Quiringh Gerritsz. van Brekelenkam (Dutch, after 1622 – about 1669), Family Group in an Interior, Dutch, about 1658 – 1660, courtesy The J. Paul Getty Museum, Los Angeles.

Wills

Everyone should have a will.

A will determines what happens to your property at death. Even if all of your known assets have been disposed of through trusts, insurance policies and other non-probate instruments, a will is still an essential document for appointing agents for administration, identifying relatives to be skipped over or dispensing bequests, inserting a no-contest clause, leaving funeral or burial instructions, and directing previously unknown assets to beneficiaries or trusts.

One of the most crucial reasons for having a will is to provide for the future of minor children. Parents with minor children or other dependent relatives should definitely have a will to provide directions for the guardianship and care of minor children and others who cannot care for themselves.

A properly executed will can provide for domestic partners and loved friends, for a church or charity, or even for pets. In combination with a testamentary, revocable, or irrevocable Trust, a will can provide additional security for those left behind.

Without a properly executed will, New Mexico state laws governing intestacy determine how a person’s property is distributed at death. The laws of intestacy are based on traditional ideas of fairness and provide a plan for a division of property between a surviving spouse, children and other relatives. New Mexico law also protects some of the value in a home or personal property for the spouse and family. However, the rules of intestacy do not fit many family and personal situations. A will is a much more effective way to achieve your wishes.

What happens without a will?
When a person dies without a will or if a will is not valid, New Mexico laws of intestacy protect surviving spouses by passing the decedent’s separate property automatically to a surviving spouse if there are no children. If there are children, the surviving spouse takes 25% of the deceased spouse’s separate property and the children take 75%. Without a will, the one-half of the community property which the decedent could have willed passes in intestacy to the surviving spouse.

If there is no spouse and no children, then property is passed in intestacy to the next of kin. If there is more than one person who has an equally close relationship with the deceased person, those equally close kin would share equally. Without a spouse or children, inheritance passes to the deceased person’s parents, and if they are not living, then to other children of the deceased person’s parents, i.e. the deceased person’s siblings, and then to their children. If necessary, because there are no siblings or nieces and nephews, then the law looks further up the family tree to the deceased person’s grandparents and their children, grandchildren etc.

(See Chapter 45, Article 2 NMSA 1978 for the full hierarchy). If there is no family member, however distant, the intestate estate passes to the state, but this is a very rare occurrence, when there are no heirs whatsoever.

What is the difference between Community and Separate Property?
New Mexico is a community property state. In general, all property that is accumulated by either spouse in a marriage through earnings is considered community property.  Community property is divided 50%-50% to each spouse. When one spouse dies, his or her one half of the community property may be disposed of by will.

Separate property includes property acquired before marriage, gifts and inheritances received by the person making the will and damage awards received from lawsuits. Separate assets that are commingled (for example, used for household expenses or mixed into joint bank accounts) may also be transmuted or turned into community property. A will covers how an individual’s property is divided on death. If the deceased person is married, then the will can define how all of the deceased spouse’s separate property and his or her one-half share of community property are distributed. The person making the will can decide what happens to this property and to whom it will be given.

Will there be estate tax?
All US citizens now have an exemption from the federal estate tax of $11,400,000. An estate below this amount owes no estate tax. Together, a married couple have a total estate tax exclusion of $22,800,000. New federal law allows the estate of the surviving spouse to benefit from any unused federal estate tax exemption of the estate of the first spouse to die. This provision is referred to as “portability.” Any unused exclusion amount may be carried over to the surviving spouse’s estate. The high threshold beneath which there is no estate tax means that few American families will ever pay estate tax. For most families a bypass or credit shelter trust is no longer necessary for the purpose of “sheltering” assets against estate tax. (See the Trusts page for other reasons why it may be beneficial to include a trust in your estate planning.) Special planning may be required for non-US citizen spouses, who do not receive the same estate tax exemption as citizens.

Durable Power of Attorney and Health Directives.
A durable power of attorney is a document in which an individual names another person as their agent or “attorney in fact.” The individual authorizes the agent to act on his or her behalf with third parties such as Social Security, Medicare, banks, landlords, title companies, stockbrokers, etc.

Most often, a durable power of attorney only comes into effect if an individual cannot act for himself or herself. Either one or two doctors must determine that an individual no longer has capacity. If the individual regains capacity, the power of attorney will no longer in be in effect. “Durable” means that the agent can still act when the person granting the power of attorney becomes disabled.

How can a living Will or health directive help in the event of physical or mental disability?
Planning for your own future includes giving advance instructions on the health care that you want if you are unable to state your decisions due to illness or incapacity. You name a trusted person who will ensure that your wishes regarding health care are carried out. You may also wish to set clear instructions or limits for the medical circumstances in which your life should be prolonged, based on your personal values or religious and spiritual beliefs.

How can you protect your minor children?
It is extremely important to name a guardian for minor children in a will. If one parent dies, then State law gives preference to a surviving parent, unless there is a very compelling reason for not doing so. An adoptive parent has the same rights as a biological parent. A stepparent does not. If both parents of a minor child die, a guardian will be named. A court will decide who should be guardian, but a court will ordinarily give serious consideration to the nomination of a guardian in a deceased parent’s will.

You can secure the financial future of minor children by establishing a trust for minor children or young adults who may not have the financial skills to manage an inheritance. A trust may be separate, or a testamentary trust may be included in a will. A trust can include instructions for how funds are distributed for a minor’s benefit, for example, for educational purposes or to cover anticipated special needs. The trust can also be set up so that assets are held until a minor comes of age or a young person achieves certain goals.

Sometimes insurance benefits or unused retirement benefits may be the key to children’s financial security. This should be discussed with your estate planner.