2008 Supplement to Life Planning in New Mexico, by Merri Rudd

(c) 2008 Merri Rudd, All Rights Reserved

Use this supplement for the 2004 4th Edition of LIFE PLANNING only! We're sorry we are unable to update earlier editions of the book. The following supplement contains part, but not all, of the new and revised material from the 2008 edition of LIFE PLANNING IN NEW MEXICO. The 2008 edition of the book is more than 40 pages longer and has extensive changes. Below are some of the most important changes. However, we are unable to include all of the new text from the 2008 edition of the book on this web page.

Chapter 1, Management During Illness or Incapacity

Due to New Mexico's new Uniform Power of Attorney Act (UPAA), effective July 1, 2007, Chapter 1 of the 2008 edition of the book has been totally revised. The changes are too lengthy to include on this web page. However, the entire law can be accessed using the instructions below.

Regarding the power of attorney form contained in Appendix 2, Form 1, pages 220-225 of the 2004 4th edition of book of LIFE PLANNING IN NEW MEXICO, the New Mexico legislature passed a new law about financial powers of attorney, the Uniform Power of Attorney Act (UPAA). UPAA contains a lengthy form that may be used for those who wish to update their financial powers of attorney. YOU ARE NOT REQUIRED TO USE THE UPAA FORM CONTAINED IN THE NEW LAW, but the information below should allow you to access the 60-page law and the UPAA form and decide whether you wish to update your financial power of attorney.

Under UPAA, powers of attorney executed before July 1, 2007 are valid if their execution complied with the law of this state as it existed at the time of execution. A power of attorney executed in New Mexico on or after July 1, 2007 is valid if its execution complies with the requirements for signing set out above.

pp. 220-225, delete old Form 1—New Mexico Power of Attorney Form and substitute the following:

Form 1—Information About Uniform Power of Attorney Act (UPAA) Form The power of attorney form contained in UPAA is too long and complex to include in the Appendix of this book. However, you can view a copy of the law that contains the form at New Mexico Laws. This web site contains all of New Mexico’s laws. To read UPAA, which contains a sample financial power of attorney, in the 'quick search' bar at the top of the screen, type "46B-1-301" including the quotation marks. Clicking the 'search' button should take you to a link for the law--click on the 3rd match, 46B-1-301. You should be able to cut and paste the “Statutory form power of attorney” into a word processing document. If you are using Microsoft Word, select “Edit, Paste Special, Unformatted Text” to avoid major formatting problems. Be sure to read the directions and cautionary language included with the UPAA form and to seek legal advice if you have questions.

Chapter 3: Planning for Nursing Home Care

Due to new federal rules governing transfers of property for eligibility for nursing home, Chapter 3 of the 2008 edition of the book has been substantially updated. The changes are too lengthy to include on this web page. However, selected updates are included below.

Chapter Three contains nursing home benefits eligibility figures from 2004. Below are the 2008 figures, which should be substituted when doing the math to determine eligibility if applying for nursing home benefits in 2008. These figures will change again in 2009.

Income Allowed: (starting on page 56, used throughout Chapter Three)

Average Monthly Cost of Nursing Home Care: (pages 65, 66)

Spousal Resources Allowed (CSRA between spouses): (pages 64, 76-78, 80, 89)

Minimum Spousal Income (CSMIA): (pages 71, 73-75, 89):

Maximum Spousal Income (CSMIA): (pages 71, 72, 73, 89):

Medicare Part B Premium: (page 72)

Personal Needs Allowance: (pages 73-75)

p. 60: Revised section on Eligibility for NHB: Resources, Single Applicants

Assuming their income meets HSD standards, individuals whose countable resources do not exceed $2,000 are eligible for the NHB program. Countable resources are any resources that the individual has the right to liquidate unless specifically excluded in the state regulations. For single appli¬cants, countable resources include the home unless certain exceptions apply, bank accounts, stocks, bonds, vacant lots, IOUs, real estate contracts and other resources. The applicant may also have up to $1,500 for burial purposes. This burial account, which must be kept separate, can earn interest.

The face value of liquid resources such as cash, savings or checking accounts is considered in determining Medicaid eligibility. The countable value of resources such as securities, bonds, real estate contracts and promissory notes is based on their current fair market value.

An HSD regulation allows a prepaid, irrevocably assigned life insurance policy payable to a funeral home to pay for specified burial services and items for any amount to be excluded as a resource. This means an individual can purchase an irrevocable insurance policy for a predetermined amount to cover funeral costs and name a funeral home as the beneficiary. If done properly, HSD would not count the policy as a resource, even if it were for an amount larger than $1,500.

Certain household goods and personal effects may be considered as countable resources if the items were acquired for their value or are held as an investment. Such items can include, but are not limited to, gems, jewelry that is not worn or held for family significance, or collectibles. Many household goods and personal effects are excluded from resources if they meet one of the following four criteria: (1) items of personal property, found in or near the home, which are used on a regular basis; items may include but are not limited to: furniture, appliances, recreational vehicles (i.e. boats and RVs), electronic equipment (i.e. computers and television sets), and carpeting; (2) items needed by the householder for maintenance, use and occupancy of the premises as a home; items may include but are not limited to: cooking and eating utensils, dishes, appliances, tools, and furniture; (3) items of personal property ordinarily worn or carried by the individual; items may include but are not limited to: clothing, shoes, bags, luggage, personal jewelry including wedding and engagement rings, and personal care items; (4) items otherwise having an intimate relation to the individual; items may include but are not limited to: prosthetic devices, educational or recreational items such as books or musical instruments, items of cultural or religious significance to an individual; or items required because of an individual’s impairment.

HSD always makes the resource determination as of the first moment of the first day of the month. The applicant is ineligible for any month in which the countable resources exceed the current resource standard. This means that if the value of the applicant's resources increases over $2,000 due to earning interest or appreciat¬ing, the applicant will not be eligible for NHB.

Unless a single person meets one of the exceptions listed in Chart 1, the home will be considered a resource. An absence of more than six months indicates that the home may no longer serve as the principal place of residence. If the applicant states a subjective intent, reasonable or not, to return home, the home will not be counted as a resource. If the applicant does not intend to return home, in most instances the home must be sold at fair market value and the proceeds spent down to the resource limits discussed above.

If the applicant owns the home with one or more individuals and the applicant has the right, authority or power to liquidate the property or his/her share of the property, it is considered a resource. However, this requirement does not apply if spouses or dependent relatives live in the home. If a property right cannot be liquidated, the property will not be considered a resource to the individual. The applicant/recipient must provide to HSD a copy of the legal document that indicates his/her interest in the property.

If the applicant/recipient owns other, either liquid or non-liquid resources, jointly with others, he/she has thirty (30) days to submit all documentation required to verify his/her claims regarding ownership of, access to, and legal ability to use the resource for personal support and maintenance. Failure to do so makes the resource countable and viewed by HSD as belonging to the applicant.

p. 65, delete old section Penalties for Transfer of Resoures and substitute the following:

In 1988 Congress passed the Medicare Catastrophic Coverage Act (MCCA) that contains provisions concerning the Medicaid program for people who require nursing home care. In 1993 the Omnibus Budget Reconciliation Act of 1993 (OBRA-93) amended some of these provisions. On February 8, 2006 the Deficit Reduction Act of 2005 (DRA) significantly changed existing transfer rules for all states.

New Mexico is required to follow the federal transfer rules and will issue regulations on NHB that include the transfer-of-resources penalties created by federal law.

Transfers of resources made on or after February 8, 2006 that take place within 60 months of application for NHB (otherwise referred to as a “look-back period”), apart from certain exceptions, are penalized. The look-back period is also 60 months for certain transfers to or from a trust.

For transfers made on or after February 8, 2006, the penalty period starts on the later to occur: the first day of the month in which the transfer is made or the date on which an applicant is eligible for NHB and is receiving institutional care except for the imposition of the penalty period.

For transfers made before February 8, 2006, the look-back period remains 36 months. The penalty period for these transfers runs from the first day of the month in which the transfer took place and not the date the applicant was institutionalized or applied for NHB.

For transfers made on or after February 8, 2006, if the transfer occurred within 60 months of the NHB application, the penalty (the number of months of no Medicaid coverage) equals the total uncompensated value of the transferred resources divided by the average monthly cost to a private patient of nursing facility services ($4,821 for applications made on or after January 1, 2008).

New federal regulations require states to count the fractional portion of the month when calculating transfer penalties for transfers made on or after February 8, 2006.

Example 1: Mary, a single woman, gave her home worth $80,000 (her only resource) to her friend Samantha, on April 1, 2007. She enters the nursing home on July 1, 2007, and her financial situation is such that she would qualify for NHB except for the application of the penalty period. There will be a 16.6-month penalty period from the date she entered the nursing home ($80,000 divided by $4,821 = 16.6 months’ penalty period). She will not be eligible for NHB until sometime in December 2008.

Example 2: Mary, a single woman, gave her home worth $69,000 (her only resource) to her friend Samantha, on January 1, 2006. There will be a 14-month penalty period from the date of the transfer ($69,000 divided by $4,821 = 14 months’ penalty period; pre-DRA rules allow the fraction to be dropped). Mary enters the nursing home 8 months later. She will not be eligible for NHB for 6 more months.

Example 3: Mary, a single woman, transfers her entire $200,000 estate to family and friends on January 1, 2007 and a few days later enters the nursing home. Applying the formula ($200,000 divided by $4,821 = 41.5), the resulting penalty period is 41.5 months from the date she is eligible for NHB and is receiving institutional care.

Example 4: Mary transfers her house on September 1, 2005. She enters the nursing home on November 1, 2008, 38 months later, and applies for NHB benefits. Under laws for transfers made prior to February 8, 2006, the look-back period is 36 months. Mary is not subject to any transfer penalties because, in this example, the transfer occurred more than 36 months before her NHB application.

Example 5: Mary transfers her house on September 1, 2006. She enters the nursing home on November 1, 2011, 62 months later, and applies for NHB benefits. Since the transfer occurred after February 8, 2006, the 60-month look-back period applies. Under current transfer laws, Mary would not be subject to any transfer penalties because the transfer occurred more than 60 months prior to her NHB application.

Chapter 4: New Mexico Law Regarding Wills

p. 98: delete old Adopted Children’s Rights and substitute the following:

According to New Mexico law, "An adopted individual is the child of his adopting parent or parents and not of his natural parents...." Most state laws treat adopted children as blood relatives of their adopting parents and as strangers to their natural parents.

Prior New Mexico Law: Prior to May 19, 2004, New Mexico’s law contained an exception to this general rule. Section 45-2-114(B)(2) read in part, “… adoption of a child by the spouse of either natural parent has no effect on: … the right of the child or a descendant of the child to inherit from or through the other natural parent.”

This meant that a child adopted by the new spouse of the child’s natural parent could also still inherit from both natural parents. This rule applied in intestate estates, where the decedent had no valid will.

Under prior New Mexico law, a child could have conceivably inherited from both natural parents and the stepparent who adopted the child.

Current New Mexico Law: In 2004 the New Mexico legislature amended this provision of the law. The law changed the four words “the other natural parent” to “that nonsevered natural parent.” New Mexico appears to be the only state in the nation to use this term.

The Fiscal Impact Report prepared by the Legislative Finance Committee when this law was still a bill confirmed that the law intends to amend intestate laws for adopted children. The report stated, “[This law] amends the adopted child’s intestate rights relating to the other, severed natural parent who was replaced by the adopting spouse. The bill limits intestate rights to the child and the nonsevered natural parent. The [law] eliminates intestate rights between the child and the severed natural parent.”

The report posited that the severed natural parent (the one who gave up his/her legal rights to the original child) may have another family, who also has inheritance rights. Once a child is adopted by a stepparent, it would be unreasonable to allow the child to inherit from three sources: 1) the nonsevered natural parent, 2) the adopting stepparent, and, 3) the severed natural parent. The legislature agreed, and the Governor signed the bill into law.

Despite this amended law, natural parents may want to include a child who was adopted by stepparents or others as a beneficiary of their estate. Even though they have no legal obligation to do so, they could create a will that stated their wishes to include that child.

Suppose Ruslyn is the natural child of Bert and Julia, who divorce. Julia marries Mark, who adopts Ruslyn. If all of the parents involved died without a valid will, under current New Mexico law, Ruslyn could inherit only from Julia and Mark, and not from Bert. If Bert does not want this to happen, he should prepare a will that states his intention to disinherit Ruslyn.

Does a natural parent have a financial obligation to a child who was adopted by strangers many years ago? No. If the natural parent wants to include that child as a beneficiary of an estate (and one has no legal or moral obligation to do so), the natural parent would need to make a will that states the wishes to include the child as a beneficiary.

p. 101, Name on Account/Property Determines Ownership, new material for Joint tenancy property:

Many deeds to houses or other real property contain the words “joint tenants.” Joint tenancy is a form of title in which an undivided interest with the right of survivorship belongs equally to all joint tenants. Joint tenants take title at the same time, by the same instrument, with equal interests, and equal rights of possession.

Adding someone to one’s home as a joint tenant can be unwise. Parents often add an adult child’s name as a joint tenant to a home. Parents who add children as joint tenants typically do not intend to give the children ownership rights over the asset. Instead, they usually add a child’s name to avoid probate. But once someone is on a deed as a joint tenant, they share ownership rights to the property, as well as liability for each other's debts. The home can be attached by creditors to pay the debts of any of the joint tenants named on the deed.

Problems can also arise if one joint tenant wants to sell the home and the other does not. One man added his daughter as a joint tenant to the deed of his home. The daughter had not contributed to the purchase of the home. Now that the man was older, he wanted to sell the home and move into an assisted living facility. The daughter refused to sign the deed transferring the home to the new owner. Without the consent of both joint tenants, the home could not be sold.

The man could bring a partition lawsuit to force a sale of the property if his daughter refused to sell. So in this situation, one could not remove a name or transfer full ownership without the consent of the other joint tenant.

A different scenario might involve one joint tenant wanting to convey his or her interest to a third party without the consent of the other joint tenant. The law allows one joint tenant to convey an interest to a third party without the other joint tenant's approval. This conveyance would sever the joint tenancy and create a tenancy in common. Even the U.S. Supreme Court has addressed this issue, stating that, “In order for one [joint] tenant to alienate his or her individual interest in the [joint] tenancy, the estate must first be severed–that is, converted to a tenancy in common with each tenant possessing an equal fractional share.”

While it may be legal to use a quitclaim deed to transfer one’s interest in a joint tenancy, such an action can create problems and litigation as to what share each actually owns.

TODDs have possible downsides. First, when a homeowner has more than one child, naming all the children as beneficiaries on a TODD may cause problems. Once the owner dies, the siblings will have to decide whether: 1) to keep the house; 2) to make improvements; 3) to rent it; or, 4) to sell it, for how much, and under what terms. Often parents have several children, some of whom are estranged or in constant conflict with one another. Setting up a TODD in that situation may avoid probate, but may not prevent a family feud.

Second is the issue of alternate beneficiaries. If an adult child dies and alternative beneficiaries are listed, a whole new set of problems may arise. The will may provide that a grandchild's share of the estate be held in trust until a child is 21 or older and may appoint a trusted friend as trustee of that child’s trust.

With a TODD, if the grandchild who receives a share of the real property as an alternate beneficiary is under 18, then (1) the child will receive their interest at age 18 (the age of majority); and (2) the person who goes to court to seek conservatorship to hold that interest until the child reaches 18 may NOT be the person the owner wanted to have that control. For example, the daughter-in-law that the parent never liked could be appointed conservator.

Third, many people insist on preparing their own TODDs rather than hiring a reputable attorney. This could be a mistake. Incorrect legal descriptions, ambiguity in naming the beneficiaries, failure to record the TODD during the owner’s lifetime, or other legal issues could invalidate the TODD. If a TODD fails, a court probate procedure would be necessary.

Fourth, a conflict may exist between the owner’s will and the TODD. For example, the will may say, “I leave all of my property in equal shares to my three children A, B and C.” But the TODD may only name Child A as the beneficiary. The TODD will “trump” the will unless fraud or undue influence is proven in a lengthy court battle. To be on the safe side, the owner’s will should reiterate the intention of the TODD in case the TODD is questioned or set aside after death. Having both documents refer to the same beneficiaries can prevent future problems.

Fifth, if a TODD beneficiary dies before the owner and no alternate is named, the transfer lapses and a court probate proceeding will be necessary.

Finally, title companies dislike TODDs. A title company is likely to ignore a TODD that is signed by an attorney-in-fact (i.e., an agent under a power of attorney) who is also a grantee (TODD beneficiary). To avoid this problem, some attorneys have modified their powers of attorney to provide the specific power to an attorney-in-fact to sign a TODD even if the attorney-in-fact is the TODD beneficiary. Despite these precautions, title companies may still be unwilling to insure a home passed via a TODD.

Also, title companies are reluctant to insure title to the house during the first year after an owner’s death. This is because the deceased owner’s creditors can reach TODD property for up to one year after death. Even if title passed via the TODD to the beneficiaries, the assets of the estate may be insufficient to pay claims against the estate and the family and personal property allowances. If so, the TODD transfer is “not effective” to the extent needed to pay those claims.

One title company refused to allow the record owner of a house to sell the house without the written consent of the TODD grantee beneficiary. This title company failed to follow TODD law, which explicitly states, “The signature, consent or agreement of or notice to a grantee beneficiary of a transfer on death deed is not required for any purpose during the lifetime of the record owner.” Nor does the TODD law require the grantee beneficiary to sign, consent or agree to any revocation of or change to a TODD. By law the owner has the full power to sell the house and revoke or change a TODD without anyone else’s consent. The title company’s failure to follow New Mexico’s law created unnecessary paperwork, expense and hassle for the record owner and attorney.

One other possible problem arises, for example, if the TODD is signed on a Friday and the owner/grantor dies the Sunday before the Monday when the TODD is recorded. According to the law, the TODD has no effect if it has not been recorded prior to the owner’s death.

If readers still want a TODD after considering these possible downsides, please hire a reputable, knowledgeable attorney to make sure the TODD is properly worded and recorded.

Income in Respect of Decedent

Many people have assets that are tax-deferred or have not yet been taxed, such as U.S. savings bonds, qualified retirement pensions, 401(k) and 403(b) tax-deferred plans, IRA’s, annuities, payments due under an installment sale, and royalties. These assets are considered income in respect of the decedent (IRD). Since taxes were not paid on these assets, the assets become subject to income tax.

These assets do not receive a stepped-up basis at the death of their owner and once these assets are redeemed or withdrawn by the beneficiaries, the income is considered “income in respect of a decedent” (IRD).

Taxpayers may defer recognizing the interest on E, EE, and I bonds until the bonds are cashed; or, alternatively, they may elect to report the accrued interest each year. Most people choose deference.

The IRD issue can arise when a taxpayer, who has deferred the interest, dies holding U.S. savings bonds, for example. At this point, the personal representative may elect to recognize the accrued interest on the decedent taxpayer's final individual income tax return rather than have the beneficiaries be responsible for the tax on the interest. Personal representatives who are unfamiliar with tax laws may not even know they have this choice. This election must be made by the due date, including extensions, for filing the decedent’s final return.

If the election is made, all of the interest earned on the bonds before the decedent's death would be included on the decedent’s income tax return. The estate or beneficiary would then include on its return only the interest earned after the date of death.

If an election is not made, the interest earned to the date of death is IRD and is not included in the decedent's final return. According to Publication 559, IRD must be included in the income of one of the following:

The decedent's estate, if the estate receives it;

The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it; or

Any person to whom the estate properly distributes the right to receive it.

Including the bond income on the decedent’s final income tax return may be the best move for decedents who do not have much income and who may have significant medical deductions (including long term care costs) in their final year, reducing their taxable income.

Recognizing the interest on the decedent's final tax return often results in lower total tax than if beneficiaries in higher tax brackets pay the tax on the interest when the bonds are later cashed. For large estates on which estate tax will be due, the election may also help because the income tax due as a result of recognizing the interest on the decedent's final return reduces the total value of the estate, thereby reducing the estate tax due.

One way a bond owner can continue to defer income tax liability is not to redeem the bonds. An owner could leave the unredeemed savings bonds to qualified charities by will, trust or beneficiary designation. Since qualified charities usually do not pay income tax, the charity can receive the full benefit of the U.S. savings bonds upon the owner’s death. For those who choose to redeem the bonds and pay the federal income taxes, at least in New Mexico, taxpayers do not have to pay state income tax on the bond interest income.

Publication 559 addresses IRD, as well as many other estate tax topics in depth. Publication 559 is available for free online at www.irs.gov or call 1-800-829-3676 to request a free copy.

p. 127, replace Revoking a Will with following section:

New Mexico law states that you may revoke a will by: (1) creating a subsequent will that revokes the previous will; or (2) performing a revocatory act, such as burning, tearing, canceling, obliterating or otherwise destroying the will with the purpose of revoking the will. You can also direct someone else to burn, tear or otherwise destroy the will in your presence.

Revocatory acts on the will may count even if the burn, tear or cancellation does not touch any of the words on the will. However, if the intent of the testator is not clear from the revocatory acts or there is some question about who actually performed the acts, a lawsuit could ensue.

Lawsuits can be long and expensive, and the more a family dislikes or distrusts each other, the more expensive lawsuits become. Creative arguments can be made to prove or disprove a testator’s intent, soundness of mind, or ability to be unduly influenced. A testator may intend to destroy a will by shredding or burning it, but forgets to destroy a copy of the will. Arguments could then be made in court about whether the copy should be admitted or whether the will was actually revoked.

If a subsequent will does not expressly revoke a previous will, the new will still controls if it disposes of all of the estate. If not, more evidence of your intent is required. New Mexico law does not say that you must be “of sound mind” to revoke a will, but a court would probably rule that you need to understand what you are doing when you revoke a will.

The safest way to revoke a will is to make a new will that completely disposes of your entire estate. Your new will should include language, such as, “This will revokes all prior wills and codicils made by me.” Be sure the complete date that you sign the new will—month, day and year—appears on the new will. You must be “of sound mind” when you execute the new will.

Some people write and sign a separate document stating that they wish to revoke their will. This method does not work in New Mexico! Even if a written revocation is signed in the presence of a notary public and the testator’s intent is clear, the New Mexico Court of Appeals has ruled that a separate, notarized document revoking a prior valid will does not constitute a valid revocation of the will under our state’s laws.

One other way that a will can be revoked is by divorce or annulment. Bequests made to an ex-spouse in a will executed prior to a divorce or annulment are revoked under New Mexico’s laws. Nominations of an ex-spouse to serve as a personal representative, executor, trustee, conservator, agent or guardian for the former spouse are similarly revoked upon divorce or annulment.

This method only revokes the portions of the will that pertain to the ex-spouse. The rest of the will would remain in effect unless it was revoked by a new will, codicil, or some other revocatory act discussed above.

Chapter 6: PROBATING AN ESTATE IN NEW MEXICO

p. 166, add to end of Introduction of Probate Terms:

The Uniform Probate Code (UPC) contains the laws that govern wills and probate proceedings within New Mexico. The UPC covers four types of cases: (1) informal probate (a will is submitted); (2) informal appointment (no will is submitted); (3) formal testacy (a will is submitted); and, (4) formal appointment (no will is submitted).

Technically, the term “probate” means the court procedure by which a will is proved to be valid or invalid. But common usage of the term “probate” has evolved to mean all matters relating to the administration of an estate.

p. 168, delete top paragraph and substitute the following:

Informal Proceedings: If the probate or proceeding is opened informally, the judge will not hold a hearing before signing an order appointing the personal representative. An informal appointment is a court proceeding to appoint a personal representative when the decedent has no valid will. Informal appointment proceedings may be filed in probate court or district court and are started by filing an application. No notice to interested persons and no hearings are required prior to the appointment of the personal representative. The court usually appoints the personal representative within a few days of when the application was filed.

An informal probate is a court proceeding to probate a will and usually includes a request to informally appoint a personal representative of an estate. Informal probates may be filed in probate court or district court and are started by filing an application.

The UPC requires wills presented to the probate or district court in an informal probate proceeding to be original. If an original will is misplaced or lost, the district court, in a formal probate proceeding, has the power to accept a copy of a will under certain rules of legal evidence.

Formal Proceedings: If the probate is opened formally, notice must be given to heirs, devisees and other interested people, and the judge will hold a hearing before issuing an order. A formal court proceeding can be used to probate a will and/or appoint a personal representative of an estate.

Formal proceedings are started by filing a petition with notice to interested persons required to be given at least 14 days prior to the hearing. At the hearing, the judge will appoint the personal representative. Formal proceedings may only be filed in district court and may include determinations of heirship and the validity of wills. They may also be called “formal testacy” or “formal appointment” proceedings.

p. 184, delete section about Special Administrators and substitute the following:

New Mexico’s law does not allow a personal representative to be appointed unless “at least one hundred twenty hours have elapsed since the decedent's death….” Sometimes someone will need to start a probate before five days have elapsed or before all renunciations, consents, or other paperwork are complete. The probate and district courts have jurisdiction to appoint special administrators to act on behalf of an estate before a personal representative is appointed. This may be done informally by the probate court on the application of any interested person: (1) when necessary to protect the estate of a decedent prior to the appointment of a general personal representative, or, (2) if a prior appointment of a personal representative has been terminated by death or disability.

If there is a will, the law states, “the person named personal representative in the will shall be appointed [as special administrator] if available, and qualified.” In other cases, “any proper person” may be appointed special administrator.

A special administrator appointed by the probate court in informal proceedings has the duty to collect and manage the estate assets, to preserve them, and to account for and deliver the assets to the personal representative after the personal representative is appointed. A special administrator appointed in informal proceedings has the power necessary to perform his duties, but does not have the power to distribute the decedent’s assets.

The do-it-yourself probate forms do not contain language for requesting a special administrator and would need to be modified.

If the applicant started with an Application for Appointment of Special Administrator, the applicant can usually use that same case file to convert the case to a regular probate case without paying another docket fee. Once all probate paperwork was in order, the court could appoint a personal representative under the same case number and would terminate the appointment of the special administrator.

A district court can also appoint a special administrator in a formal proceeding “on the petition of any interested person and finding, after notice and hearing, that appointment is necessary to preserve the estate or to secure its proper administration including its administration in circumstances where a general personal representative cannot or should not act. If it appears to the district court that an emergency exists, appointment may be ordered without notice.”

A special administrator appointed by the district court in any formal proceeding has the power of a general personal representative except as limited in the appointment and duties listed in the court’s order. The appointment may be for a specified time, or to perform particular acts, or on other terms as the district court may direct.

The appointment of a special administrator terminates as set out in the order of appointment or upon the appointment of a general personal representative.

p. 189, delete old section Real Property Located Outside of New Mexico and substitute the following:

If a decedent owned real property outside the state where the decedent was domiciled at death, additional procedures to pass clear title to the property may be necessary in the other state where the property is located. This situation could arise if: 1) a decedent died while domiciled in New Mexico, but owned real estate, oil, gas or other mineral rights in another location outside of New Mexico; or 2) a decedent died while domiciled outside of New Mexico, but owned real estate, oil, gas or other mineral rights within New Mexico.

In the first circumstance, an ancillary probate or other proceeding could be required in the other state, depending on that state’s law. Ancillary proceedings are conducted in a state other than the state where the decedent resided at the time of death. For example, suppose a decedent was domiciled in New Mexico at the time of death, but owned real property in Colorado. A probate is filed in New Mexico. An ancillary proceeding could be opened in Colorado to pass title to the Colorado property to the decedent’s heirs or devisees.

In the second circumstance, if a personal representative were appointed in the decedent’s state of domicile, he or she could file a proof of authority A proof of authority is documentation filed with the court showing that a person has been appointed by a court in another state to act on behalf of the estate of a deceased person. Paperwork required for a proof of authority filing includes: 1) an authenticated6 copy of the out-of-state appointment, 2) any official bond that has been given; and 3) a statement of the domiciliary foreign personal representative’s address.

A proof of authority filing does not involve opening a full probate (although the person filing the proof pays the usual court filing fee) and does not involve the issuance of Letters Testamentary or Letters of Administration. Filing a proof of authority with the court gives a personal representative appointed in another state the authority to act in New Mexico. A foreign personal representative who has properly filed a proof of authority may exercise as to assets in New Mexico all powers of a local personal representative and may maintain actions and proceedings in New Mexico subject to any conditions imposed upon nonresident parties generally.

However, if a title company or other business does not accept a proof of authority, the personal representative could open an additional or ancillary probate in New Mexico if a probate had already been opened in the state of domicile.

If a probate had not been opened in the state of domicile in the second circumstance, one could open an original probate in New Mexico. This would not be the same as an ancillary proceeding, however.

If a probate has already been opened in the state of domicile, New Mexico law allows an informal probate of a will that has been previously probated in another state or foreign country to be granted at any time upon written application by any interested person, together with an authenticated copy of the will and of the order or statement probating it from the office or court where it was first probated.

For intestate cases where the decedent is not domiciled in New Mexico, if a probate has been opened in the state of domicile, an applicant who is the domiciliary personal representative (the person appointed in the place the decedent was domiciled) may open an informal probate proceeding in New Mexico.

New Mexico law also allows formal ancillary proceedings in a district court. The personal representative should contact the court and/or the county clerk's office in the state where the property is located for more information on how to proceed. Searching on the Internet for various state’s laws and court procedures can provide some of this information.

p. 191, new section before Paying Debts of Decedent:

Creditor Claims Against Estate

The UPC generally mandates that all creditors’ claims are barred against an estate unless presented within one year following the decedent’s death. Some people purposely wait one year or more to file a probate case to avoid creditors’ claims. Thus, if a probate were not opened until one year after decedent dies, creditors would probably be out of luck.

Creditors have an option within the one-year period, however. Any interested person, such as a creditor, can apply to the court to have a qualified person appointed as a personal representative. Creditors must wait 45 days from a decedent’s death to do so. Creditors would need to file a formal probate in the district court since they would probably be seeking to have someone appointed who did not have highest priority to serve as personal representative.

If a case is filed within one year of decedent’s death, the UPC contains time limits for notifying creditors of the death and that a case has been filed for the estate. The UPC requires personal representatives, within three months of their appointment, to give written notice to known and reasonably ascertainable creditors.

Upon receiving notice, the creditor has two months to present a claim, either to the personal representative or to the court. The personal representative has sixty days to act on the claim, allowing or disallowing it. If the personal representative does not respond to a claim against the estate within sixty days, the claim is deemed allowed. Therefore, a personal representative cannot afford to be silent upon receiving a claim. Any claimant disputing the denial of their claim must take action in the district court. A creditor has 60 days to file request for allowance after a claim is disallowed.

Often claims are mailed directly to the personal representative or his/her attorney. But sometimes claims are filed in the court file. If a case was opened within one year of the decedent’s death, it is the responsibility of the personal representative to check the court case file and determine if any claims have been filed against the estate, evaluate the validity of all claims against the estate, and respond in a timely manner.

p. 192, before Paying Creditors’ Claims from Other Assets of Decedent, add:

The docket sheets for district court cases can be looked up online at www.nmcourts.com/caselookup. The docket sheets for Bernalillo County Probate Court cases are available online at www.bernco.gov/probate (click on “Case Lookup” link).

p. 194, add new material before Tax Considerations of Probate:

Obtaining Decedent’s Medical Records

A decedent’s estate may not require a court proceeding except for medical records that family members or heirs seek for various reasons. Due to HIPAA privacy regulations, discussed in Chapter Two, a decedent’s surviving heirs or family members may encounter difficulty obtaining a decedent’s medical records from a hospital or doctor’s office.

This is because HIPAA regulations also apply "to the protected health information of a deceased individual." 45 C.F.R. § 164.502(f) (2004). For deceased individuals, the covered entity must "treat a personal representative as the individual." 45 C.F.R. § 164.502(g)(1).

A personal representative of the deceased individual includes an executor or administrator who under applicable law is authorized to act on behalf of a deceased individual's estate. 45 C.F.R. § 164.502(g)(4). This regulation permits the personal representative to obtain the information or provide the appropriate authorization for disclosure.

Although an affidavit of successor in interest ought to accomplish the retrieval of a decedent’s medical records without court involvement, many hospitals are requiring decedents’ family members to open a probate case solely for the purpose of gaining access to medical records or other information about the decedent. Once the court appoints a personal representative, he/she has the same authority to access decedent’s medical records as the decedent would have had.

If a personal representative opens a case under the UPC to gather a decedent’s medical information, technically he or she is still responsible for all duties of a personal representative, such as giving notices to heirs, devisees, and creditors, and preparing inventories and accountings.

p. 208, delete old section about Start Probate Within Three Years After Death and substitute the following:

The general rule in New Mexico is that a probate case cannot be started until 120 hours (5 days) after someone dies and should be opened within three years of a person’s death. If three years or less have passed since a person died, you can usually open a probate for estates with or without a will in either the probate or district court.

A few exceptions to the general three-year rule exist. One exception allows an informal appointment of personal representative more than three years after a person’s death for the purpose of confirming title to the appropriate successors. The personal representative has no right to possess estate assets other than to confirm title. Creditors’ claims, other than expenses of administration, cannot be presented against the estate at this late date. This type of informal appointment can be filed in the probate or district court if the person died intestate (without a valid will).

The do-it-yourself probate forms approved by the New Mexico Supreme Court for use in the probate courts include a statement, “The decedent died more than one-hundred twenty hours ago. It has not been more than three years since the decedent's death.” The forms do not include an option for intestate probates opened more than three years after a person’s death.

You can use these forms to open an intestate estate in the probate courts more than three years after a decedent’s death. However, you would need to alter the Application for Informal Appointment of Personal Representative, Form 4B-101, to state that it has been more than three years since the decedent died, and that you are opening the probate for the purpose of confirming title to property to the successors to the estate.

If a decedent had a will and it has been more than three years since death, New Mexico law appears to require a formal testacy proceeding. Only the district court would have jurisdiction in this circumstance, and a formal probate would be required. A formal probate proceeding may be started after the three-year period “for the purpose of establishing an instrument to direct or control the ownership of property” to preserve clear title when other possible owners are involved.

Sometimes, even if it has been more than three years and a will exists, the district court will allow an informal probate proceeding instead of a formal one if all of the decedent’s family members agree. This is because district courts have broader jurisdiction and powers than probate courts. The district court judge would also have to decide whether to admit the will to probate if it has been more than three years since the decedent’s death.

Some people purposely wait one year after a decedent’s death to file a probate case. This is because New Mexico’s law bars creditor claims one year after the decedent’s death. If a creditor wants to file a claim and the family refuses to open the probate, a creditor as an “interested person” can ask to be appointed as personal representative 45 days after a decedent’s death. This type of proceeding would need to be filed in the district court.

In other instances, the court might conduct a determination of heirship procedure or a quiet title suit if real property is involved. A quiet title suit is a court proceeding to determine the legal owner of a piece of property. All previous owners (or the heirs of previous owners who have died) must receive notice of the suit. Quiet title suits can take years and cost a lot of money to prepare. The court will distribute the decedent's property according to the laws of intestate succession, discussed in Chapter Four.

p. 236, Appendix 2--Form 2, delete old paragraph (2) AGENT’S AUTHORITY and substitute:

(2) AGENT'S AUTHORITY: My agent is authorized to obtain and review medical records, reports and information about me, including protected health information under the Health Insurance Portability and Accountability Act (HIPAA) privacy regulations and other federal and state laws. My agent shall be entitled to all of my medical information and records and shall be treated as my personal representative within the meaning of HIPAA. My agent is authorized to make all health care decisions for me, including decisions to provide, withhold or withdraw artificial nutrition, hydration and all other forms of health care to keep me alive, except as I state here:

Copyright © 2008 by Abogada Press
revised 8/8/08

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