A Comprehensive Guide to Make a Living Trust in Hawaii

Planning for the future and protecting your assets is of utmost importance, and a living trust can be a valuable tool in fulfilling these objectives.

Whether you're a Hawaii resident or own property in the state, making a living trust can empower you to take control of your estate planning and ensure a smooth transition for your loved ones.

What is a Living Trust?

A living trust is an essential part of an estate plan that empowers grantors to exert control over their assets during their lifetime and even after their passing. It can help avoid probate and ensure a smooth transition of assets to beneficiaries.

This legal instrument enables individuals to proactively manage their estate, ensuring that their wishes regarding asset distribution and administration are upheld. It provides greater confidentiality and control over their personal and financial affairs.

Why do you need a Living Trust in Hawaii?

Making a living trust in Hawaii helps individuals retain control over their assets during their lifetime and ensure their decisions will be followed after their demise.

After the grantor's death, the trustee or successor trustee appointed by the grantor distributes the trust assets as mentioned by the grantor in the trust document. For instance, grantors may specify a certain age or specific goals, which ensures the distribution of trust properties to the beneficiaries.

Making a living trust can also be helpful to protect grantors if they become incapacitated. With assets added to a trust, the trustee can oversee them, allowing for efficient management of finances and individual needs without resorting to the complexities of a conservatorship process.

In addition, property in a living trust does not require court approval and does not undergo the probate process.

It implies that the trust details, including beneficiaries, assets, and specific terms, remain confidential and not disclosed to the public. This provides added privacy and discretion in managing and safeguarding one's assets and estate.

Types of trust

Revocable Living Trust

A revocable trust offers grantors increased flexibility. Grantors have the freedom to modify the trust provisions whenever necessary.

However, since grantors of revocable living trusts maintain ownership of the assets held within the trust, they may remain liable for any taxes associated with the assets.

Irrevocable Living Trust

An irrevocable living trust remains in effect indefinitely.

In an irrevocable trust, the grantor is restricted from removing any asset from the trust without the consent of all the individuals involved in the trust document.

The grantors of irrevocable trusts are required to hand over ownership of the property placed within the trust. As a result, the trust handles tax payments rather than the grantor.

How to Make a Living Trust in Hawaii

Making a living trust in Hawaii involves following the steps mentioned below.

Decide the type of trust to make.

Individuals must decide the type of trust most suitable for their needs. For instance, a single living trust is ideal for individuals, whereas couples may prefer single trusts or joint living trusts.

Identify the assets to be placed into the trust.

Grantors must assess all assets they own and identify which assets will be added to a living trust.

Ideally, grantors must add their assets as much as they can. While assets like retirement accounts cannot be added to a living trust, assets like physical real estate, family heirlooms, etc., can be added to a living trust.

Decide a trustee and beneficiaries for the trust.

Grantors must decide on a trustee of the living trust. Ideally, the trustee is responsible for handling the trust property.

Grantors can name themselves as a trustee of the trust. However, they will be required to name a successor trustee who can take responsibility in the event of the death or incapacitation of the grantor.

In addition, grantors must also decide the beneficiaries of the trust.

Make the trust document.

Grantors are required to prepare the trust document by mentioning the terms of the trust.

Grantors may use online resources or hire an attorney to draft the trust document. Once the document has been prepared, grantors must sign it in the presence of a notary public.

Transfer ownership

Once the trust document is in place, it is necessary to revise the ownership information indicating the property is owned by the trust, creating a legal link between the trust and the property it possesses.

Difference between a Will and a Living Trust

A living trust and a Will are both financial tools important for an effective estate plan. However, it is advisable to create both for various benefits.

Making a Will in Hawaii helps testators give out specific instructions that are not available in a trust. For instance, testators can provide instructions like appointing a guardian to care for minor children, deciding on a representative to handle property on their behalf, ensuring pet care, etc.

A Will is also beneficial to secure assets not added to a trust or acquired after making the living trust.

A living trust is beneficial to keep properties out of probate court.

Unlike a Will, the trust property does not require to undergo probate proceedings which are usually time-consuming and requires court costs, attorney fees, etc.

Does a Living Trust reduce estate taxes in Hawaii?

In Hawaii, there is no inheritance tax, meaning the trust's beneficiaries are not required to pay taxes upon receiving inherited assets.

However, Hawaii has a state estate tax applicable only when the estate's valuation is beyond a certain threshold. Individuals concerned about their estate tax may consult an attorney to explore more complex trust options.

In addition, in Hawaii, a federal estate tax applies to estates valued nearly about at $12 million for individuals and about $24 million for couples.

Closing Thoughts

By taking the time to understand the legal requirements, selecting the right trustee, and customizing your living trust to suit your specific needs, you can empower yourself to protect your assets and ensure an effortless transfer of wealth to your selected beneficiaries.

With a well-prepared living trust, you can have peace of mind knowing that your wishes will be valued and your loved ones will be cared for in the future.