Why Can't I Have a Trust?
When you open your newspaper and a pink flyer falls out telling you to come to a seminar about trusts, does that make you wonder why you do not have one too? It seems like everyone has trusts these days. Should everyone have trusts, as the flyer seems to imply? Maybe I should have one and my lawyer just forgot to tell me. Why do some people have trusts and other people do not?
Revocable inter vivos trusts, which are also called “living trusts,” are vehicles to hold assets while you are alive. There are many reasons why people have one, and in New Mexico there are many good reasons why you do not need one.
One of the reasons that you might hear that you need a revocable trust is to avoid probate. Using avoidance of probate as the only reason to create a trust in New Mexico might mean that you are being sold a more expensive estate plan than you need. New Mexico has adopted the Uniform Probate Code. The county Probate Courts in New Mexico do not collect taxes on probate estates. What this means is that in New Mexico, probate is relatively inexpensive and simple. In other states, probate often means delays, appearing in court, paying court fees, and paying probate taxes. In New Mexico, the fee for opening informal probate with the Probate Judge is $30.00. The creditors’ claim period is 60 days. While the Personal Representative must prepare an inventory of the assets in the estate, and prepare a final accounting for the beneficiaries of the estate, these two documents do not have to be filed with the Probate Court. Instead, the Personal Representative files an affidavit with the Probate Court swearing that the two documents have been prepared and provided to each of the beneficiaries. There are no court appearances in informal probates in New Mexico. The assets of the decedent and the distribution amounts to each beneficiary do not become public information. However, the Will does have to be filed, and it does become public record. In general, though, avoiding probate alone is not a reason to obtain a trust.
Sophisticated federal estate tax planning for very large estates can be accomplished using Wills rather than trusts in New Mexico. Wealth alone is not a reason to do a revocable trust.
There are many good reasons to put assets into a revocable trust, however. Those reasons include owning real estate in more than one jurisdiction, planning for the incapacity of the grantor so that assets can be managed by a trustee for the grantor during lifetime, distinguishing separate and community property assets in a blended marriage, managing assets for unmarried couples, managing complicated assets such as business interests that are controlled by corporate documents, and privacy if you do not want the details of your Will to be public record.
Not everyone needs a revocable trust, and not everyone should have a revocable trust, if the estate planning is done properly.