Beyond the Basics: Life Planning


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What is a “Life Plan?”

In short, a “Life Plan” is a basic estate plan that adds:

In other words, a Life Plan provides the essential elements of a Basic Death Plan, i.e. probate avoidance and unnecessary estate tax protection elimination, but ADDS substantial protection for those you care about most.

Let’s review each of these protection areas in a little more detail.


Image of incapacityYour living trust should have an entire section devoted to your estate management in the event you become incapacitated. This language will work in conjunction with and in coordination with your “Schiavo” Documents. But, be careful here…Your trust provisions regarding incapacity must be coordinated with the Schiavo Documents, or problems may arise.


When it comes to protecting the assets, there are three primary areas of concern a surviving spouse will face:

  1. Potential for Lawsuits
  2. Risk of Re-marriage
  3. Risk of Inadvertent Disinheritance


Potential for Lawsuits

Image of gavelNow, I don’t have to tell you that the latest and greatest get rich quick scheme in America today is to sue somebody.  And, when you are sued, everything that is in your name, with minor exception, is available to pay a judgment if you lose. In the normal Death Plan, the surviving spouse has little or no protection at all from a judgment creditor.  Everything that he or she owns or can access is susceptible to loss.

Conversely, in a properly prepared Life Plan, the assets of the decedent CAN be substantially protected from this type of liability.  So if the surviving spouse were to get into an auto accident, or someone slipped and fell on the residence driveway, or the dog bit someone, or if any number of other possibilities that might create lawsuit liability were to occur, a large portion of the estate could be protected against loss due to any one or more of these possibilities.


Risk of Re-marriage

Do you remember Anna Nicole Smith and her billionaire husband, J. Howard Marshall? How do think the original Mrs. Marshall might have felt about her half of the Marshall estate going to Anna Nicole?

This can be a huge problem that the Death Plan typically does not address.  In fact, the surviving spouse under a Death Plan will usually have no difficulty using the decedents half of the estate any way he or she pleases.  The Life Plan, however, has protection components that would make it much more difficult for the surviving spouse to use the decedent’s half of the estate for purposes never intended.


Risk of Inadvertent Disinheritance

Image of strangersThe third area of concern revolves around the risk of inadvertent disinheritance.   This might arise when the surviving spouse withdraws money from the decedent’s trust and keeps it under the survivor’s own name.  If the survivor were to then remarry and thereafter pass away, those dollars could wind up going to the new spouse of the survivor, who then sends that money to HIS OR HER children, NOT your children.

All three of these scenarios are merely the tip of the iceberg when it comes to ways your surviving spouse might lose money in an unintended manner.  Maintaining a protective envelope around your life’s work can assure that those assets will be protected in a manner unavailable under the basic Death Plan.

Now, let’s talk about how we can protect the children from these same types of risks. As would be expected, our children are susceptible to similar loss possibilities as those of our surviving spouse.  But, in addition, they have a few of their own.



Instantly “Rich” at 18

Image of teenagersFor example, if you and your spouse were to pass prematurely together and your entire estate was left to your 18 year old child, would you be concerned about whether he or she could handle it? Frankly, I don’t know many 18 year olds who are mature enough to manage a new six or seven figure estate without substantial loss or inappropriate usage.


Protection in the Event of Your Child’s Divorce

Another risk to be faced is the possibility of your child’s spouse taking up to one-half of your life’s work when that spouse divorces your son or daughter.

Without proper Life Plan safeguards, both of the above scenarios are very real possibilities that happen more often than you know.


Risk of Lawsuit

The risk of lawsuit liability facing your child is similar to that facing your surviving spouse.  Certainly, under a Death Plan, if your child were found liable for any tort or contract action, your entire estate could be at the mercy of that plaintiff’s attorney without much protecting it from total loss.

Under a Life Plan however, your estate may be protected from such loss in a manner that only you can assure. Doesn’t it make sense to provide that protective envelope against the possibility of loss due to a potential or actual lawsuit?


Risk of Bankruptcy

Image of bankruptcy noticeAnother risk revolves around the possibility of financial difficulties driving your child into bankruptcy.  As you might expect, if your estate has been passed under a Death Plan to your child in his or her name, the bankruptcy judge will consider that money to be in your child’s estate, and as such, available to pay his or her creditors.

In a properly prepared Life Plan, however, your estate would be unavailable to your child’s creditors even if bankruptcy was an unfortunate part of your child’s future.


Risk of Inadvertent Disinheritance

And just like the risk you face in relation to your surviving spouse, you must face the very real risk of your child inadvertently disinheriting your blood line, sending your life’s work to people you don’t like or don’t know.

Imagine you have a Death Plan that sends your entire estate to your child, free of trust, only to have that child pre-decease his or her spouse.  That soni-in-law or daughter-in-law would then likely receive your entire estate with you hoping he or she does the right thing.  If that child-in-law were to remarry and pre-decease that new spouse, however, I think it is safe to say your grandchildren could be completely disinherited, with your estate going to the children of that new spouse whom you never met. Not a pretty picture.


All of the risks we’ve been exploring around the protection of assets for the benefit of your spouse and your children against loss due to creditors, predators, divorce, bankruptcy or inadvertent disinheritance will also be faced by your grandchildren as they grow into adulthood, unless you take action to protect them.

But there are several other factors that require your understanding that relate to the grandchildren solely.


Transfer of Assets to Grandchildren

Image of kids playingFor example, are you interested in assuring the grandchildren receive some portion of your life’s work upon your passing or the passing of your children?  Unfortunately, the Basic Death Plan does not provide for that.

The Life Plan, however, does provide the structure to assure your grandchildren receive whatever it is you want them to ultimately have.


Estate Tax Free Money

Further, your grandchildren may wind up paying an estate tax which if properly set up, could have been avoided, that is, received estate tax free.  Through proper use of the generation skipping transfer tax exemption, the grandkids can receive estate tax free money that otherwise would be estate taxable.


Growth of Asset Value

Also, within certain limits, what you allocate to the grandchildren can grow to any amount, without paying any estate tax on that growth.

So you see, when it comes to you and your family, many different things can and do happen that might be either negative or positive.  Whether any one or more of them does happen will depend upon the quality of the estate plan you create for your family’s benefit.  But over time things are certainly going to change. 

A Life Plan covers the basics involved in protecting your children, spouse, and grandchildren, should you become incapacitated or die.  In our next video, we talk about the importance of Keeping Your Estate Plan Current.”

If we can answer any questions or provide a complimentary counseling session to discuss your specific needs, please contact us at 805-277-5020 or e-mail


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Steven M. Greenwood, P.C.
2801 Townsgate Rd., Ste. 210
Westlake Village, CA 91361

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