New Mexico Estate Planning: Do You Need More Than Just a Will?

Surprisingly, the majority of Americans do not have a will, let alone a more comprehensive estate plan to either avoid probate, minimize estate taxes, or both. However, it is rarely too early to at least consider whether it is time to start formulating and memorializing a plan for what will happen to your estate after your death. What type of plan you should consider may depend on several things: your age, health, etc. Below, you’ll find tips for different categories of people and what they might want to consider as far as estate planning is concerned.

Single People In Their 20’s or 30’s

At this younger age, there usually is not a need to invest a significant amount of time, thought, or energy into estate planning, unless you are incredibly wealthy, you live a particularly risky lifestyle, are suffering from a serious illness, or have minor children. If you are an unusually wealthy twenty-somethings and thirty-somethings, or have minor children, a will by itself is generally sufficient. A will allows you to designate who should take which of your belongings, property and other assets upon your death as well as designate a guardian for your minor children. If you were to die without a will, the majority of your property would likely go to your parents or siblings in accordance with New Mexico intestacy laws (for more information see our article regarding what happens when you die without a will).

People Who are Sick And/Or Over Fifty

If you are in this category, now is definitely the time to take steps toward estate planning if you have not already done so. Start out with the basics, and consider a plan which includes probate-avoidance devices like living trusts, etc. Also determine whether you need to be concerned with estate taxes, and write a will or bring an old will up to date. Next, consider whether you should plan for incapacity (through the use of a durable power of attorney, and medical power of attorney with advanced directives), meaning whether you should formulate a plan for who will handle your finances if you are still living, but are unable to do so because of illness or injury. Though it is an unpleasant possibility, failure to plan for incapacity can have negative consequences as a judge will be forced to appoint someone to handle your finances for you. As with a court-appointed guardian for children, a judge’s choice may not be ideal to you.

People In Relationships, But Who Are Unmarried

If you are in a relationship but are unmarried, it is essential that you have a will if you wish to leave property to your significant other. Without one, New Mexico intestacy laws will kick in after your death, and will ignore your partner and distribute your assets to your relatives instead. An unmarried partner will usually be left with nothing, unless a couple has legally registered as a domestic partnership or has been joined in a civil union. Civil unions are not permitted in all states. In ensuring that your partner is not excluded from inheriting, you can make sure that your most expensive property is owned jointly. Houses, cars, etc. should be owned by you both in “joint tenancy” with rights of survivorship. This way, if one partner dies, the property automatically passes to the surviving partner, who then owns it outright. Use of joint tenancy title interests can be an effective way to pass property and avoid probate (see our article for more information on reasons to avoid probate).

People With Young Children

People with children under the age of eighteen should certainly have a will. One of the most important aspects of a will is that it allows you to dictate who should care for your children in the event of your death, if the children’s other parent is unavailable to do so. If you do not name a guardian, the court who handles your estate will be forced to appoint one. This is not always a bad solution, but can often result in someone caring for your children who you may not have necessarily chosen if you’d had the opportunity. A court will not be familiar with the children, your family, or your wishes, and as such, it can be a very impersonal process if there is no will to determine who the guardian should be.

You should note also note that if you do not have a will at the time of your death, a portion of your property may go directly to your children, and the remainder to your spouse. Though this may seem ideal, it is not always desirable to allow young children to inherit large sums of money, as a surviving spouse may have to get the court’s permission in order to invest the money or access it at all. Another option to consider is purchasing a life insurance policy that would effectively replace your earnings, and thereby provide for your family if you died without a will. Term life insurance is generally affordable, particularly for those who are younger and do not smoke. Life insurance can be an essential part of estate planning, we generally recommend term life insurance and advise clients to stay away from whole life insurance.

Having children generally prompts people to honestly consider estate planning. Although, you should keep in mind that your plan for your assets may change in ten to twenty years. If that happens, an estate plan can be easily revisited and changed- so you should not avoid creating one simply because it may change in the future. As an Albuquerque estate planning lawyer we try to draft documents that will last a long time, but circumstances change. Once circumstances do change, we recommend implementing such changes immediately as a delay could mean missing the opportunity to make any changes at all. I’ve personally dealt with a case where an elderly family member wanted to make changes to her will but decided to wait until after the weekend to handle such changes; unfortunately she passed away before such changes could be made.

You should first look to creating a will, and you can later consider other estate planning tools, like those discussed below:

Revocable Living Trusts

A revocable living trust will avoid probate, thereby saving your loved ones time, money, and the hassle that come along with the probate process.  A living trust is relatively easy to create, and will allow your assets to pass directly to the heirs of your choosing after your death. During your life, the trust will have no effect, and can be revoked by you at any time. After your death, however, the property put into the trust can be easily and quickly transferred, on the terms that you chose during your life. For more information see our articles about livings trusts and avoiding probate, benefits of trusts, or that answers frequently asked questions about trusts.

Payable-on-Death Accounts

Payable-on-death accounts are another relatively easy method for avoiding probate and ensuring that your assets end up where you want them to. You can essentially turn any bank account into a POD account by filling out a simple form obtained from a bank, and specifying who is to inherit the contents of the account upon your death.

Reducing Estate Taxes

Not many people have large enough estates that they should worry about estate taxes. Tax will only be charged to an estate if the decedent gives away more than $5.25 million in his or her lifetime (which for most people, happens exclusively at death).  If you do end up with an estate large enough to be taxed, you can attempt to avoid such taxes altogether, or reduce them, by giving away a portion of your property before death. However, if you give away more than $14,000 per person per year, the overage will count against your lifetime limit of $5.25 million, mentioned directly above. But essentially, you could give $14,000 a year to each of your children or relatives every year, and thereby decrease the total of your estate subject to estate taxes after death. Also, gifts directly to your spouse, and payment of tuition bills or medical bills will be tax exempt. Please note that the above numbers will adjust for inflation as time goes on.

Of course for anyone with questions remaining see our Frequently Asked Questions about Wills. Also do not hesitate to contact our office to schedule a free consultation with one of our estate planning experts.