What is probate?
Probate is a legal process under the supervision of a court in which a person’s property is distributed after death. The State of New Mexico has set up a simplified probate process through the Probate Court that can be followed by individual personal representatives (also called the executor, a person named by the decedent in his will). The personal representative distributes the assets of the estate based on the instructions in the will if a will exists, and on the state laws of inheritance under intestate succession if there is no will.
The personal representative can file the probate on their own when estates are simple, well-organized, and there are no challenges or unexpected claims. Most often, however, probate is handled by an attorney who files the necessary papers on behalf of the personal representative in the court.
Similar tasks must be performed in every type of probate. In a formal probate, all heirs need to be notified and a hearing held before appointment of a personal representative. In an informal probate, notice is sent out to heirs after appointment. The creditors of the deceased person must be identified and paid. An inventory is done of all assets and property is distributed to the proper beneficiaries. Real property is transferred and deeds are recorded. A final income tax return, and if necessary, an estate tax return, is prepared.
Probate can be complicated if there is no personal representative named, wills are outdated, or there are conflicting claims for estate property. Persons not named or excluded from the will may make claims. Previously unknown assets and debts may be located. If the deceased owned real property in another state, an ancillary probate must be filed there as well.
From start to finish, most New Mexico probates take about two years to complete. However, 95% of the work is usually done in the first months of a probate. Steps such as publishing a proper notice to creditors can reduce the amount of time before distributions of the estate can be made.
The State of New Mexico has done all it can to make probate understandable to families. Probate does not even require a lawyer to be involved. The forms for a simple, uncontested probate are available for a free download from the website of the Supreme Court of New Mexico. Most probate judges and clerks will go out of their way to assist families at this difficult time. Nonetheless, probate can place a lot of stress on the families of the deceased, especially when there is family strife, where important assets do not have proper title, or the estate is complex. In that situation, an experienced professional can assist families to find the best and least costly solutions.
While there are minimal probate court costs, the majority of the expense of probate is in legal fees. An ordinary probate can cost between $1,200-$2,000 in legal fees - and higher costs should be expected in contested or complex matters. This cost often leads people to try to avoid probate by distributing property before death or by holding assets in nonprobate forms such as a trust, insurance policy or payable on death accounts - or by lifetime giving. While this can be a good strategy, it can also backfire by causing the heirs to be liable for excessive capital gains. It is often less expensive to probate a will than to take elaborate steps to avoid it.
The “probate estate” normally includes only a portion of the assets a person owned at the time of death. These are assets that do not automatically pass to someone else as a result of the person's death.
Ordinary bank and credit union accounts, CDs, stock or brokerage accounts, bonds, real estate, retirement accounts and IRAs without beneficiary designations, annuities without beneficiary designations, life insurance without beneficiary designations, and tangible personal property including everything from clothing and jewelry to art and other collectibles, unless these are placed in a trust.
Joint Tenancies. Under New Mexico law, joint tenants have a “right of survivorship”, which means that when one of the joint tenants dies, the other joint tenant gets the whole asset. The transfer takes place automatically and is not capable of alteration though a person’s will or trust. Assets that are sometimes held in joint tenancy by couples are ordinary bank accounts, real estate, cars, stock, brokerage accounts, and savings bonds.
Transfer on Death Deeds. New Mexico law also allows owners to execute a Transfer on Death Deed for real property that will transfer real property to a named beneficiary or beneficiaries automatically on death outside of probate.
Pay on Death or Transfer on Death Accounts do not pass through probate. These accounts have a named beneficiary (which can also be a trust) who receives the assets in the account automatically when the owner dies, but unlike a joint tenant, has no right to the assets before the owner’s death. Common forms of payable on death assets are bank accounts (P.O.D.), certificates of deposit (P.O.D.), credit union accounts (P.O.D.), stock (T.O.D.), and brokerage accounts (T.O.D.). The beneficiary named in the account is the person who will receive the assets. Naming a new beneficiary in a will does not change the beneficiary. Changes to the designated beneficiary must be made with the bank or holding company, usually on their own form.
Beneficiary Designated Assets are passed to a beneficiary outside of probate. Whether these forms of assets will automatically pass to another person through one of the automatic transfer processes, or will be a probate asset controlled by that person's will or by intestate law depends on the wording of the ownership and whether there is a named beneficiary. If there is a named beneficiary, the named beneficiary will receive generally the asset and the beneficiary cannot be changed simply by a devise in a will. Common assets in this category are life insurance, IRAs, pension plans, profit sharing plans, and annuities.
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