Short answer. Possibly void. Article 823 says that if someone attests a will, a devise or legacy to that witness, or to the witness's spouse, parent, or child, is void as to that person, unless three other competent witnesses also attested. So a legacy to your wife's mother, with your wife as witness, can be void.
What the law says
such devise or legacy shall, so far only as concerns such person, or spouse, or parent, or child of such person, or any one claiming under such person or spouse, or parent, or child, be void, unless there are three other competent witnesses to such will.
Civil Code, Article 823 — A Gift to a Witness Is Void. Read the full provision →
A gift tied to a witness is suspect
The law worries that a person who both witnesses a will and benefits from it, directly or through close family, may have had a hand in shaping it. Article 823 addresses this by limiting gifts connected to an attesting witness. It reaches not only a devise or legacy to the witness himself but also one to the witness's spouse, parent, or child, and to anyone claiming under them. The concern is that a witness with a family stake in the will's provisions is not the disinterested attestor the law wants, so the benefit connected to him is placed in doubt.
The gift is void as to those persons
The consequence is targeted. The article provides that such devise or legacy shall, so far only as concerns such person, or spouse, or parent, or child of such person, or any one claiming under such person or spouse, or parent, or child, be void, unless there are three other competent witnesses to such will. So a legacy to the mother of an attesting witness, the witness's parent, is void as to the mother. Importantly, the nullity is confined to that particular gift and those particular persons; it does not void the whole will or other, unconnected dispositions in it.
The saving rule: three other competent witnesses
The voiding is not absolute. It applies unless there are three other competent witnesses to the will, apart from the interested one. A will normally needs three witnesses; if there are three untainted, competent witnesses in addition to the one whose family benefits, the concern about a self-interested attestor falls away, because the will is adequately witnessed without counting him. In that case the gift to his spouse, parent, or child stands. The rule thus penalises the gift only when it depends on the interested witness to make up the required number of attestors.
The witness still counts as a witness
A further point softens the rule. Article 823 provides that the interested person is still admitted as a witness, as if the devise or legacy had not been made. In other words, his competency to attest the will is not destroyed; only the gift connected to him is affected. So the will itself does not fail merely because a beneficiary's relative served as a witness. The practical lesson is to avoid having a beneficiary, or a beneficiary's spouse, parent, or child, act as one of the essential witnesses, unless three other competent witnesses will also sign.