New Mexico Probate Exemptions & Distributing Assets
The last step in administering an estate is paying the allowable debts and distributing the assets. Although this is not difficult, it is an area where many questions can arise.
The experienced attorneys at New Mexico Probate & Estate Lawyers are here to help you navigate this process.
Paying Allowable Debts
Before the estate can be distributed, the allowable debts must be paid. The personal representative should have already taken steps to learn of any creditor claims. Once the time to make claims has passed, the personal representative should know the total amount of claims against the estate. Also, because the personal representative also prepared an inventory, they should know the total value of the estate.
If there are more allowed debts than assets, this is the end of the process. The personal representative pays debts on the order of priority (which is set by law) until no money is left. Any remaining debts are unpaid, and there is nothing to distribute to the beneficiaries. However, if there is money left, then the personal representative can proceed to the final step: distributing the estate to the beneficiaries.
There is one important exception. The probate code provides for personal and family allowances, which are relatively small allowances for payments to certain close family members that take precedence over creditor claims.
Distributing Personal Property
An estate will almost always have personal property to distribute. Personal property can be things like vehicles, the contents of a house, jewelry, firearms, etc. In an estate with a will, the will may direct who should get certain types of personal property. When the will does not say where the property should go, the personal representative will have to decide.
Most of the time, the personal representative will know that a certain percentage of the estate must go to each beneficiary. For example, three children might each inherit one third of an estate. The percentages are measured in terms of the value of the estate. If the estate contains only money, the calculation is simple: each child gets a third of the money. But what if it also contains property? One answer is that the property can be sold. But often the PR or beneficiaries will wish to give property to beneficiaries. This is called distributing “in kind.”
To distribute property in kind, the personal representative must estimate the value of the property. The PR does this when preparing the inventory. So, if the estate contained $200,000 and a home worth $100,000, the PR might give the home to one child and $100,000 each to the two other children. Each child has received an equal portion of the $300,000 estate.
Distributing Real Property
The simplest way to deal with real property is, of course, to sell it. Often, however, the beneficiaries have attachments to the property and would like to keep it in the family. This means distributing it in kind. Careful attention should be given to distributions of property.
Real property is more complicated to distribute in kind than personal property. Although accounting for it is not difficult, it requires more work to determine its ownership status, how it should be treated, and how it may be conveyed. Property ownership is an area where many non-attorneys have misunderstandings of how the law works, and this part of administration can often benefit from an attorney’s help to do it correctly.
Not all real property will need to pass through probate. Two common types of deeds transfer ownership automatically on death. First, the property may be owned as a “joint tenancy” with other owners (usually, a spouse). When a joint tenant dies, their share of the property essentially disappears, leaving the other joint tenants with ownership and nothing for the estate. Second, a transfer on death deed can automatically transfer ownership to someone else upon the grantor’s death. There are limited exceptions to both of these rules, so you should seek legal assistance to ensure that these types of properties are handled correctly.
If the property is in the estate, the personal representative will need to determine the nature of the rights owned by the estate and whether there are any other owners. With that information, the personal representative will be able to determine what may be conveyed to the home. That, in turn, will dictate what type of conveyance may be made to distribute the property in kind.
Distribution Problems Specific to Wills
While a will can make it easier to distribute property (by specifying who gets what), it can also add complications. What should happen when the will leaves property to someone but the property is no longer in the estate? What if the beneficiary is no longer alive or cannot be found? What if the beneficiary does not want the property? Even the best wills can run into these sorts of wrinkles. An estate attorney can help answer these questions when they come up. We are here to help you understand New Mexico probate exemptions & distributing assets.
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