Transfer on Death Deed in New Mexico

Quick Summary: Transfer-on-Death Deed in New Mexico

• A transfer-on-death deed transfers property to a chosen beneficiary as soon as five days after the original owner’s death.
• A transfer-on-death deed bypasses probate and overrides any transfers arranged in a will.
• Properties with a joint tenancy with right of survivorship (JTWROS) deed prevent transfers of ownership interest to anyone other than the remaining tenant(s).
• Creditors may still be able to file a claim on TOD properties if probate is opened and the estate does not have enough money to settle all creditor claims.

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

Transfer-on-death (TOD) deeds offer a convenient way for families and others engaging in estate planning to ensure that their cherished property ends up in the right hands. These deeds can be used for any titled real property, including primary residences, land, investment homes, vacation homes, and other real estate holdings.

One primary advantage of transfer-on-death deeds is that the transfer takes place without the need for probate. This mechanism reduces the time and administrative overhead required to complete the transfer, although it does not eliminate the property’s possible exposure to creditor claims.

If you are interested in using a transfer-on-death deed as part of your arrangements, you can reach out to New Mexico Financial & Estate Planning Attorneys for assistance. We can advise you on the best strategies available given your unique estate, goals, and selected heir(s). We may recommend a transfer-on-death deed, a living revocable trust, or another form of estate planning, depending on the characteristics of your estate and other key factors.

Schedule a confidential, no-obligation discussion and estate plan review with an experienced New Mexico attorney when you call our firm at (505) 503-1637 or contact us online.

How a New Mexico TOD Deed Works

New Mexico is one of 23 states to pass the Real Property Transfer-on-death Act. The provisions of this act allow property owners to declare one or more death beneficiaries on a specific type of title. After the interest share owner’s passing, this deed automatically transfers their interest while avoiding probate in New Mexico at the same time.

How to File a Transfer-on-Death Deed in New Mexico

To create a transfer-on-death deed, someone with an ownership interest in the property must draft a new title using the appropriate legal language. The title document should make their intentions clear, including the address of the property and who will assume title after their death.

To avoid complications or unintended consequences while meeting all of the standard New Mexico TOD deed requirements, the State Bar advises that property owners consult with an experienced attorney when drafting a new title.

Once the title is complete, it should be notarized and filed with the county clerk’s office in the county where the property is located.

A sample statutory version of a TOD deed can be found in New Mexico’s statutes (NM Stat § 45-6-416), although it includes its own suggestion that the filing party “may want to consult a lawyer before using [the] form.”

Eligibility Requirements to Transfer a Property Interest

In addition to knowing how to file a transfer-on-death deed in New Mexico, parties involved should also understand when they are able to do so. To be eligible to transfer their interest, the property owner must:

• Have the mental capacity to understand what they are doing and how it affects their estate plan
• Not be subject to undue influence, fraud, coercion, or misrepresentation

Property owners who don’t meet these requirements could cause a deed to be set aside by a judgment or court order. Property ownership would then revert to the last legitimate version of the title, which would often have the effect of making the property intestate if the owner has already passed.

In addition, the property owner should know the legal status of their ownership interest in the property, including whether the title is “cloudy” vs. free-and-clear, whether it is affected by a lien, or whether there are any co-tenants. None of these issues will inherently affect someone’s ability to transfer their ownership interest using a TOD deed, but they can make things more complicated. They can also affect someone’s ability to receive title insurance on the property.

If you have any questions about the status of a title, either as a property owner or the recipient of a TOD deed transfer, you can refer to a New Mexico probate and estate planning attorney.

Contingent Beneficiaries

A property owner can list one or more contingent (i.e., “backup”) beneficiaries of a transfer-on-death deed in case the original intended recipient dies first or otherwise can’t inherit the property.

It is advisable to include at least one contingency beneficiary. Owners should also revisit any TOD deeds (and other estate planning arrangements) often to ensure the document reflects their current wishes and aligns with the objectives of their overall estate plan.

Revoking a Transfer-on-death Deed

A transfer-on-death deed can be revoked at any time (NM Stat § 45-6-406), as long as the property owner has the capacity to continue to do so. The revoked deed should immediately be replaced by an equivalent document that meets New Mexico’s county clerk recording requirements. 

The new document could be another TOD deed, a simple single-owner deed, a tenancy in common deed, or whatever type of deed the property owner would like to use. The key is that the owner makes it clear who holds the current ownership interest in the property now. Listing who might receive that interest in the future is optional.

The ability to revoke the deed provides flexibility. This is why the document is sometimes referred to as a “revocable transfer-on-death deed” in New Mexico.

Creditor Claims and TOD Deeds

TOD deeds can sometimes create issues when real property transfer in New Mexico makes up the bulk of an estate’s value. The estate may have trouble paying for its expenses and bills if the house must be transferred intact. Other parties may feel left out of an estate plan if one heir inherits the entire home.

One major area of concern is whether a TOD deed could lead to a creditor claim on the property if probate is opened. While these transfers occur outside of probate, the transferred property is still subject to creditor claims. If there is not enough cash “residue” in the estate, and the personal representative does not have assets they can liquidate to cover the cost of claims, creditor claimants may be able to place a lien on the TOD property. Creditors may even be able to reverse the transfer, in some cases, placing the property back into the estate’s asset pool.

If you are dealing with creditor claims now or want to prepare for them as part of your estate planning, you can reach out to New Mexico Financial & Estate Planning Attorneys for assistance. Senior Attorney Don Harris is certified in creditors’ rights by the American Board of Certification and can provide you with guidance when handling or preparing for claims.

TOD and Joint Tenancy

When multiple parties own a property through a simple tenants-in-common arrangement, each party is free to convey their interest to a survivor beneficiary using a document that meets New Mexico’s TOD deed requirements.

If, for example, a home was equally co-owned by two brothers, either could leave their share of interest in the property to their eldest child, respectively. Or, they could divide their interest among their children. Suppose one brother had two kids and died. If he left his interest in the property to both of them, divided equally, then each child would retain 25% ownership of the property while the surviving brother could hold onto their 50% share.

Note that these same arrangements do not apply if the property is co-owned under a joint tenancy with right of survivorship (JTWROS) arrangement. Under a JTWROS deed, each co-owner can only transfer their share of interest in the property to a surviving co-owner. 

In other words, the hypothetical brothers described above could only leave their share to a surviving brother upon their death. Only the last-surviving brother would have an interest that is free and clear to transfer to their children or some other party of their choosing.

TOD Deed vs. Living Trust in New Mexico

Another option for transferring property while avoiding probate in New Mexico is to place the property in a living trust. A trustee (who can be the property owner while they are alive and have capacity) is responsible for managing the property and any other assets held in the trust. Regardless of who the trustee is, the original owner (who is known as the trust’s “grantor”) can continue to live in the home.

The trust must also list beneficiaries to receive distributions of cash, assets, ownership interest, or other forms of interest according to the trust’s terms. Under some arrangements, these distributions will occur while the grantor is still alive. Or, as another option, the entire trust could distribute to its beneficiaries after the grantor’s death.

One advantage of having a trust is that the grantor can list a contingent trustee to step in if they or another trustee becomes mentally incapacitated. The grantor can also create more complex arrangements than a simple transfer-on-death deed would allow.

A grantor could, for example, allow children to live in the house after their death while ultimately leaving ownership interest to grandchildren. They can also give beneficiaries and trustees the right to sell an interest in the home if beneficiaries would rather receive liquid assets compared to inheriting the property intact.

Weighing Options for Transferring Property Outside of New Mexico Probate

Three methods for transferring property have been discussed above:

• Transfer-on-death (TOD) deeds, also known as a “beneficiary deed” in New Mexico
• Joint tenancy with right of survivorship (JTWROS) deeds
• Living trusts

All three of these methods allow property ownership to be transferred without the need for probate. This preparation speeds up the time needed to complete the transfer while reducing the possibility of complications during probate.

JTWROS Deeds

JTWROS deeds are the most limiting of these options, as any transfer intended for someone other than the co-tenant will be overridden by the co-tenant’s right of survivorship. The co-tenant could not, for example, sell their interest in the home to anyone other than their fellow co-tenants. They also likely need the co-owner’s permission before using their property interest as collateral for a loan.

TOD Deeds

TOD deeds can also be somewhat limiting in that they leave little flexibility for a trustee or personal representative to liquidate the property if cash is needed to pay estate bills or divide inheritances more evenly. However, they can work well for small families that don’t need to make flexible or complex arrangements.

Living Trusts

Living trusts offer the most flexibility. Compared to a beneficiary deed in New Mexico, they can allow the property transfer to be divided evenly among all current surviving beneficiaries. Or, the property can remain temporarily intact following the grantor’s death. 

Trusts can also contain other assets in addition to the property. Upon the grantor’s death, a pour-over will can be used by their executor to finish transferring the estate’s remaining assets into the trust. Or, the trust can immediately distribute its assets to beneficiaries while the remaining estate assets proceed through probate it all depends on the arrangements set.

Get Help Estate Planning Without Probate in New Mexico

New Mexico Financial & Estate Planning Attorneys can go over the unique details of your estate along with your goals, your concerns, and your ideal scenarios for the future. We can then recommend a TOD deed or alternative arrangement to best fit your objectives while benefiting the people you care about most.

Get information about transfer-on-death deeds and other estate planning arrangements during a confidential, no obligation consultation with an experienced New Mexico attorney. Schedule your appointment today when you call our firm at (505) 503-1637 or contact us online.