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Should you have a 'Titanic clause?'

When you draw up an estate plan, an experienced attorney will ask you to consider all possible contingencies. This not only helps ensure that your wishes are carried out regardless of what happens to others in your immediate circle, but helps avoid the need for multiple amendments later on.

Generally, when married couples do their estate plans, their spouse is their primary beneficiary. However, what if a couple dies at the same time? It happens. Couples may be involved in a fatal car or airline crash, for example.

In fact, there's something that's referred to as a "Titanic clause" because of the fact that so many couples perished together in that disaster. Attorneys also refer to a "simultaneous death clause" or even Armageddon planning.

If a couple dies together in an accident, it may not be determinable who in fact died first. This can make a difference because of estate taxes. One spouse may have an individual estate that will require additional taxes to be paid by those who inherit it, while the other may not. This can impact how much money the ultimate beneficiaries of the estate are able to keep and how much they have to turn over to the government.

If couples put a simultaneous death clause in their wills, they can designate who will be deemed to have died first if they are killed together. If that clause isn't included, estates can be subject to something called the Uniform Simultaneous Death Act (USDA). Under the USDA, if two people die no more than 120 hours apart, each is considered to have died first for purposes of who gets the estate. North Carolina has what's called a "120-Hour Survivorship Requirement."

Most couples designate their children as contingent beneficiaries to their spouses, so if they would die within a short period of each other, everything would go to those children. However, every situation is different. Perhaps there are no children and each spouse has charities or other beneficiaries whom they want to receive their assets. It's important to have multiple options that you're comfortable with.

Even family members who aren't married may want to consider such contingencies in their estate plans. As we saw at the end of the year with Carrie Fisher and Debbie Reynolds dying within one day of each other, family tragedies can come one upon the other.

Source: CNBC, "Why your estate needs a 'Titanic clause'," Kelli B. Grant, accessed Feb. 24, 2017

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