Ethan R. Okura
Hawai‘i Herald Columnist
In this column, let’s compare the privacy of wills with the privacy of trusts while you are living. The attorney who prepares either document – and the attorney’s paralegal or secretary – will know who gets what when you die. The attorney also needs to know about your financial situation: what assets you own, how much they are worth, how much you owe in debts, etc. It is impossible for an attorney to advise you properly without knowing your financial situation. Perhaps you’re concerned about a child who spends money too freely, or maybe you don’t want your child’s spouse to get anything if you leave an inheritance to your child. To do a good job for you, your estate planning attorney and his or her staff need to know everything about your assets and your family, things that are normally private matters. It’s important that the law office have high standards of confidentiality.
Who else needs to know about your will or trust? In Hawai‘i, no one has to know about your will while you are alive. As for trusts, banks previously requested a copy of your Short Form Trust or Certification of Trust when you opened an account in the name of the trust. The Short Form or Certification of Trust generally contains the names of the trustees and successor trustees as well as the powers of the trustee. It does not, however, contain confidential information such as who gets what. Increasingly in recent times, banks have been requesting the entire trust document. If you feel strongly that you do not want to reveal your entire trust to the bank, tell them that you plan to switch to another bank if they require more than the Certification of Trust. There’s a good chance that they will back off on insisting that you provide the entire trust document.
There is an interesting law, which implies that a trust must be registered in the circuit court. This is Hawaii Revised Statutes §560:1-108. Oddly, the supporting laws detailing how to go about registering a trust and the consequences for not registering have now been repealed. They were in HRS §560:7-101 through §560:7-106. But the vague reference “requiring” registration in §560:1-108 still exists. In actuality very few trusts were ever registered, even when the supporting laws providing detail were still in effect. Why? Three reasons: first, very few people knew about this law; second, although the law tried to say that trusts should be registered, it was so poorly written that it wasn’t clear whether registration was actually required by the law (even though the references to §560:1-108 in the supporting laws said that it was required); and, third, if you didn’t register a trust, the penalty in most cases was no different than the result of registering the trust. The trustee becomes subject to the jurisdiction of the court. This means that people can bring a lawsuit concerning the trust in the court where the trust is registered. In short, the requirement was practically useless. Although the supporting statutes have been repealed by the legislature, the Hawaii Probate Rules still provide a process to register a trust in Rule 127.
To this day, most trusts in Hawai‘i aren’t registered, and most attorneys don’t recommend to their clients that they register their trusts. On the other hand, although it isn’t legally required, it’s usually a good idea to inform trusted family members or friends about your will or trust. For example, your personal representative (the person who will handle your affairs if you die with a will) should know where your will is kept and what it says. Your successor trustee (the person who will handle your trust if you become incapacitated or die) should know where your trust is and what it says. Unless you have a good reason to do differently, it is best to give these trusted people copies of your documents. I also encourage informing children of who will get what so that there are no surprises after your passing, which might lead to negative feelings or even a lawsuit among the children.
Next month: The privacy of your will or trust after death.
© OKURA & ASSOCIATES, 2021
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Ethan R. Okura received his JD from Columbia University in 2002. He specializes in Estate Planning to protect assets from nursing-home costs, probate, estate taxes and creditors.
This column is for general information only and is not tax or legal advice. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate-planning specialist.