Frequently Asked Questions in Probate
What will happen to my property when I die?
What happens to your property depends on what arrangements you have made, in writing, prior to your death.
Those who want the most certainty about how their property gets transferred following their death should have an attorney prepare a trust. There are several different types of trusts. A trust may be established to take legal possession of your assets while you’re alive after you lose capacity, or after your death. A trust would be directed by the person you name as trustee. You may serve as the trustee, or you can designate a spouse or other person to serve as trustee.
A trust allows you to name intended beneficiaries, ensuring that property transfers can avoid probate, creditor claims (for irrevocable trusts), and most forms of legal contests. Consult an attorney with regard to different consequences as to who will be the trustee.
If you have a last will and testament properly prepared by an attorney, otherwise known as a “will,” then most of your property gets distributed to your beneficiaries according to your instructions. If you do not have a will, your property may get distributed through intestate procedures.
In New Mexico, for any deceased person whose total assets (their estate) exceed a value of $50,000, their will or estate (even without a will) may need to go through probate. Probate is a procedure through the Court where the details of the will are verified, and individuals like creditors and contesting parties can raise objections to the execution of the will as written.
If the Will is uncontested, a petition may be filed to open probate through a county probate court. However, if the Will is contested, if there is uncertainty as to the validity of the will, or other legal issues arise, the petition must be filed in district court to probate the will.
The Court appoints a personal representative to oversee how property gets distributed to your beneficiaries. Probate generally tries to name a representative in accordance with the language of your will, unless the validity of the will is contested or there is another valid legal reason for not doing so.
If all known wills are declared invalid or the decedent died without drafting a valid testamentary instrument, then the Court orders distribution of property according to the laws of intestate succession (see 2006 New Mexico Statutes 45-2-101 through 45-2-114). Generally, intestate laws will award the property to the surviving spouse and children of the decedent. If the decedent had neither, then other, more-distant relatives might inherit, such as parents, siblings, or even aunts and uncles.
There are some forms of property/assets that do not need to go through probate in order to be transferred upon your death. These include bank accounts, property put in a living trust, life insurance benefits, funds for retirement accounts like IRA or 401(k), property owned in joint tenancy, and any property or funds designated by a transfer-on-death or payable on death document. These holdings/assets will instead go to the named beneficiaries.
Do I need a Will?
Legally speaking, there is no requirement to form a will.
However, most people have some desire to distribute property to certain people following their death. If a person dies without having made a valid will, then the Court will distribute property according to the laws of intestate succession (see 2006 New Mexico Statutes 45-2-101 through 45-2-114).
Generally speaking, the laws of intestate succession will only award the property to certain family members. It may be costly for family members to probate an intestate estate just to ensure the property is distributed according to law.
In such arrangements, it is impossible to designate a specific property to go to specific people without a will or trust. Therefore, anyone concerned about distributing property according to their wishes, and not an all-or-nothing system executed by the Court, should have a will prepared by an attorney, in conformance with statutory guidelines.
A will can also dictate specific wishes not related to property, such as how you would like your remains handled, who will obtain custody of your minor children (should you not have a surviving spouse), who will inherit your pets, what funeral services may be held, and whether you would like certain acts to be performed in your memory, such as a charitable donation. A will can also set instructions for the formation of a trust, the transfer of certain properties, and other instructions.
How can I ensure my property is distributed to the people I want my property distributed?
Placing property in a living trust ensures that the named beneficiary receives the property while having the transaction avoid going through probate. A revocable living trust gives you control of the trust’s management and rules until the time of your death.
Aside from this information, it helps to know that there are three main concerns when trying to avoid a situation where your property might go to someone other than to whom it was intended:
- An improperly written will could be declared invalid, meaning intestate laws would instead dictate who receives your property.
- Someone could contest the will, asserting that they have rights to property contrary to what the will says because of a particular legal reason.
- Creditors and lien-holders could have the right to access the estate or specific property first in order to resolve unpaid debts.
The first and second scenarios can be avoided by ensuring that you engage the services of an experienced estate planning attorney in order to prepare a valid will. You must let your attorney know if you had a previous will or other documents that exist that could contradict your preferred version of the will. Any alternative versions of your will should be destroyed to avoid a will being contested or declared invalid.
The third scenario can only be avoided by paying off all debts in full before your death. You may also want to look into establishing a trust specifically for the purpose of paying off debts after your death or placing part of your estate you want to shield from creditors within an irrevocable living trust. It is generally advised to settle debts with creditors prior to your death to avoid legal action that could jeopardize your intended wishes.
When is it required for my Will to be probated through Court?
In New Mexico, if the total value of the estate exceeds $50,000 the will must go through the Court to be probate. An estate worth less than $50,000 is considered a small estate. Another scenario may be that a financial entity requires Letters Testamentary from a Personal Representative for an heir to access a bank account, or investment account. There has also been the situation where a transfer on death deed was incorrectly drafted or filed in the wrong county requiring probate.
Note that property placed in a living trust is considered separate from the decedent’s estate, meaning that the property instead goes to the named beneficiaries. So, while a will may still be executed and need to go through probate, the property placed in the trust is not of concern during these proceedings.
Is it possible to avoid the cost of probating my estate through Court after I die?
Yes, but only if all assets are transferred to a living trust, revocable trust, or irrevocable trust.
Another situation may be that you have no real property and all other assets are arranged with appropriate transfer-upon-death documents prior to your death. You should still have a will prepared by an attorney that lists how you desire your property to be left, and is consistent with how you have arranged your transfer upon death documents.
Your estate planning depends on your individual situation and the extent and value of your property.
When should I have a trust?
There are several reasons to have a trust, and most people will have more than one reason. The most common reasons to form a trust include:
- Avoiding the risks, costs, procedural burden, and length of time of probate.
- Avoiding situations where a will could be contested, or someone could seek to declare the will invalid.
- In some cases, shielding assets from creditors or other claimants by placing them in an irrevocable living trust.
- Ensuring that specific instructions are followed dictating the transfer of property, such as only allowing the transfer of funds to a minor relative once they reach their 20th birthday.
- Wishing to prepare for future scenarios in addition to death, such as wanting to set aside money for someone to manage your finances and obligations should you become medically incapacitated.
- Channeling funding for a specific purpose, such as establishing a trust that can pay for the care of a pet following your death.
There are many other reasons to establish a trust. Someone does not need to have lots of money or property to be able to benefit from the legal certainty and security a trust can provide.
If you have any specific wishes after your death or in the event of an incapacitating medical condition, then you should speak to a legal professional about how a trust might ensure those wishes are someday carried out.