While playing the other day, my sims' elderly dad died during his kid's birthday party (he had stellar timing.) Oddly enough, only the wife was affected by this and got a moodlet for it. His kids didn't even notice a thing until I told them to mourn his urn, after which they got the "A friend has passed" moodlet, which seems inappropriate given it was their direct relative.
It just seems odd that if a family member died, the whole immediate family wouldn't be affected. I'm not sure if this had to do with his kid aging up at the exact same time that he died. Either way, watching his kids nonchalantly step over his body while eating birthday cake was pretty messed up.
On a related note, after his death the wife now seems to be stuck in a conversation with him forever and I can't get his little relationship box to disappear from the top of the screen. All I know is death has apparently made him feel "very uncomfortable".
If it helps, I am playing the game on Windows 7 64-bit with no mods or downloaded content.