A "living" trust (also called an "inter vivos" trust) is simply a trust you create while you're alive. The beneficiaries you name in your living trust receive the trust property when you die. You could instead use a will, but wills must go through probate—the court process that oversees the transfer of your property to your beneficiaries.
Many people create a revocable living trust as part of their estate plan. You can modify or revoke (cancel) this type of trust at any time. Typically, you'll name yourself as the "trustee" of your trust. This means that while you're alive, you retain control of the trust and its property. In your trust document, you'll also name a "successor trustee" to take over and manage the trust after you die; this person will distribute the property in the trust to your beneficiaries. (If you create a shared living trust, as is often done by married couples, then your successor trustee would assume control after both spouses have died.)
In contrast, irrevocable trusts cannot be revoked or modified after they are signed. Irrevocable trusts can be useful tools for specific goals, like reducing taxes, but they require giving up ownership and control of trust property.
When you set up a living trust to transfer your property to your loved ones after your death, you can potentially save them time, hassle, and money. Property left through a will (rather than a living trust) might be tied up for months or even years in probate court, and could involve court costs and lawyers' fees. By contrast, property left through a trust can be distributed to your beneficiaries almost immediately, and often without the need for an attorney.
Fortunately, New Mexico is one of the states that has fully adopted the Uniform Probate Code, a model law that streamlines the probate process. In other words, probate in New Mexico might not be quite as cumbersome as it is in other states. In addition, New Mexico offers simplified probate processes for "small" estates. In New Mexico, an estate can actually skip the probate process altogether and use a simple affidavit procedure instead if:
In addition, New Mexico offers a shortened probate process known as "summary administration." Your estate can qualify if the value of the estate doesn't exceed certain allowances (amounts reserved for spouses and children) and expenses like funeral expenses and the costs of the last illness.
If one of these shortcuts is likely to be available to your estate, you might not need to create a living trust just to avoid probate. You could also very reasonably decide that a will is sufficient because New Mexico offers a relatively streamlined probate process compared to other states. In New Mexico, you can also transfer real property using a transfer-on-death deed; this can keep your home out of probate without using a living trust.
Still, there are a few other advantages of making a living trust. (See Living Trust vs. Will.)
Yes, you'll still need a will. This might seem confusing—isn't the point of a living trust to avoid needing a will? Yes, it is, and your will might never be used. But you should still write one, for one or both of the following reasons:
If you don't have a will, any property that isn't transferred by your living trust or other method (such as joint tenancy) will go to your closest relatives as determined by New Mexico state law.
Probably not. Most people do not need to worry about federal estate taxes because the federal estate tax is levied only on estates worth close to $12 million. New Mexico does not have its own estate tax.
That said, if you have an estate worth close to $12 million (or you and your spouse or partner have a combined estate of close to $24 million), you might be able to use a more complicated trust (such as an AB trust) to reduce or avoid estate taxes.
To make a living trust in New Mexico, you:
You can use WillMaker & Trust to make a living trust using your computer. It has a simple interview format that allows you to complete the trust at your own pace, and it gives you lots of legal and practical help along the way. Based on your responses, the program produces a living trust document customized for you and your situation. With WillMaker & Trust, you can also make a will, powers of attorney, health care directives, transfer on death deeds, and many other useful documents. Use it just for yourself or for your entire family.
For more on New Mexico estate planning issues, see New Mexico Estate Planning.