Hawaii Estate Planning Considerations
Hawaii is a Common Law State, which means the rules governing the ownership, division, and inheritance of income and property acquired by a husband or wife during their marriage hold that subject to various qualifications, each spouse owns and has complete control over their own her income and property.
Last Will and Testament
The minimum age of a person competent to make a will is 18. The number of witnesses necessary to execute a will is two.
The original custodial gift may be a life insurance policy or annuity contract.
Custodial property may be invested in or used to pay premiums on (1) a policy on the minor’s life if the minor’s estate is the sole beneficiary, or (2) a policy on a third party in whom the child has an insurable interest if the minor or the custodian is the irrevocable beneficiary.
The custodial arrangement terminates when:
- The minor child reaches age 21 for custodial transfers made by irrevocable lifetime gift, will, or trust, or exercise of a power of appointment.
- The minor child reaches age 18 concerning other custodial transfers.
- The minor child dies.
Dying without a Last Will, the Hawaii laws of Intestacy.
The estate goes to the surviving spouse or reciprocal beneficiary (RB), as follows:
- If there are no surviving descendants or parents, —100% of the estate
- If all surviving descendants are also related to the spouse or RB, and there is no other descendant of the spouse or RB who survives the decedent, —100% of the estate
- If one or both parents survive, but there are no surviving descendants—$200,000 plus 75% of the remaining estate
- If the surviving spouse or RB has descendants other than those also related to the decedent—$150,000 plus 50% of the remaining estate
- If there are surviving descendants, at least one of whom is not directly related to the surviving spouse or RB—$100,000 plus 50% of the remaining estate
If there is no surviving spouse or RB, or if a portion of the estate does not go to the spouse or RB:
- 100% (or applicable portion) of the estate goes to descendants by representation (see HRS §560:2‐106)
If there is no surviving spouse/RB or descendant:
- 100% to surviving parent or parents equally
If there is no surviving spouse/RB, descendant, or parent:
- 100% of the estate goes to descendants of parents by representation (see HRS §560:2‐106)
If none of the above:
- Intestacy laws outline further distribution steps to the level of grandparents and their descendants. See Haw. Rev. Stat. §560:2‐103(4).
Death With Dignity
The “Our Choice, Our Care Act” was signed into law in April, 2018, allows “mentally capable, terminally ill people with six months or less to live — the option to take prescription medication that enables them to die peacefully in their sleep.” This legislation went into effect January 1, 2019.
Hawaii follows the Uniform Fiduciary Access to Digital Assets Act to ensure that testators can retain control of their digital property and plan for its ultimate disposition.
Hawaii does not impose an inheritance tax.
Hawaii imposes an estate tax.
The exemption amount for residents is $5.49 million in 2020. For non-residents, the exemption amount is multiplied by a factor equal to the property’s value located in Hawaii divided by the federal gross estate.
The tax rates range from 10% of the net taxable estate for estates of $1 million or less to $1,385,000 plus 20% of the excess over $10 million.
Hawaii imposes a GST tax on transfers involving property located in the state and transfers from a resident trust.
Hawaii does not impose a gift tax.
On May 2, 2012, the Hawaii legislature passed HB 2328, which conforms the Hawaii estate tax exemption to the federal estate tax exemption for decedents dying after January 25, 2012.
On June 7, 2018, the Governor signed SB 2821, which amended HI ST § 236E-6 to reduce the Hawaiian exemption, effective January 1, 2018, to $5,000,000 indexed for inflation.
The Hawaii Department of Taxation released Announcement 2018-13 on September 4, 2018, in which it announced that the exemption would remain at the amount available to decedents dying during 2017.
In response to practitioners’ calls, the Hawaii Department of Taxation indicated that it would not adjust the exemption for inflation in 2019.
Effective January 1, 2020, Hawaii increased the rate of its state estate tax on estates valued at over $10,000,000 to 20 percent. See Act No. 3 (April 4, 2019).