Are thinking about getting started on an estate plan? If so, there are a lot of possible routes you can take to prepare. One of the methods you can use is to make a living trust. This article will guide you through creating a living trust in New Mexico, laying out all of the steps and looking at the pros and cons of using a living trust as part of your estate plan. If you’re just starting with estate planning or if you’ve been trying and you’re at a loss, a financial advisor may be able to help. SmartAsset has a free financial advisor matching service you can use to find an advisor who serves your area.
Here are the steps to making a living trust in the Land of Enchantment:
A living trust is a legal framework, established by a document, that can be used to store property and assets. A trustee is in charge of ensuring the property and assets stored within the trust are distributed to the trust’s beneficiaries according to its instructions. You can name yourself as trustee or pick someone else. Many people choose their child or another trusted relative to serve as trustee.
There are two main types of living trusts. The first is an irrevocable living trust, which is more permanent. Once property is placed in an irrevocable living trust it cannot be removed without the permission of everyone named in the trust. The trust wholly owns the property stored in it, and taxes are paid via the trust.
A revocable living trust, meanwhile, offers more flexibility. The person who creates the trust, also known as the grantor or settlor, can modify the trust and remove property from it as he or she wishes. The grantor maintains ownership of the property and thus pays taxes on it as normal.
The cost of creating a living trust depends on the method you use to do it. One way to create a living trust is to use an online program and write the trust yourself. This will likely cost a few hundred dollars or so. The other option is to hire an attorney to help you draw up the trust. This option will probably cost at least $1,000, with the exact cost depending on your attorney’s fees.
While it is cheaper to make a living trust by yourself, there are some potential pitfalls to DIY estate planning. It requires a lot of attention to detail, so if you’re not going to put the time and energy into the research needed to get it right, you may be better off getting a lawyer. Just make sure the lawyer is a trust specialist rather than just an estate planner, and make sure you know the lawyer’s fees upfront to avoid any surprises.
The reason most people form a living trust is so that when they die, their family can avoid going to probate court, a time-consuming and potentially costly process that can sometimes constitute an invasion of privacy. That isn’t as much of a concern in New Mexico, as the state has adopted the Uniform Probate Code, which simplifies the probate process. For this reason, a living trust might not be necessary in New Mexico, especially for smaller and less complex estates, though of course you’ll still need an estate plan.
There are other reasons a living trust might be worthwhile though. It can be helpful if you plan to leave property to a minor, as you can leave that property inside the trust under the trustee’s care until the child reaches a certain age. A living trust can also be helpful in the event you become incapacitated. As you’ll already have selected a trustee through your living trust, you’ll avoid conservatorship.
Living trusts certainly aren’t only for the wealthy. However, the fact that New Mexico has adopted the Uniform Probate Code means that unless your estate is especially large or complex, creating a living trust may be more trouble than it’s worth. Additionally, the state further simplifies the probate process for estates that are worth $50,000 or less.
There are downsides to living trusts that you should take into account when you’re deciding whether to get one. Living trusts are generally more difficult and expensive to set up than wills. Moreover, living trusts allow a longer time for legal challenges after you die, which could increase the likelihood of issues arising.
Even if you have a living trust, you’ll need a will to direct any property not placed in the trust. Additionally, wills have the following capabilities that living trusts do not:
For a better understanding of the similarities and differences between wills and living trusts, see the table below:
| Task | Living Trusts | Wills |
| Names a property beneficiary | Yes | Yes |
| Allows revisions to be made | Depends on type | Yes |
| Avoids probate court | Yes | No |
| Requires a notary | Yes | No |
| Names guardians for children | No | Yes |
| Names an executor | No | Yes |
| Requires witnesses | No | Yes |
Having a living trust likely won’t impact your taxes, but you should still know about the New Mexico estate tax and the New Mexico inheritance tax as you plan your estate.
Luckily, there is no estate tax or inheritance tax in New Mexico. The federal estate tax only applies to estates that are worth $12.06 million in 2022 or $12.92 million in 2023. Each of these figures are doubled for married couples’ estates.
New Mexicans may want to create a living trust if their estate is large or complex, but the state’s adoption of the Uniform Probate Code means that a living trust might not be necessary for smaller or less complex estates. If you do make a living trust, it’s possible to do it yourself but it can get complicated. For this reason, getting a lawyer may be a good idea.
Photo credit: ©iStock.com/djedzura, ©iStock.com/JannHuizenga, SmartAsset.com
Ben Geier, CEPF®Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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