Starting an estate plan can seem like a daunting task. There are several elements that can be included in your plan, but understanding what exactly they are can help you determine what works best for you. Below you will find a guide to the basics of estate planning, as well as what you can expect to see during the process.
Trusts and Wills
Trusts and wills are some of the most commonly known components of an estate plan. Many people assume they hold the same functions, when in fact they are very different. A will, also referred to as a “last will and testament”, is a simple planning document that specifies where your assets will go when you pass away. These are some of the easiest legal documents to produce, but they also have several shortcomings. The most notable of these shortcomings is that they are subject to probate as a public document. This means that any family member that objects to the terms of the will can dispute it and cause unnecessary rifts between family members.
Trusts, on the other hand, have several of the same capabilities but holding even more advantages. To create a living trust, a trustee must be appointed to administrate any assets you want to place within the trust. You can also place as many, or as few, of your assets as you wish into the trust, while still being able to use/spend them as you see fit.
Trusts can also be made revocable, which is difficult after drafting a will. This simply means you can give yourself the ability to amend the terms of the living trust throughout your life.
Here are some of the main advantages that trusts have over wills:
- They remain private documents
- They are not subject to probate, and are able to help avoid the process and expenses for many people
- Trusts allow for a great deal of control to plan for several different situations
- They allow you to customize the when/where/how/who of the distribution of your assets
- Trusts are much harder to challenge, making it less likely for loved ones to deal with a litigious dispute
With trusts providing much more in-depth control over your assets, they do take more time to draft and formalize. With the amount of administration they require, it is always wise to seek professional services when pursuing the creation of a trust.
Powers of Attorney
Powers of attorney include legal documents that allow another individual to make important decisions if you become incapacitated. There are 5 main types of power of attorney, that all aim to serve different situations.
- Simple power of attorney – the ability to make decisions on behalf of an individual while they are still alive and mentally competent, expiring when the principal passes away or becomes incapacitated
- Durable power of attorney – the individual can perform the same functions as simple power of attorney, but will still remain active when the principal becomes incapacitated
- Springing power of attorney – is only activated when an individual becomes incapacitated, usually by authorization of a doctor, and automatically expires when the principal passes or is no longer incapacitated
- Healthcare/medical power of attorney – gives the designated individual the ability to make decisions of medical care for the principal, within the parameters set by the principal, should they become incapacitated
- Business/financial power of attorney – authorizes the designated individual to make business or financial decisions, within the parameters set by the principal, should they become incapacitated
The state of New Mexico does not have an estate or inheritance tax, but it does not mean taxes won’t show up. An individual’s inheritance can be seen as a modification to a taxpayer’s income and can be subject to be taxed that way.
Even though New Mexico does not impose an estate tax on descendants who have passed away after January 1, 2005, an experienced attorney has the ability to minimize any taxes that may rear their heads during the estate planning process.
Properly drafted estate plans can also establish a legal guardian for your child(ren) when you pass away. Establishing a legal guardian can help provide a structured and secure future for your child in the future, and ensure they have the best chance of having a normal childhood.
Guardianship is automatically required for minor children with no surviving parents, and having a designated guardian for them can help save time and paperwork should the need suddenly arise. Establishing guardianship is especially useful for dependents that are not able to take care of themselves, such as those with special needs or disabilities, to help make sure they are properly taken care of should when you pass away.
Contact Our Albequerque Estate Planning Team Today
Taking the time to properly draft an estate plan can not only ensure your interests will be kept intact in the future, but can also help meet the needs of your family and dependents when the time comes. With a track record of success, we are ready and willing to help you create a personalized and cost-effective estate plan.
If you are interested in planning your estate, don’t hesitate to get in touch with us today through our website or give us a call at (505) 881-5155 to schedule a consultation.