Hawaii Probate System

In Hawaii as in most states in America, if a person dies owning any kind of asset (real estate, bank accounts, stocks, partnership interest, or limited liability company interest) in his one name only, the ownership must be transferred by a judicial procedure called probate. If a person dies with a will and in the will the owner names his beneficiary or beneficiaries, the ownership must be transferred by probate if the ownership of the asset is in one name. For example, if an individual who owns stocks with his name only dies, the transfer of the ownership of the stocks must go through probate. (In Japan, the transfer of the ownership is automatic if the owner dies.) However, in the U.S., if the stockholder has other names on the stock certificate, the transfer of the ownership does not have to go through probate even the individual passes away. The ownership is transferred automatically to the other owners of the stocks. The most important factor that results in a probate case is when the assets are owned in one name only and the person dies.

The probate procedure in Hawaii is processed by the Probate Court which is administered by the Probate Judge. In Japan if the owner of an asset is his name only dies, then the family can transfer ownership by going to the municipal office with the koseiki tohon which indicates all the members of the family. Then the municipal official will transfer the ownership according to the inheritance statute. In Japan it is relatively easy and fast to transfer ownership on the death of the owner of the asset. In Hawaii, the transfer of ownership in one name only is complicated, expensive and takes time, about a year to eighteen months. The negative aspects of the probate procedure in Hawaii are:

1. The family of the owner of the asset must hire an attorney who has the experience and knowledge of the probate procedure. Therefore, legal fees must be paid to the attorney.

2. Because the Probate Court is busy and is part of the Hawaii judicial system, the officials of the Probate Court must examine all of the documents submitted to the Probate Court. As a consequence, the procedure takes about one year to eighteen (1) months, and sometimes more.

3. Besides the attorney's fees, other costs include filing fees for the Probate Court, newspaper notice, and at the end of the probate procedure, the approval signed by the Probate Court judge must be recorded at the State of Hawaii Bureau of Conveyances.

How to avoid Probate

In Hawaii most people who own assets, especially real estate, will have an attorney write a revocable living trust to avoid the probate system. A revocable living trust means that the trust document which is signed by the owner of the asset can change or revise the trust document at any time before his or her death. It is a living trust, because it is signed by the owner of the asset while the owner is living. The trust is very convenient, less expensive, and the ownership can be changed quickly as compared to the probate procedure.

If a trust document is prepared and signed by the owner of the asset, the owner becomes the trustee. In other words, the ownership is changed from the owner to himself as the trustee. The only difference is a legal ownership change from an individual owner to a trustee owner. The owner/trustee will appoint a person or trust company to be his successor trustee when he dies. The main function of the successor trustee is to sign the legal document to transfer ownership to the beneficiaries who are named in the trust document. For a trust there is no probate procedure. It is relatively fast and cheaper, because the successor trustee just signs the change of ownership document and if the asset is real estate, the document is recorded at the Bureau of Conveyances. When the document is recorded at the Bureau of Conveyances, the ownership is transferred to the beneficiary or beneficiaries named in the trust document.

For example, if a residence or other real property is owned by a husband and wife, both the husband and wife will sign a separate trust document and usually fifty percent (50%) interest is transferred to the husband's trust and the other fifty percent (50%) is transferred to the wife's trust. In each trust document, it usually is written that the fifty percent (50%) interest of the first spouse to die is to be held by the surviving spouse until the surviving spouse dies. The right of the first spouse is not distributed to the beneficiary or beneficiaries when the first spouse dies. It is distributed by the Successor Trustee when both spouses die. At that time, a third person who is named the successor trustee will transfer the ownership to the beneficiary or beneficiaries, who may be the owners children or relatives.

In summary, when the owner of an asset dies, it is more convenient, less expensive, and less costly to transfer the asset to the new owners if there is a Trust. Many Hawaii residents who own real estate have a Trust to transfer the assets to the beneficiaries when the owner passes away. Also, for a wealthy individual, it is a tax saving way to set up a Trust under the present U.S. estate tax law.