Polo’s 700-year-old last will and testament. (photo credit: REUTERS)
A REPLICA of Marco Polo’s 700-year-old last will and testament.
(photo credit: REUTERS)
Why should you bother making a will? Is it worth the time, trouble and expense?
When we are talking about a married couple, the answer is a definitive “yes.”
Why?
Because, one of the quirks of Israeli law is that when a spouse dies, the surviving partner does not inherit the entire estate. In fact, according to the default rules of the Inheritance Law, which come into play when there is no will, only half the assets are left to the spouse, and the other half (in equal shares) to the couple’s children.
As women statistically live longer than men, a widow can find herself in a situation where not only has she lost her lifelong partner, but, to her amazement, the marital home where she has lived all her married life now belongs in part to the children.
And to her even greater amazement, she finds that the law affords her no special status or protection which would allow her to continue living in the home. On the contrary, anyone who has a share in a property has the right to trigger the sale of that property and the distribution of the proceeds in accordance with the ownership ratio. Thus, the widow is at risk of being ejected from the residence once the property has been sold from under her.
As people live longer and longer, a widow in this situation may have not only children, but also grandchildren and great-grandchildren. Into this mix come daughters-in-law, sons-in-law and so on. The question in such situations is often “why does grandma need such a big house?” And if a decision to sell has been taken, the bereaved widow will be unable to prevent such a sale. Precisely at an age when they want to be living peacefully, older people can find themselves in conflict with their various levels of offspring, some of whom might be quite distant, generationally and emotionally.
So, to protect your spouse, it makes very good sense to make a binding will and instruct that the assets that you have accumulated together with your partner remain in your partner’s ownership and possession until their death.
But often a partner wishes to protect not only his/her spouse but also and also wants to ensure that after the death of both parties, the property passes to their children. Thus, the concept of a mutual will took shape and became part and parcel of normative legal advice given to couples.
But what is a mutual will?
And is it really such a good idea to make such a will?
Well, things can and do go drastically wrong.
To explain – a mutual will is a document signed at the same time by both parties. It is either contained in one document or very often in two separate but identical wills.
The original aim was to protect family assets. If a mutual will states that “I leave all my assets to my wife and after her passing they go to my children,” then I am ensuring the family assets remain with our offspring, making sure also that if the surviving partner remarries, for example, that the hard-won family assets will not be inherited by the new spouse.
BUT THERE could be a serious downside to making a mutual will. This is because couples making an identical commitment to one another that the property they wish to protect will reach their offspring are not just making a will, they are also entering into a mutual contract which binds both of them. And contracts, as we all know, have to be honored in law and will be enforced.
Thus, the parties entering into a mutual will contract will not easily be able to get out of their obligations to one another and to the children.
In comparison, an ordinary will can be changed at any time and in a variety of ways, and it is the constitutional right of every Israeli to leave his assets to whoever he wants. To cancel his present will, all a person has to do is to write a new one. That is the inherent right of a free person.
Not so with mutual wills. Once you have entered into a mutual will, you are contractually obliged to adhere to it. You cannot write another will and if you do, such a will will not be recognized by the court and is essentially valueless. This is where mutual wills begin to be injurious to your health and wellbeing.
A common occurrence is that a loving couple makes a mutual will and one of the partners passes away and the entire estate is distributed to the surviving partner. Time goes by and the surviving partner has a strong disagreement with one of their children (or their children’s spouses.)
I recently faced a case where an elderly lady, feeling totally disrespected by her daughter’s family, wanted to disinherit her by drawing up a new will. To her dismay, she discovered that she cannot change the mutual will she made many years back with her late husband. Because mutual wills are contractual, she was locked into this situation. She got around this by gifting in her lifetime large parts of her estate to her other children. Gifting large parts of your assets during your lifetime is not a good idea. Those who have not yet done so should go now to the bookshelf and read Shakespeare’s King Lear. Lear gave away his kingdom to his daughters in his lifetime. There is not a happy end (but I won’t be spoiler and tell you the exact ending, as I am certain you will want to read this in the original.)
Under an amendment to the law in August 2008, there are now ways of canceling mutual wills (which I will describe in another article), but this gets harder and virtually impossible once one of the parties has died and their estate has been distributed to the surviving partner.
The conclusion is, therefore, that the impact of the often-commonplace advice to enter into mutual wills can be very negative. This is particularly so when there major disagreements ensue between the survivor and the rest of the family.
Therefore, yes, you should make an ordinary will to protect your partner. This will you can always change. However, you should carefully consider before entering into a mutual will, which takes away some of your basic freedoms.
Dr. Haim Katz and Adv. Sam Katz are senior partners in a law firm based in Tel Aviv and Jerusalem. Their new book in English, The Complete Guide to Wills and Inheritance in Israel is published by Israel Legal Publications and is coming out in September.
office@drkatzlaw.com