Why Your Will Needs a 'Titanic Clause'

Many people spend a great deal of time and effort crafting a detailed estate plan that will ensure their assets are distributed in the manner of their choosing when they are gone. But crimes and other misfortunes may cause the deaths of several beneficiaries at once, and this can wreak havoc on even the best laid estate plan.

For this reason, many estate planners recommend that their clients include something in their wills known as a “Titanic clause.” This clause gets its name from the concept that a husband and wife can die in a single disaster. Famously, Isidor and Ida Straus (he was an owner of Macy's) died together on the Titanic when she refused to leave him to get in a lifeboat with other women. The clause can provide remedial instructions regarding what to do with your assets if your intended beneficiaries are unable to receive them.

This clause will establish a clear order of death for two people, such as a married couple who are leaving all of their assets to each other. In some cases, it is impossible to determine who died first, such as in a car crash or other similar accident or occurrence. When this happens, a simultaneous death clause will dictate which party is deemed to have died first.

This can be a vitally important factor in many estate plans, as it allows the orderly dispersion of assets to a contingent beneficiary and may help the estate avoid taxation in some cases. In an interview with CNBC, Larry Lehman, the president of the National Association of Estate Planners and Councils, said, “This is the nuts and bolts of designing wills and trusts. The aim is to never leave it up to chance or to state intestacy laws.”

If you don't have this clause in your will, your estate may be subject to the Uniform Simultaneous Death Act, which has been adopted in many states. This provision dictates that if two people who are leaving assets to each other die within 120 hours of each other, each person will be considered to have predeceased the other if there is no will or other legal document that stipulates otherwise. For a married couple, the contingent beneficiaries would receive the estate of each person as if he or she had predeceased the other.

It is also a good idea to specify in your will that all beneficiaries must survive you for at least a given period of time, such as a few months. This clause treats the primary beneficiary as if he or she had predeceased you and passes the assets directly on to the contingent beneficiary. This way the assets in your estate will not be subject to possible probate proceedings twice within a short period of time. It may also help to reduce estate taxes if the size of your estate exceeds the amount of your unified credit.

A final clause that should probably go in every will is sometimes called an “all-dead” clause (it, too, may be referred to as a Titanic clause). Whatever it’s called, it refers to a clause that will name a final beneficiary, such as a charity or other institution, to receive your assets in the unlikely event that all of your primary and contingent beneficiaries die before you do.

This clause differs from the simultaneous death clause in that it encompasses all listed beneficiaries, not just the primary one. It ensures that your assets are still handled according to your wishes after you are gone, and may also reduce or eliminate estate taxes if you name a qualified 501(c)3 organization as the final beneficiary. “The nice thing about the Titanic clause is that it ensures that your assets are used in the manner that you desire,” says Todd Rasmussen, an estate planning attorney in Overland Park, Kan. “It functions as a bottom line catch-all that can prevent your estate from becoming tangled up in court and perhaps ultimately wasted.”

Although the odds of two people dying at the same time are rather low, serious problems with estate settlement can arise when this happens without proper planning. The clauses described here can help to eliminate these problems and ensure the smooth handling of your assets after your death. For more information on estate planning clauses and which ones you need, consult your financial advisor or an estate planning attorney.  

See our tutorial on Estate Planning as well as 6 Estate Planning Must-Haves for more on this topic.