Beneficiary Designations in New Mexico

Quick Summary: Beneficiary Designations in New Mexico

• Bank accounts, investment accounts, and retirement accounts can include a survivor beneficiary, arranging for automatic transfer or payment after the account holder passes.
• Account beneficiary designations in New Mexico invoke a non-probate transfer, meaning surviving loved ones have quick access to cash and assets.
• Beneficiary designations override instructions in estate planning instruments like a will, but conflicts can create uncertainty or even disagreements among survivors.
• Account holders should regularly review beneficiary designations with the help of an estate planning lawyer in New Mexico.

Need immediate help? Contact the New Mexico Financial & Estate Planning Attorneys. 

Beneficiary designations are one of the simplest and most effective methods for transferring property after your death. These transfers occur outside of probate, as well, making them a quick, efficient, and effective solution. They are especially useful during times when cash is badly needed, helping quickly settle debts or support dependent family members after a death.

The only difficulty with estate planning using beneficiary forms in New Mexico is that there can be dozens of different accounts to keep up with. Those using the strategy must be thorough, keep everything up to date, and avoid conflicts with other estate planning methods.

New Mexico Financial & Estate Planning Attorneys can assist you with setting up accounts and other financial mechanisms, like life insurance policies, to include a death beneficiary. Whether you want to use these methods to transfer a single account or nearly your entire estate, we can help you incorporate beneficiary designations within a comprehensive estate plan.

Call (505) 503-1637 or contact us online to schedule an appointment with an experienced estate planning attorney near you.

What Types of Accounts Can Use Beneficiary Designations?

Nearly every type of asset-holding account can include a beneficiary designation, subject to the policies of the account provider.

Some of the most common types of accounts with beneficiary designations include:

• Banking, checking, and savings accounts
• Credit union accounts (other than loans and lines of credit)
• Certificates of deposit (CDs) and money market (MM) accounts
• Investment and brokerage accounts
• Annuities
• 401(k)s
• IRA (Roth and traditional)
• Other pension and retirement funds

In addition, death beneficiaries can be added to the following other assets or instruments:

• Life insurance policies
• Individual stock and bond certificates
• Certain closely held equity and debt shares in a business
• Real property titles (using a transfer-on-death deed)
• Vehicle titles (using a transfer-on-death deed)

There may be other assets, accounts, and instruments that can accommodate a death beneficiary, as well. Review your institution’s policies and refer to an attorney with any questions you have.

An attorney can help you complete documentation fully and accurately while incorporating your beneficiary and transfer-on-death designations in New Mexico within a larger estate planning strategy.

How Can I Select a Beneficiary?

You may need to refer to each individual institution’s policies and provided resources to fully understand how to record your preferred death beneficiary.

In many cases, you will be able to select a beneficiary using a simple online account management tool. In others, you may need to submit physical paperwork to the institution providing the account.

The information you must provide will differ between institutions, but in all instances, your selection should include the beneficiary’s:

• Full legal name
• Relationship to you
• Date of birth

You may also need to provide the beneficiary’s Social Security number, especially for banking accounts.

Depending on the institution, you may be able to split your account assets among multiple beneficiaries when you pass. In most cases, this can be done using a set dollar amount or a percentage.

Your recipient does not need to be made aware that they have been selected as your beneficiary, but informing them is advisable under most circumstances.

Make sure to confirm the process with each individual institution to ensure that your selections have been fully made and recorded according to their policies. You can refer to an experienced estate planning attorney for guidance.

How Can I Go About Revoking or Updating Beneficiary Designations in New Mexico?

The process of revoking or updating a beneficiary designation is typically the same as registering your first choice. In most cases, you will merely need to go into the institution’s account management system or submit updated paperwork. You may be able to remove chosen beneficiaries without having to provide a replacement, although you are advised to select a replacement soon to avoid having the account’s assets become intestate.

Updating beneficiary designations in New Mexico should be done every few years. It should also be done after major life changes such as marriage, divorce, death of a selected beneficiary, or a significant change to your estate plan.

What Does It Mean When a Beneficiary Transfer Skips Probate?

One of the biggest advantages of selecting retirement account beneficiaries in New Mexico is that the transfer can occur as soon as five days after your death, in most cases, without the need for the assets to first go through probate.

During probate, your personal representative is responsible for submitting your will, paying off your debts, and settling other final affairs. They must give creditors a chance to submit claims against your estate, which can take up to a year.

All of these procedures take time, typically 6 to 12 months. More complicated estates, such as those dealing with a will contest or a lawsuit, could remain in probate for several years. During this process, your personal representative may end up needing to spend a substantial portion of your estate’s assets on professional services, estate expenses, litigation, and so forth.

Before any of this happens, a transfer can be made to your retirement account beneficiaries in New Mexico. They can benefit from an infusion of cash, helping them pay their own bills and potentially settle expenses related to your estate. These probate-skipping transfers can, therefore, be helpful to both your surviving beneficiaries and the estate itself.

How NM Beneficiary Designations Override a Will

Beneficiary and transfer-on-death designations in New Mexico occur outside of probate, superseding any instructions contained in a will. If a will bequest and a transfer-on-death arrangement list two different beneficiaries, then the TOD designation will always override the will.

However, an institution or a person with a legal interest in the property may be able to have the transfer-on-death or beneficiary designation set aside. This could revert control of the asset to the will or make the property intestate. However, there would need to be a legal justification for a beneficiary designation to be set aside. Usually, this occurs in connection with improperly completed paperwork or when the person designating a beneficiary lacked the capacity to authorize the transfer.

While overturning beneficiary designations is rare, be aware of the conflicts that can arise when someone thinks they are going to inherit cash or an asset through a will, only to have it go to a different designated beneficiary. You should be thorough and seek to avoid such conflicts when creating a will in New Mexico.

An attorney can help you during this process. They can review all of your accounts alongside your will (and other estate planning documents) to look for beneficiary designation conflicts in New Mexico.

What About Employee Retirement Plans and Life Insurance Beneficiary Rules in New Mexico?

Employers and insurance companies are, to a certain extent, able to set their own life insurance beneficiary rules in New Mexico. 

One common rule to be aware of is that your spouse may be selected as the default death beneficiary. You may need your spouse to sign a consent form for plans like Public Employees Retirement Association (PERA) benefits if you intend to leave your benefits to someone else.

Can I List a Trust as a Beneficiary?

Yes. A trust can be listed just like any other beneficiary for accounts, transfer-on-death deeds, life insurance policies, and similar instruments.

Make sure that your trustee (or successor trustee, if you are the primary trustee) is aware of this arrangement. Ideally, the trustee will receive instructions for submitting the information needed to complete the transfer after your passing. Life insurance beneficiary rules in New Mexico, for example, typically require you to submit a copy of the trust instrument or some other proof of the trustee’s authority before a final transfer can take place.

Keep in mind, too, that living trusts in New Mexico become irrevocable after the death of the grantor (or all co-grantors). You will want to ensure that your trust not only has language incorporating the transfer but also guiding the trustee as to who should ultimately receive them and how the assets or cash should be managed before they are transferred to their beneficiaries.

Common Beneficiary Designation Mistakes to Avoid in NM

Below are some of the most common mistakes that can lead to stress, conflict, or unintended consequences when using beneficiary designations.

Not Including a Contingent Beneficiary

If your first choice of beneficiary dies, cannot be located, or otherwise cannot accept the transfer, then the related account or assets are likely to become intestate. To avoid this, make sure to include a contingent beneficiary as a backup. While very few accounts have contingent beneficiary requirements in New Mexico (meaning it is optional to designate one) you should consider selecting one as a matter of due diligence.

Forgetting That Another Arrangement Overrules Your Beneficiary Designation

Properties titled as joint tenancy with right of survivorship (JTWROS) do not allow a co-tenant to transfer their property interest to anyone other than their surviving co-tenants. As such, a transfer-on-death deed (TODD) is likely to be set aside, and the share of interest will instead be absorbed by the remaining surviving tenants.

Situations like these illustrate the need to watch out for beneficiary designation conflicts in New Mexico. An attorney can help you review your holdings to look for title issues and other conflicts that could result in difficulties for your estate.

Failing to Leave Enough Money to Pay Estate Expenses and Debts

One way or another, your estate’s expenses and debts must be paid. If there is not enough money left in your probated estate to cover these costs, then creditors and other claimants may be able to reverse transfers to beneficiaries, place a lien on transfer-on-death properties, or submit a direct claim upon non-probate assets.

For this reason, make sure to take steps to make debts manageable for your personal representative and others handling your estate. You could even instruct family members to cover estate expenses from the proceeds of payable-on-death accounts in New Mexico, but keep in mind that, unlike instructions left in a will or trust document, these requests aren’t legally binding.

Usually, the best course of action is to pay down debts during your lifetime and ensure there is enough “residue” in your estate to cover taxes, creditor claims, and other probate expenses.

Get Help Reviewing All of Your Accounts and Avoiding Conflicts in Beneficiary Designations

New Mexico Financial & Estate Planning Attorneys can assist you with incorporating beneficiary designations into your overall strategy. Arranging these types of transfers can be highly beneficial for both your surviving loved ones and your estate itself, so don’t overlook your ability to use them to your advantage.

Find out more and get started on building a complete estate plan when you call our firm at (505) 503-1637. Contact us online to schedule a no-obligation appointment.