The chances of a married couple dying in the same accident or within a short period of time are probably quite low. It does, however, occur. And it happens often enough that most states have laws in place to address the issue and the problems that can arise as a result of both partners dying at the same time. In this article, we will explore these laws and how they might be important to you.
The Problems Created by Simultaneous Deaths
Both estates in probate
When the estates of both partners must go through the probate process at the same time, you can expect additional costs, delays, and red tape. Consider the following scenario:
- A terrible car accident results in the death of the wife immediately and the husband a few hours later.
- The titles of all of the couple’s property are solely in the wife’s name.
- Each partner named the other as their sole beneficiary, with their children listed as contingent beneficiaries.
- Unless there is a survivorship requirement in the wills, the law would require separate probate to administer each of the spouse’s estates.
- In the wife’s probate, her will directs the transfer of all her property to her husband because she died first.
- In the husband’s probate, his will would then direct the transfer of all the property to their children.
To recap, probate is the court process that appoints an executor. The executor is also known as a personal representative. The executor has the authority to:
- collect a deceased person’s accounts, and property
- sell the property if necessary
- pay off the decedent’s debts,
- eventually, distribute any remaining property to the decedent’s heirs.
Most people prefer to avoid probate as it can be time-consuming, expensive, and very public. When you have two separate probates for family members who die simultaneously, it can be prohibitively expensive, time-consuming, and complicated.
Estate tax difficulties when both spouses die simultaneously
When both spouses die and have a substantial estate, they may be subject to a hefty estate tax. The estate tax exemption currently sits at $11.7 million per person in 2021. This is an all-time high. The Biden administration may choose to reduce this cap in the future significantly. The administration may choose to return to pre-Tax Cuts and Job Acts levels in 2026. Consider the following scenario:
- Assume that the estate tax exemption available to all US citizens increases to $5 million within the next few years.
- A husband and wife die simultaneously in a serious automobile accident.
- The wife owned separate property valued at $10 million. The husband owned separate property valued at $3 million.
- The wife has a revocable living trust agreement which establishes a credit shelter trust to hold and shield up to $5 million of her separate property from estate taxes by applying her available estate tax exemption.
- The rest of the wife’s estate passes to her husband without any estate taxes levied on it due to the unlimited marital deduction.
How would you determine who died first? The answer to this question has important tax implications. If the question cannot be answered, the surviving family and the Internal; Revenue Service may be at odds on how the estate tax should be calculated.
Possibility 1: the husband died first and left everything to his wife in his will:
- $8 million would be subject to an estate tax at 40 percent
- ($10 million + $3 million -$5 million) = $ 8 million
Possibility 2: the wife died first and left everything to her husband in her will:
- $3 million would be subject to an estate tax at 40 percent
- ($10 million -$5 million + $3 million)= $8 million in the husband’s estate – $5 million from her husband’s taxable estate= $3 million
The wife’s scenario is much better than the husband’s, a savings of $5 million subject to estate taxes. These scenarios illustrate the importance of having solutions in place for how to treat the estates of two partners who die simultaneously or almost simultaneously and would inherit from each other.
Potential solutions when spouses die simultaneously
Many states have default laws in place to deal with these common issues, such as the Uniform Simultaneous Death Act and various versions of the Uniform Probate Code. In general, these laws establish a rule that if two people die within 120 hours of each other, each will be considered to have predeceased the other.
For example, since the husband and wife in the scenario died within 120 hours of each other and the husband’s will distributes 100 percent of his property to his wife at his death, the wife is treated as having predeceased her husband. This means that his estate can be passed to the individuals or organizations named in his will as contingent beneficiaries rather than to his deceased wife’s estate. This statutory requirement removes the need for a separate probate of the wife’s estate solely to receive her husband’s property and then pass it to her children or beneficiaries through her estate. Multiple probates may still be required if the wife had separate property that did not pass by right of survivorship or beneficiary designation.
If a deceased person’s will or trust has a provision on handling simultaneous death, most, if not all, state simultaneous-death laws make exceptions to the default rule. A will or trust can be drafted to extend the survivorship requirement for as long as you deem appropriate. In a simultaneous-death situation, you can also specify which spouse should be considered to have predeceased the other.
In the scenario described above, a provision in both spouses’ estate planning documents stating that the wife should be presumed to have predeceased the husband in the event of simultaneous death could be useful to ensure that both spouses’ estates are administered to maximize tax savings.
Review your estate plans with the possibility of simultaneous death in mind
If you’re not sure what would happen to your accounts and property if you and your spouse died at the same time or within a short period of time, start by reading your will or trust documents carefully. You might be surprised to learn that one spouse is presumed to have died before the other. If you feel this provision is unjustified, check with your estate planning attorney to see if it was added for tax-related planning.
If your estate planning documents do not include a provision for survivorship or simultaneous death, consider what your state law requires in such a case. Contact us to help you answer these important questions. How would simultaneous deaths impact your estate planning? Would both you and your spouse approve of the outcome?