Avoiding Probate in New Mexico
If you have ever lost a loved one and had to go through a complicated or stressful probate process to settle their estate, you probably want to avoid putting your family through that. Probate may not be nearly as bad as you expect, and sometimes there may be good reason for an estate to go through probate (such as when there are disputes between heirs that need to be settled by the court).
That said, there are also measures you can take in your estate planning to make going through probate unnecessary. If probate avoidance is your aim, you should speak to a New Mexico estate planning attorney to make sure your planning is designed to achieve that goal.
What is Probate?
Probate is the legal process of settling the estate of a deceased person (decedent). A person who needs to open a probate case does so in the district court for the New Mexico county where the decedent was domiciled (physically living) at the time of their death. A probate case can be opened between five days and three years after a death.
In probate, the court appoints a personal representative (PR) to oversee estate business. The personal representative is responsible, among other things, for protecting and managing estate assets; notifying heirs, beneficiaries, and creditors of the probate case; paying legitimate estate debts; and distributing remaining estate assets according to the decedent’s will, or New Mexico intestacy law if there was no will.
Not all assets must go through the probate process, but assets that are owned in the decedent’s sole name and that do not have beneficiary designations are part of the probate estate. Planning to avoid probate involves titling assets in such a way that they can pass to their intended recipients outside of the probate process.
Ways to Avoid Probate in New Mexico
There are multiple options for removing assets from your probate estate, depending on the type of asset and your circumstances.
Living Trust
A living trust is one of the most common and popular estate planning tools for avoiding probate. After creating the trust, you fund it by transferring assets from your name (“Jane Q. Smith”) to the name of the trust (“Jane Q. Smith Living Trust”). The trust then becomes the legal owner of the assets, which can include real estate, vehicles, investments, bank accounts, and many other types of property.
During your lifetime, you can serve as both trustee and beneficiary of the trust, which means that you can manage and enjoy trust property just as if it were in your own name. When you become incapacitated or die, the successor trustee you have named takes over management of the trust.
After your death, trust assets can be distributed to the remainder beneficiaries you identified in the trust document. They do not have to go through probate.
Beneficiary Designations
Some types of assets are designed to easily bypass probate because they have beneficiary designations. A beneficiary designation is a legally binding instruction for who should receive an asset after your death. Assets that commonly allow or require beneficiary designations include:
- Annuities
- Bank accounts
- Brokerage accounts
- Health savings accounts
- Investment accounts
- Life insurance policies
- Retirement accounts like 401(k)s, IRAs, or Roth IRAs
Property with a beneficiary designation passes automatically to the named beneficiary outside of probate. Some people forget (or don’t realize) that an asset has a beneficiary designation, and try to leave it to someone else in a will. When that happens, the beneficiary designation prevails. To avoid unintended consequences, work with an attorney to create your estate plan.
“Transfer on Death” (TOD) Deeds
“Transfer on Death” deeds are a particular type of beneficiary designation used to transfer real estate. As the name suggests, a TOD deed allows you to transfer real estate directly to a chosen beneficiary upon your death. The beneficiary has no legal right to the property before your death, and you can change your beneficiary at any time before you die or become legally incapacitated.
To be effective, a TOD deed must be notarized and must be recorded before your death in the county clerk’s office for the county in which the property is located.
Joint Tenancy with Rights of Survivorship
If real estate is owned by two or more people as joint tenants with rights of survivorship, when one owner dies, the property passes automatically to the surviving joint owner(s) by operation of law and there is no need for probate involvement.
Unlike with a TOD, a joint owner in this scenario does have legal rights to the property during other joint owners’ lifetimes, and their creditors may be able to reach the property. If you are uncomfortable with this prospect, you may not want to hold property with another person in this way.
What if I Still Have Assets in My Probate Estate?
Many, if not most, people in New Mexico die with at least some assets in their own name. However, if you are able to reduce your probate estate to less than $50,000 and the estate includes no real estate, you have what is called a “small estate” and can generally avoid court-supervised probate.
Avoiding probate can be a worthwhile goal, but remember that it’s not the only goal of your estate plan. Taking steps to avoid probate without considering the impact those measures have on your other planning goals can lead to unintended consequences, including conflict among your heirs.
To make sure that your efforts to avoid probate are aligned with the rest of your priorities, work with an experienced New Mexico estate planning attorney. To learn more about avoiding probate in New Mexico or to get help with your planning, contact The Law Offices of Dana M. Kyle, P.A. to schedule a consultation.