||Why is a revocable living trust important for people who don't have much money?
If you want to avoid probate, the easiest way to set up an estate is with a living revocable trust. And the less money you have, in my opinion, the more you need a living revocable trust, because where does a person who doesn't have a lot of money come up with the money to pay for court costs, probate fees, executor costs, lawyer costs? Where do they get that? They don't have it.
So, if you happen to have assets such as a life insurance policy -- life insurance does not go through probate because it has a designated beneficiary -- or an IRA or retirement account with a designated beneficiary, or savings accounts that are made payable-on-death accounts, or stock accounts that are set up in the same way, none of these have to go through probate.
Real estate is an asset that usually always has to go through probate unless it's set up as a revocable living trust or held as a joint-tenancy with right of survivorship.
Even so, there are people who don't recommend having a revocable living trust. What's wrong with their thinking?
The reporters who say that these are not necessary really do not, in my opinion, have a clue what they are talking about.
Today, most mortgages require two incomes to be able to pay the mortgage. Many people today have 100 percent financing and many people are now seeing increases in their payments because they're dealing with adjustable-rate mortgages. And let's say you just bought a house, and let's say you then get a call that your spouse/life partner was in a serious car accident and they are totally incapacitated. They didn't die, but they cannot work anymore, they don't even recognize you anymore. They're alive, but they are no longer generating an income.
A will, in this situation, will not help you at all because they're not dead; a life insurance policy will not help you at all in this situation because they're not dead.
And you need to then sell the property. Can you sell a home that you own with joint-tenancy with right of survivorship in that situation? No. And the reason you cannot is because the person you own it with is incapacitated. When you go to sell the property, it takes two signatures to be able to sell it if you own it in both names. So, you're then going to have to go and have your spouse/life-partner declared incompetent, become appointed by the court as their conservator -- that's the case here in California and it's $10,000 to do that -- and good luck from that point on.
If you simply had a living revocable trust that had an incapacity clause in it, it totally takes that out of the equation.
Joint-tenancy with right of survivorship doesn't help that; a will doesn't help that; most financial powers-of-attorney don't help that because they become null and void the day there's an incapacity unless things are set up correctly.