Probate Avoidance Strategies in New Mexico

Quick Summary: Probate Avoidance Strategies in New Mexico

• Probate is the formal process for handling someone’s estate, but it can introduce delays and costs.
• Payable-on-death accounts and 401(k)s with named beneficiaries can be used to legally transfer assets outside of New Mexico’s probate courts.
• More-complicated strategies can be used to avoid probate, too, such as a transfer-on-death deed (TODD) or a revocable living trust.
• Estate planning can reduce or even eliminate the amount of estate assets that enter probate.

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

The probate process in New Mexico can consume time, money, and resources from your estate while burdening loved ones. In some cases, it can also expose an estate to claims and contests that may have otherwise been avoided. 

Reducing exposure to probate requires careful estate planning. Using just a few simple arrangements, you can transfer assets and real property to their rightful heirs almost immediately after your death. For more complex estates, arrangements like a living trust can provide customizable benefits, while potentially reducing the size of your probated estate to nothing.

The right strategy for you depends on your goals, your family situation, and the unique characteristics of your estate. Schedule a consultation with New Mexico Financial & Estate Planning Attorneys to find out more. Call us at (505) 503-1637 or contact us online to schedule your confidential, no obligation appointment with an experienced probate avoidance lawyer.

How Avoiding Probate in New Mexico Works

Avoiding probate in New Mexico is possible through several legal and financial strategies. These include bank accounts with a payable-on-death beneficiary and investment accounts with a named death beneficiary.

In addition, half of your community property in New Mexico automatically passes to your spouse upon your death unless other provisions are made in a will or trust.

When you reach out to an estate planning lawyer to discuss your options, they’ll first review your current asset portfolio to see if any assets could easily be arranged for an out-of-probate transfer. 

Depending on the nature of your estate, including its total value, the number of properties owned, your exposure to creditor liability, and other factors, the attorney you meet with may recommend forming a trust. While trusts require money, time, and legal procedures to set up, the ultimate benefits are usually worth it.

Benefits of Avoiding Probate

Using probate avoidance strategies as part of your estate planning can deliver the following benefits:

• Speed up transfers to loved ones to help pay debts and settle affairs of your estate.
• Avoid public disclosures that can come from will transfers, keeping assets and family matters private.
• Force creditors and other claimants to prioritize any probated property, possibly preventing them from pursuing assets like the family home (provided there is enough money in the probated estate to repay all debts).
• Reduce the size and complexity of your probated estate.

If your probate-able estate is reduced to $50,000 or less, it may even qualify for a transfer via a small estate affidavit in New Mexico, allowing it to bypass probate entirely. Using this affidavit, a survivor could transfer the remaining assets into their name using an Affidavit of Successor in Interest. This process can take place just 30 days after a death, settling the estate’s affairs quickly.

The Easiest of New Mexico Probate Avoidance Options: Adding Account Beneficiaries

Beneficiary designations in New Mexico are one of the simplest ways to streamline your estate plan while avoiding probate. Many financial services providers like Vanguard, Fidelity, and Bank of America offer simple forms you can complete online in connection with your IRA, 401(k), or personal investment account.

When you pass, your named beneficiary can begin the transfer process immediately. They will likely need to provide a death certificate and proof of identification to complete the transaction, but that’s much less effort compared to putting the assets through probate.

Similarly, banking institutions allow you to name a transfer-on-death (TOD) or payable-on-death (POD) recipient for each account. You may be able to complete these forms online, but you may also need to go to one of their offices to complete a physical form and provide identification. Similarly, your beneficiary may need to claim the account in person to complete the transfer paperwork, especially if the account was at a smaller banking institution.

Transferring Real Property Outside of Probate in New Mexico

Real property, including homes and land, is the most valuable type of asset within many estates. Transferring these properties during probate can be complicated, as they have to be retitled by the executor in order to be sold or transferred.

To avoid probate, many states require that someone be listed as a joint tenant with rights of survivorship (JTWROS). These deeds confer co-ownership to the named party as soon as they are added. Each owner has no right to transfer their interest in the property to another party, so long as another joint tenant survives. This arrangement can also create complications, including the inability to transfer an ownership interest to an heir if other living joint tenants remain on the title.

Using a Transfer-on-Death Deed in New Mexico

Fortunately, residents of the state can use a transfer-on-death deed in New Mexico to transfer property, bypass probate, and avoid the complications that can come with rights of survivorship (NM Stat § 45-6-405).

Joint tenancy with rights of survivorship in New Mexico may be preferable for some families, especially when the property is meant to go to a surviving spouse or family caretaker. 

Consult with an estate planning attorney to review your goals and concerns. They will help you craft a personalized estate plan that accounts for the strengths and weaknesses of each type of deed before helping you decide on the one that could work best for you.

Creating a Living Trust as Part of Your Estate Plan

A trust is a legal arrangement where a trustee manages and cares for property on behalf of the trust’s beneficiaries. Once created, a trust could last a long time, even generations after the trust creator (known as the “grantor”) has passed. 

To ensure continuous asset management in the event of their medical incapacitation or passing, the grantor should name a series of possible trustees. The trust can then endure as long as the grantor intended, with their preferred choice of individual or institution as an enduring trustee. Without a named successor, a court would need to assign someone to act as the trustee, unless the trust’s terms provide for another process to select and approve a successor trustee.

When used for probate avoidance, trust arrangements most often take the form of a New Mexico revocable living trust. Here’s how one typically works:

• The grantor drafts a trust instrument document, which names a trustee, designates successor trustees, names beneficiaries, and sets the rules of the trust.
• The grantor transfers property into the ownership of the trust, in care of the trustee.
• The trustee, who can be the same person as the grantor, follows the rules of the trust, including making distributions from the trust to beneficiaries at appropriate times.
• When the grantor dies, the current trustee must follow the rules for what to do next. Depending on the arrangements the grantor made, this may mean that the trustee:
  • Keeps the trust active, allowing it to continue for the benefit of survivors and, possibly, new generations of family members.
  • Restructures the trust according to the grantor’s estate plan, such as by changing it to a charitable remainder trust.
  • Completely distributes the trust’s contents to its beneficiaries, dissolving the trust.

The rules you set for your trust can be flexible, and they will have a dramatic impact on the outcome of your estate plan. When your trust is revocable, you can also change the trust’s details as long as you have the mental capacity to do so.

Consult with an attorney to get guidance and decide on the optimal arrangements for your legacy.

Using a Pour-Over Will in Combination With a Trust

Another advantage of starting a trust is that you can instruct your estate’s personal representative to transfer all remaining outside assets into the trust after your death. This arrangement is known as a pour-over will, as it instructs your executor to pour over all non-trust assets into the trust during probate.

Creating a pour-over will can be as simple as naming a trust as your probated estate’s sole beneficiary. However, you can also consider alternatives, such as distributing some of your probated estate to non-beneficiary heirs, reserving the rest for the trust, itself. 

Reach out to an attorney to discuss New Mexico wills and estate planning and learn more.

New Mexico Probate Avoidance FAQ

What assets automatically avoid probate under New Mexico law?

The following assets may transfer outside of New Mexico probate:

• A payable-on-death (POD) or transfer-on-death (TOD) banking, credit union, or other financial account
• 401(k)s, IRAs, pensions, and other retirement or investment accounts with a named beneficiary
• Life insurance policy proceeds
• Property with a transfer-on-death deed (TODD) or a joint tenancy with rights of survivorship (JTWROS) deed
• Property transferred into a living trust during the grantor’s lifetime

How does a transfer-on-death deed work for real estate in New Mexico?

To create a transfer-on-death deed, the property must be retitled. This is accomplished through the same process that would take place after the owner sold the property or decided to add a co-owner to the title.

Any new transfer-on-death deed should be drafted using careful legal language, with consideration for the property itself and the goals of the current owner(s). The deed must then be recorded at the office of the county clerk in the county where the property is located.

Can creditors still make claims against assets that bypass probate in New Mexico?

Yes. If the remaining assets in an estate are not enough to fully cover the decedent’s debts, the creditors of the estate may be able to seek estate assets not transferred through probate. However, certain trust structures may make it difficult for creditors to pursue their assets, especially if the grantor created an irrevocable asset protection trust that gave their trustee discretionary powers.

What is the current small estate threshold that allows New Mexico families to skip formal probate?

Estates with a value of $50,000 or less that do not contain real property may be eligible for a small estate affidavit transfer in New Mexico.

Talk to an Attorney About New Mexico Estate Planning Without Probate

New Mexico Financial & Estate Planning Attorneys specializes in helping you craft a personalized estate plan, one that accounts for both the present and the future. By taking measures to avoid probate and simplify asset transfers after your death, you can help your loved ones breathe easier during a difficult time.

Find out more about probate avoidance and other estate planning options when you call our office at (505) 503-1637 or contact us online to schedule a no-obligation case review.