Many clients come to us because they have heard they need to create a will. While everyone should definitely ensure that they have a plan in place in the event of their death, a will isn’t always the best way to do that. In many cases, a trust can be a much more effective tool to help people to achieve their estate planning goals.
How Does Probate Work In NM And Should I Avoid It?
Contrary to popular belief, trusts are not just for millionaires or business owners with large estates. One of the most common reasons to opt for a trust instead of a will is to avoid probate. Probate is the process of transferring a deceased person’s assets to the beneficiaries designated in the deceased person’s Will or to his or her statutory heirs if there isn’t a Will. It is initiated through the probate court or district court in the county where the deceased person was living at the time of his or her death, and in any county where the deceased person owned real estate at the time of his or her death, if different. Unlike other states around the country, probate in New Mexico is not overly complicated or expensive. For that reason, it is not something that people should fear or base all of their planning around. However, probate does open the opportunity for the will to be contested or its validity question, and it also creates a substantial delay in actually transferring the property to the beneficiaries. Not to mention the fact that assets can be taxed at a much higher rate than they would be if transferred within a trust.
When A Trust Is A Better Option Than A Will
Trusts can be established during your life, or can be established at death as part of your Will. To avoid probate, you would establish a trust during your life so that the trust would govern your assets at the time of your death, rather than requiring probate. One reason you may want to set up a trust during your life would be for administrative ease if you own property in more than one county or state. Doing so would avoid having to open probate in multiple counties or states, which could be cumbersome. Trusts can also be a great option for those who are entering their golden years as your Trust can guard your assets and govern how they are used when your no longer in a position to do so. For example, the trust can fund your retirement home and monthly expenses according to your wishes even while you are still alive, as opposed to a will, which only takes effect after your death.
Here are a few additional reasons why you might want to set up a trust during your life or as part of your Will:
- You want or need ongoing management of your assets after your death: this is important if your intended beneficiaries are under age 18, are disabled, or would otherwise need assistance or oversight with managing assets.
- You want to provide for someone during their lifetime, but then want any remaining assets to go to your desired recipient: this is a common situation with blended families, where spouses want to provide for each other, but ultimately want their share of the remaining assets to go to their own children.
- Tax planning: there are different tax strategies, too lengthy to be described here, that trusts can accomplish which can save you and your heirs’ money.
- You desire privacy for you and your family and do not wish your estate to dealt with on the public record.
What Type of Trust Is Best For Me?
There are a variety of factors that can determine what type of trust will work best for you. Many of these factors are dependent on your heirs. Some people, for a variety of reasons, have mental and physical incapacities and there are many other people who are simply very bad managing money, and for one reason or another, should not be left in charge of their own investments. In these cases, trusts can help protect your hard-earned assets as well as your loved one’s best interests. The trust can either take the form of a revocable trust or an irrevocable trust. If revocable, terms can be changed as needed. If irrevocable, the terms of the trust typically, cannot be changed. Usually, in cases of an irrevocable trust, the grantor (creator of the trust) is not the same person as the beneficiary of the trust.
One example that we see commonly is when adult children are stepping in to assist a parent with the management of their assets due to an illness, old age, or some other debilitating event. Establishing a trust with the assets in the parent’s name so that they can be managed for his or her benefit is a good way to assure continuity and care of the assets, as well as the well-being of the parent. Another example is creating a trust for the benefit of a child with a disability. This can be a very good estate planning technique. Family members who have a disability may be relying on government benefits that prohibit them from having assets in their own names. A special needs trust is a great way to provide for needs that a person might have over and above what the government benefits are providing while protecting their access to those benefits. Finally, a trust for adult children can play a positive role in their lives by providing assets that typically cannot be attacked by creditors and clearly designates the inherited assets as the child’s sole and separate property. This can protect their inheritance even from partners or spouses who may not be there to stay.
How Can I Get Help With A Will Or A Trust?
If any of these situations apply to you, then a trust may be a better solution for you. Contact one of our Albuquerque estate planning attorneys at Genus Law Group today to set up your free consultation and see how we can help you accomplish your goals!