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Can You Plan for an Unexpected Tragedy?

Aug 19, 2021

Paul S. Labiner

Paul Labiner

Managing
Partner

If you live in South Florida, you have no doubt heard about the tragic collapse of the Champlain Towers condominiums on June 24 that claimed 98 lives. Unlike, for example, the coronavirus, which has tended to hit older populations more harshly, this tragedy struck indiscriminately, killing young and old alike, including a one-year-old girl.

Worse still, because the collapse happened at 1:30 in the morning, entire families were lost in the disaster—Grandfathers and grandmothers, husbands and wives, sons and daughters.

Although these kinds of large-scale disasters are relatively rare, smaller-scale accidents that claim the lives of multiple family members—car accidents, for example—are more common than we might think.

To compound the pain of these situations even further, the deaths of multiple family members can wreak havoc on one’s estate planning. However, if you understand the unique complications and explicitly address them in your estate planning documents, you can avoid duplicative probate, excessive estate taxes, and other problems.

Florida’s Simultaneous Death Law

Florida has specific statutory provisions that address situations in which multiple individuals in the chain of succession die simultaneously.

Unless your estate plan or other “governing instrument” explicitly says otherwise, Florida law (732.601, Fl. Stat.) states that, “[when] there is insufficient evidence that the persons have died otherwise than simultaneously, the property of each person shall be disposed of as if that person survived.” What this means in plain English is that if a husband and wife die simultaneously or in quick succession, their property is distributed as if each spouse survived the other.

This may sound strange, but it avoids the following paradoxical situation. A husband and wife die simultaneously, after which the husband’s estate passes to his deceased wife and the wife’s estate passes to her deceased husband. Obviously, this makes no sense and could lead to the same property going through multiple estate administration processes.

Fortunately, the Simultaneous Death Law allows the husband’s estate to bypass the wife (and vice versa) and transfer to the alternate or contingent beneficiaries (e.g. children, brothers, etc.).

Pro Tip: A very common mistake is failing to name alternate beneficiaries. If spouses die simultaneously and neither has alternate beneficiaries named in their wills, Florida’s default intestate laws go into effect to determine the distribution of your estate. In other words, even though you had estate plans in place, you could still lose control over who receives your property and assets.

Unintended Consequences of Default Statutes

However, allowing the default statutes to govern your estate is not always in your best interest as it can lead to a number of unintended consequences.

For instance, let’s look at Tim and Tammy, a married couple whose home is held as tenants by the entirety. Both Tim and Tammy have children from a previous marriage, but they have not had children of their own.

common death TBE property transfer

Were both Tim and Tammy to die in a car accident, Florida’s statutes would require the property be split evenly, one half going to Tim’s beneficiaries, one half going to Tammy’s beneficiaries.

common death TBE property split

In this case, the children of their previous marriages would each gain partial ownership of the home, after the property went through probate. But this may not be what either Tim or Tammy wanted to happen with their home.

A second situation involves life insurance policies. Sticking with Tim and Tammy, let’s now assume each had a life insurance policy designating the other as the primary beneficiary. Unfortunately, neither policy names a contingent beneficiary.

common death life insurance proceeds

Normally, assets with named beneficiaries, such as life insurance proceeds and retirement accounts, pass to the beneficiary by process of law, meaning they do not go through probate. So, if only Tim were to die, Tammy would receive the life insurance proceeds.

common death life insurance as probate asset

Should Tim and Tammy both die in a car accident, however, the life insurance proceeds would become probate assets, increasing the time and expense involved in passing these assets to heirs. Moreover, who receives their life insurance proceeds will now be determined by Florida’s intestacy statutes, which function based on blood relations.

Luckily, there are ways to override the Simultaneous Death Law to ensure you remain in control of the disposition of your estate.

Planning for an Unexpected Tragedy

To ensure property is distributed according to your wishes, and to prevent unnecessary expenses and delays in the estate administration process, your estate plan should include provisions to address the unlikely scenario in which you and your spouse (or other primary beneficiary) die simultaneously or within quick succession.

When drafting your documents, estate planning attorneys can insert a clause that explicitly states which spouse will be considered the survivor in the event of simultaneous deaths. This is sometimes called a “Common Death” clause—“common” meaning “common to both spouses,” not “frequently” or “commonplace.”

Additionally, survivorship clauses can be added to your estate planning documents that, for example, require a beneficiary to outlive you by 30, 60, or 90 days. Certain states have automatic survivorship periods (usually 120 hours or 5 days), but Florida does not. Such language helps avoid a double-probate situation where the same asset is administered by multiple estates.

Insurance Proceeds and Survivorship Clauses

To demonstrate the benefits of a survivorship clause we can look at the real court case Janus v. Tarasewicz 135 Ill. App. 3d 936 (Ill. App. Ct. 1985).

In 1982, Stanley and Theresa Janus both accidentally ingested cyanide-laced Tylenol capsules. When they arrived at the ER, neither Stanley nor his wife had stable vital signs. Stanley died shortly after being admitted to the hospital. Theresa survived on life support for two more days before officially being pronounced dead.

Stanley had a $100,000 life-insurance policy that named Theresa as primary beneficiary and his mother, Alojza Janus, as contingent beneficiary. However, the proceeds of Stanley’s policy were paid to Theresa’s father, Jan Tarasewicz. Stanley’s mother, Alojza Janus, filed suit claiming that she was entitled to the insurance proceeds because Theresa did not outlive Stanley. The courts found that, despite being on life support, Theresa had survived Stanley for two days and, therefore, his insurance policy had been correctly paid to Theresa’s father.

Based on his beneficiary designations, we can assume that Stanley wanted his policy paid to his mother if it could not go to his wife. However, without any survivorship requirement in place, his wishes were not observed.

“Titanic” Clause

Finally, there is a catchall clause that could be inserted into your documents as a sort of last line of defense. Variously known as the “Armageddon,” “Titanic,” or “all dead” clause, this provision protects against the unlikely situation in which all of your primary and contingent beneficiaries die simultaneously.

For example, had a mother and all of her named beneficiaries (e.g. husband and two children) died in the Champlain Towers collapse, the Titanic clause would ensure that the mother’s assets were still able to pass to some beneficiary successfully.

Your Next Steps

Are you sure that your estate planning documents explicitly address these various situations?

Do you have contingent beneficiaries designated in your estate planning instruments? Have you specified who is to be the surviving spouse in the case of a simultaneous death? Do you have (or want) survivorship requirements? Are your assets titled correctly such that they would transfer to the right people in various circumstances?

Though nobody expects to suffer a tragedy like what happened at Champlain Towers, failing to plan for such possibilities doesn’t mean they won’t happen. Plus, there are more ways for spouses to die simultaneously than in a building collapse. Unfortunately, the novelty and rarity of these kinds of tragedies means many people are unaware of the need to explicitly address them in their estate planning documents.

Working with an estate planning attorney is the best defense against making costly mistakes or overlooking vital estate planning strategies. Estate planning professionals have the knowledge and experience to draft a comprehensive estate plan that fortifies your wealth from unintended negative consequences and ensures you remain in control of your estate.

If you need to review or revise your estate planning documents, call us today at 561-998-2362 or request a consultation online. We would love to help you protect your wealth and prepare for the future.

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