A (Very) Brief Primer on Estate Planning
Estate planning can seem overwhelming, but the right attorney can make it easier and help you cover all of your bases.
In order to give you a framework for the decisions you need to make, let’s start with a very brief outline of what an estate plan is and how it works. This outline is not comprehensive, it is not New Mexico-specific, and it is not meant to provide legal advice. It is simply a way to get you familiar with the basic process and terminology involved in the estate planning process.
Typical Estate Planning Documents
There are only three or four documents that make up a typical estate plan. They are a Will (which only takes effect after you die), two powers of attorney (which are in effect during your lifetime but cease to be in effect when you die), and in some cases a trust (which can take effect during your lifetime or when you die). You can change any or all of these documents at any time during your lifetime unless you become legally incompetent.
Wills and Powers of Attorney
Your Will controls the disposition of any property you owned individually at the time of your death. (It does not control the disposition of property you owned jointly with another person, property with a designated beneficiary, or property you had already placed in a trust.) Your Will also indicates your wishes regarding who will settle your estate (your executor, personal representative, or administrator; this article will use the term executor) and who will raise your children (their guardian). Note that the court does not have to follow your wishes with respect to these appointments, but in most cases it will.
Powers of attorney give the person named in the document (called your attorney-in-fact or agent; this article will use the term agent) the authority to act on your behalf if you cannot do so because of disability. Property powers of attorney give the agent the authority to act on your behalf with respect to financial matters, and health care powers of attorney (also called health care directives) give the agent the authority to make medical and health care decisions on your behalf. If you become disabled and both of these documents are in place, you most likely will not have to resort to a court-appointed guardian and conservator; people with whom you need to deal (financial institution, health care facility, etc.) should accept the signed power of attorney as authorization to work with your agent just as he or she would work with you.
Trusts are extremely flexible tools that can work both during your lifetime and after your death. Basically, a trust is a legal entity that can “own” property and is governed by whatever terms the trust agreement contains. Trusts can be revocable (you can change the terms) or irrevocable (you can’t change the terms), they can be created jointly with others or alone, they can dictate what happens to trust property years into the future―the possibilities are (nearly) endless.
The most common type of trust used in estate planning is the revocable trust (also called a living trust), and that is the type of trust we will refer to in this article. If funded properly, a revocable trust allows you to avoid probate (but see below) and also allows you to exercise control more easily over how your assets are used and when they are distributed.
The Truth About Probate
If you own individual property worth over a minimal amount at the time of your death, your estate will “go through probate.” This usually is not the horrific experience that people expect. Often using forms supplied by the local court and often with the assistance of an attorney, your executor presents your Will to the court and the court verifies that the Will is valid. (Technically, this is the “probate” part of the process.) The court issues a document that gives your executor the authority to deal with estate assets, your executor deals with the assets and reports back to the court when the work is done, and the court closes the process. If minor children are involved, the court also officially names a guardian for the children and often requires annual check-ins to ensure that the guardian is doing a good job. And that’s it.
This is not to say that probate is not worth avoiding if possible. Some legitimate downsides to probate include:
- Added expense. While most jurisdictions do not require attorney involvement in the probate process, most people do retain an attorney to ensure that everything is done properly, and while an attorney’s work may be limited in a straightforward estate, there will be fees involved. There also likely will be court filing fees and, in some jurisdictions, additional probate fees based on the value of the estate.
- Delay. Different jurisdictions have different rules, but typically the probate matter will need to remain open for several months to a year or more. While most of the actual work can be accomplished early in the process, many people find it unpleasant to have to wait so long before they can feel that everything is done.
- Publicity. The probate process is public, which means that your Will, asset inventory, and so forth can be obtained by anyone with a legitimate interest (which may as well be everyone). As a practical matter, this is rarely an issue; if, however, you are a private person and/or your estate plan contains provisions that you would rather keep private, you should be aware of the possibility of disclosure.
In short, if the rest of your circumstances make it possible or advantageous to own no property in your individual name when you die, then probate avoidance can be a nice side benefit of your plan. In and of itself, however, probate avoidance does not need to be your primary goal.
Taking The Next Steps
Whether you use an attorney or go it alone when preparing your estate plan or going through probate, you should always at consult a qualified estate planning attorney to explain the scope of your situation and any landmines you might be facing. Our firm handles estate planning and representation in probate matters throughout the state of New Mexico. You can contact us at (575) 339-2100 and we’ll be happy to discuss your case.
Author: Julie Kester is an estate planning attorney with New Mexico Legal Group. She is based in Las Cruces, but represents clients throughout the state of New Mexico in all areas of estate planning and probate.