The Financial Stress a Simple Document Could Have Prevented

You or your parents may think a will is enough — until probate creates costly delays and stress. One simple document could help your family avoid a financial nightmare.

I recently helped a friend go through probate after her father passed away. Although he had a will, he did not have a Revocable Living trust— the document that can help families avoid lengthy and costly time in court called Probate.

What many people do not realize is that a will alone does not avoid probate. Probate is the legal process of settling someone’s estate after they die, and it can take many months — sometimes more than a year — to complete. During that time, families often cannot fully access the deceased person’s money or property.

In my friend’s case, her father left her his house. But because the property still had to go through probate, she could not immediately access the equity in his house. For over a year, she had to use her own money to pay the mortgage, insurance, taxes, and maintenance on the home just to keep the property from falling into foreclosure.

All of this could likely have been avoided if her father had created a Revocable Living Trust and transferred the deed of the house into the trust    while he was a live. Instead of waiting more than a year, she could have had access to the property within weeks.

Probate can also be expensive.

In states like Florida and California, attorney fees for probate are often based on the gross value of the estate — not the equity.

For example, in Florida, statutory “presumed reasonable” attorney fees are generally around 3% for estates between $100,000 and $1 million.

That means if your mother owns a house worth $500,000 with a $400,000 mortgage, the probate estate may still be valued at $500,000. Even though there is only $100,000 of equity, the probate attorney fee could still be about $15,000.

California can be even more expensive because both the attorney and the executor are entitled to statutory fees based on the gross estate value. In a similar example, the combined fees could easily total $20,000 or more.

A revocable living trust can help families avoid much of this expense, delay, and stress.

A revocable living trust is flexible and can be changed at any time while you are alive.

I often explain it this way: the trust is like a suitcase, and your assets — especially your home and financial accounts — are placed inside that suitcase. Your will then explains how those assets should ultimately be distributed.

The Hidden Risk of Relying Only on a Lady Bird Deed

Some states — including Florida, Texas, Michigan, Vermont, and West Virginia — allow a deed called a Lady Bird Deed, also known as an Enhanced Life Estate Deed. Many people mistakenly believe they do not need a Revocable Living Trust and can rely only on a Lady Bird Deed instead. While a Lady Bird Deed can help a home pass directly to beneficiaries without probate, it does not provide all the protections of a Revocable Living Trust.

A Lady Bird Deed allows real estate to transfer automatically at death, avoiding probate. However, one major drawback is that it does not include an incapacity provision.

For example, if a mother becomes incapacitated from dementia or another illness, her daughter — even if she is the beneficiary named on the Lady Bird Deed — cannot sell the house to help pay for her mother’s care while her mother is still alive without going through “expensive and time-consuming court proceedings” to gain authority to act.

Similarly, if a husband and wife own a home and both are listed on a Lady Bird Deed, problems can arise if one spouse becomes incapacitated. If the incapacitated spouse is still legally an owner of the property, the healthy spouse may not be able to sell the home to help pay for care without first going to court to obtain legal authority.

A properly drafted Revocable Living Trust is different because it typically includes an incapacity clause that allows a successor trustee to manage or sell assets if the person who created the trust becomes unable to handle their financial affairs.

A Revocable Living Trust saves time and money.

Many people assume estate planning documents are extremely expensive, but that is often not true. An attorney can usually prepare a revocable living trust, will, durable power of attorney, health care documents, and advance directives for approximately $2,500–$4,000 — often far less than the eventual cost of probate.

A much simpler and less expensive tool is Suze Orman’s Must Have Documents, which allows families to create and update important estate planning documents online.  You can create this in under an hour and the lifetime price is $99.  I highly recommend this if you don’t want to pay for an estate attorney.  This is a great website that explains all of the documents even if you decide to use an estate attorney.

If you or your parents do not yet have a revocable living trust in place, it is worth taking the time to set one up now. It can save your family significant money, delays, and unnecessary stress later.

Losing a loved one is already such a sad and difficult time. I personally know how overwhelming and emotional it can feel.

My goal is to help women avoid the costly and stressful mistakes I so often see families go through after someone passes away — and to make this process a little easier for the people you love.