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KAILUA KONA

75-5591 Palani Rd STE 2001

Kailua Kona, Hawaii 96740

Avoiding Probate in Hawaii

There are 3 basic situations where you might find yourself stuck in Hawaii’s probate court, dealing with the distribution of your loved one’s assets. First, probate is required when someone dies without a will. This process is referred to as administration and it is governed by the Hawaii Revised Statutes. The executor and heirs are determined by law and in order to ensure the just administration of the estate, outside experts may be required and their fees will be deducted from the assets of the estate.

 

Second, you might find yourself in Hawaii’s probate court if your loved one died with a will and either (a) the estate is worth more than $100k, or (b) the estate owns real property. In either case, you can use an “informal” proceeding unless there is a reasonable likelihood of disputes or objections from family members, heirs, or disinherited heirs. The potential for conflict necessitates a “formal” proceeding.

Third, even though the deceased might have created a living trust, probate needs to be opened when not all of the deceased’s assets were owned by the trust. This is often the case with an old bank account or vehicle. When a living trust is created, a pour-over will should be executed at the same time. This special type of will acts to transfer all of the deceased’s assets to the trust. So after a quick probate, the trust controls all of the assets and the successor trustee can now make the required distributions.

To recap, the 3 main scenarios where probate will be required are when:

  1. The deceased doesn’t have a will;

  2. The deceased has a will but either:

    1. Has a total value of more than $100k

    2. Owns real estate;

  3. The deceased created a living trust but didn’t transfer all of his/her assets to it.

What Happens If You Don't Plan Ahead?

Probate is a court proceeding and it therefore requires time and money in order to be completed properly. The costs of probate are usually paid by the estate, which reduces the amounts that heirs will receive. It also opens the door to possible disputes among family members, heirs, and disinherited heirs. While probate is ongoing, heirs are losing potential rental income or the current value of the assets. There is the risk of changes in the market that significantly reduce the overall value of the assets. And financial obligations of the estate are not paused—the estate has to continue paying a mortgage, property taxes, association fees, etc. All of this effects (and usually reduces) what the heirs are intended to inherit.

What's the big deal about probate court?
 
And why does it matter?

All of this can be avoided or minimized to a known quantity with a legal consultation and a few essential documents. Depending on your situation (your assets and goals) there are many options. The advantages and disadvantages of each may vary for each individual, but they are generally accurate for everyone.

Transfer on Death Deed

Hawaii state law permits property owners to record a transfer on death deed, which is intended to minimize or eliminate the need for probate. This type of deed maintains your ownership of the property but specifies who is to take ownership when you pass away. As an automatic conveyance, there is very little paperwork needed to formalize this transfer after death and probate is not required. You might be wondering what happens if you change your mind later and want your real estate to go to someone else. A transfer on death deed can be amended and/or replaced at any time and the other thing that needs to be done is to draft, sign, and record a new deed.

This is advantageous for people whose real estate is their largest asset. One disadvantage is that if your other assets have a value of more than $100k, probate will still be necessary to transfer ownership of those assets.

Joint Tenancy with Rights of Survivorship

This is similar to a transfer on death deed, except that the beneficiaries are added to the title at the time of recording a new deed. It is most common for this type of ownership to be established on financial accounts, but it can be used for real property as well. We often see parents add an only child to their real estate title as a joint tenant with rights of survivorship. When both parents pass away, the child is automatically the sole owner of the property and only very minimal paperwork is required to establish this post-death.

This is advantageous because its operation is automatic, so there is no need for probate. It works well for families and heirs who have good relationships and who are committed to the arrangement. There are some risks that come with this for all of the involved parties. Using the example above, the child becomes an owner immediately and is therefore legally liable for the taxes, mortgage, and other obligations for the property. At the same time, the parents are forever joint tenants with the child and the child can only be removed from the title with the child’s consent.

Living / Revocable Trust

A trust is a legal fiction like a corporation; it is a separate entity from the creators of it. Trusts are controlled by a trustee or trustees whose duties and obligations are defined by a Trust Agreement. A living / revocable trust can be changed, modified, or cancelled at any time by the person or persons who created it because they are the initial trustees. Trust Agreements are very flexible, which means that they can have just about any terms, conditions, or requirements that you want.

But before a living trust is legally effective, it must own property. So, after a trust is created, it is critical that your real estate be conveyed to the trust. As soon as the real estate becomes an asset of the trust, the terms of the trust determine how the property should be managed, to whom it should be conveyed, and when it should be conveyed. Trusts are private arrangements and the probate court does not need to weigh in on transfers made according to the terms of it (unless there is a dispute or an objection to the trustee’s actions).

Living trusts are advantageous because they create privacy and offer great flexibility for defining exactly what you want to happen to your property. Privacy can be useful when the beneficiaries might not want the public to know what or how much they inherited—this is especially true in our small State of Hawaii where we’re all separated by just a few degrees. Trusts require some extra planning and attention during your lifetime to ensure that all of your assets are properly titled and owned by the trust. But a living trust can serve to completely avoid cost, time, and risks associated with probate court.

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Additional Considerations

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Information on this page, and throughout the website should not be construed as legal advice.

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ANCILLARY PROBATE  This is a second probate proceeding, but it isn’t as costly or as time-consuming as the first one because it piggy-backs off of the first one. With an ancillary probate in Hawaii, we are seeking to obtain the local court’s recognition of an executor’s authority that was ordered by a foreign court. This is necessary in order to empower the executor to dispose of tangible property in Hawaii. Your parents might have owned a vacation home in Hawaii but lived in other state or country. Their Hawaii property is governed by Hawaii law. When probate is started in another state and that state’s court appoints an executor, that person is not automatically authorized to dispose of property owned in Hawaii. The Hawaii probate court must acknowledge the authority of a foreign-appointed executor before Hawaii property can be conveyed by an executor. Ancillary probate is a hassle, but it is intended to ensure the integrity of property rights in Hawaii. Our proven systems and processes help clients through the ancillary probate process efficiently and effectively. We love helping the next generation take over property ownership in Hawaii and there are ways that we can do this proactively so that you can avoid an ancillary probate entirely.

Learn more about avoiding ancillary probate with effective estate planning.

 INFORMAL PROBATE  In Hawaii, estates that include real property must go through probate. The executor of the will must initiate probate proceedings in order to obtain the legal authority to convey the property to the heir or heirs, in accordance with the terms of the will. Persons other than the executor can initiate probate, but they will not necessary be granted any authority to act for the deceased. The informal probate process is not monitored by the court and, once the Letters Testamentary are signed by the judge and filed by the court, the executor can take control of the assets of the estate and make the necessary distributions.  Informal probate is a relatively easy type of court case because it is based upon full agreement among the family members and heirs of the deceased. If there is ANY likelihood that a member of the family or an heir (or a disinherited heir) could object to any actions being taken, then informal probate is inappropriate, and a formal probate proceeding should be initiated.

Losing a loved one is stressful enough, so disagreements and disputes among families (and heirs/disinherited-heirs) should stay out of the courts. A person’s last will should be honored and respected by everyone who is affected by it. When interested parties reach an agreement to resolve a dispute before or during the probate process, an informal probate can proceed. But that agreement should be clearly stated in a signed written document.

 TRUSTEE CONVEYANCE  If your loved one created a living trust (sometimes called a revocable trust), they wanted you to avoid the cost and hassle of probate. When the trustee of a trust passes away, the successor trustee is automatically appointed and he or she assumes full control of the assets that trust owns. The Trust Agreement will define the successor trustee’s duties and obligations, which, in most cases, will require the distribution of the trust’s assets. Sometimes, it is necessary to conduct a quick probate of the deceased’s pour-over will in order to transfer all of the assets into the trust.

By recording an Affidavit of Death of Trustee, the successor trustee formalizes his or her authority to convey real property and can then record a deed transferring any of the trust’s real property to the rightful beneficiary.

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