What Is a Will Contract?
What is a “will contract,” and why might you care? A will contract is an agreement you might make with another person, often a spouse (and more likely in a second or later marriage) where you each contractually bind yourselves to a particular plan for how your assets will be distributed (i.e., your dispositive scheme). Why might you do this? So, if you die or become incapacitated, your spouse cannot change the plan you have.
Example: John and Jane are in a second marriage, each with two children from a prior marriage. John and Jane want to get new wills (and/or revocable trusts) completed and signed. But they are both concerned that their agreed deal is that Jane’s children will get an overall 60% of their estate because she brought more wealth to the marriage, and John’s kids will get 40%. If all goes as planned, each of Jane’s children will get 30% of their estate, and each of John’s children will get 20%. Assume Jane dies and all assets pass to John. John immediately changes his will to make it equal 25% to each child (or worse, cuts out Jane’s children entirely). Without a will contract confirming their arrangement, Jane’s children might not be protected. Yes, Jane could have bequeathed everything into a trust that would have assured that division, but that plan, while perhaps better than an outright bequest, may still not fully protect Jane’s children. So, even if Jane uses trusts as the receptacles of her estate, she might still want to consider a will contract.
What to Do If You Do Get a Will Contract
Most married couples hire one law firm to represent them both. If there are issues to address, you might be safer by each having independent attorneys. If the same attorney represents both of you in your estate plan and will contract, that firm will likely have you sign a waiver acknowledging the conflict of interest.
You and your spouse should be informed of the overall plan. That might include attaching a memorandum of the intended estate plan and perhaps one or more schematics showing the plan to the will contract agreement.
You should each be aware of and understand the family assets involved. A balance sheet and perhaps a financial plan and forecast attached as exhibits to the will contract may corroborate that.
You will each likely sign a new will and perhaps a new revocable trust, implementing the agreed-upon plan. Those documents may also be attached to the will contract as exhibits.
The agreement may require each of you to provide the other advanced notice before any change is made to your estate planning documents. If you are incapacitated, you might agree on who should get the notice. You might even go a step further and provide that if one of you is incapacitated, no change can be made without the approval of an independent person named in the agreement.
It would be best if you also addressed what happens in the event of a divorce in the agreement.
The Will agreement may limit or prohibit either of you from making any significant gifts without the written consent of the other spouse and/or specified individuals. If that is not done, either of you (or the agents under your durable powers of attorney if either of you are incapacitated) could undermine the entire will contract by giving away assets while you are alive.
The will contract should address what will happen if there is a future dispute over gifts, interpretation of the agreement, changes proposed to an estate planning document, and other possible issues. Will you have mandatory mediation and arbitration? Will you agree that there would be no arbitration but that a court trial will not have a jury, etc.? Lots of decisions will need to be addressed.
It would be best to consider how complicated this and other points will make a will contract and the level of infringement it may create on your freedom to take actions you might later wish to take. This illustrates some reasons why will contracts, while seemingly logical, are not used very often.
Why Might You Not Want a Will Contract?
Most people don’t have will contracts. Perhaps very few. You might not want the cost and complexity of a separate document. If you and your spouse want a will contract that is more likely to be respected, you might each want to hire independent attorneys. That is more complexity and expense on top of your regular planning. If you bequeath assets to trusts, that might reduce the risks of a challenge succeeding. But that doesn’t prevent the potential rationale for still having a will contract, as that agreement might reinforce and state your intent to have a specific type of disposition in trust.
You might decide that you don’t need a will contract as a prenuptial or post-nuptial agreement might address the issues involved to your satisfaction. If you have provisions in a prenuptial or post-nuptial agreement contradicting your current dispositive plan, you and your spouse should return to your respective matrimonial attorneys and modify or void that marital agreement to avoid that type of conflict.
Will contracts raise many issues and may not be easy to enforce even if you have one. There are better ways to exert control over your estate and where you want it to go. Some experts even advise not to use will contracts because the case law shows that those arrangements do not work. They seldom accomplish the intent of the testators who purport to make them. The reality is that some courts refuse to honor the apparent intent of testators who purport to bind themselves in a will contract. On the flip side, lawyers have been challenged for not creating will contracts in situations where there is a second or later marriage, a short-term marriage, and other situations. But again, a good trust plan might suffice.
What If You Don’t Want a Will Contract?
Suppose you don’t want a will contract. In that case, you might affirmatively state in your will (and revocable trust) that there is no contract between you and your spouse regarding asset distribution and that each of you is free to change your will (and revocable trust) even after the death of the first of them. Explicitly stating that there is no will contract may avoid the uncertainty of whether there is one.
Conclusion
As with many estate planning techniques, will contracts may be useful for some, but if you pursue one, be certain to address the practical issues noted above and any issues unique to your situation. Given the complexity, this is not a DIY project and should only be done with a specialist.
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