Taking Care of Mom and Dad: Reciprocal Wills
Most married couples (and, for that matter, unmarried ones) do well to set up reciprocal wills. The concept is simple: Each partner writes a separate will that is a mirror image of the other's. Depending on where you live, the wills may be part of a single legal document, may reference each other or may restrict changes made to one but not the other. Among other things, this device provides the simplest form of parity and assurance that basic financial plans can be achieved.
For married couples, reciprocal wills also simplify some tax issues. If the combined estates of both spouses total under $1 million, the wills may be all the tax planning they need.
Most simple wills prepared for parents have a clause to deal with a common disaster situation. Each will says some variation of: "All of my property to my spouse, if he/she survives me by at least 30 days. Otherwise, all to the children." There's nothing special about using 30 days, but the period should be less than six months. If it is longer, some state laws limit the tax-free status of the property transfer to the surviving spouse.
If either or both the wife and husband have children from a previous marriage, the reciprocal wills are usually not true mirror images. Each will has a parallel section that articulates the differences. This usually works -- legally -- but an estate lawyer must review it before it is signed.
Differences -- even minor ones -- can make a big difference when one spouse dies first (or is presumed to die first, in the case of a common disaster). What happens if a husband and wife with reciprocal wills die together in a car wreck? The executor of the husband's will sees that the wife did not survive for 30 days after her husband's death. She inherits nothing. The husband's estate is divided among his children. They pay inheritance tax, but the logic of the transfer is clear.
On the other hand, assume the common disaster clause says something like: "If we die together, and the order of death cannot be determined, my wife is presumed to have survived me." This might sound ludicrous...but in some situations it's a good idea. Property must be left to the surviving spouse, in order to take the unlimited marital deduction for calculating federal estate taxes. If the spouses' estates total over $1 million, this can mean a big tax break.
Now, go back to the aftermath of the car wreck. The husband's executor distributes property as if the wife were still alive. Never mind that she lived only a minute longer; she gets everything. The husband's money is lumped in with the wife's property. Her will doesn't mention the husband's children from a previous marriage (neither did his). All of her assets, including her husband's, go to her kids, according to her will. His kids from the previous marriage get nothing.
Most states have adopted the Uniform Simultaneous Death Act to avoid these problems. The law dictates the order of death when parents die together. It is used only when the spouses' wills say nothing about who survived whom -- or if there are no wills at all.
