Avoiding the Black Sheep Sibling as Personal Representative, Trustee, Power of Attorney and Parental Caregiver by Michael D. Rudy, Esq.

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Unwitnessed, handwritten wills or Holographic Wills, as the law more particularly describes them, can be perfectly valid and enforceable in Hawaii if certain drafting conditions are met. As this article discusses more particularly below, Hawaii is among just five other states that has a specific law that provides for very permissive criteria allowing a probate judge to accept wills that may not otherwise conform to the strict standards of a properly witnessed and attested to will. The Hawaii Revised Statutes (“HRS” or the “Statute”) § 560:2-502(b) and (c) states a Holographic Will: (a) is valid as a holographic will, whether or not witnessed, if the signature and material portions of the document are in the testator's handwriting. (c) Intent that the document constitute the testator's will can be established by extrinsic evidence, including, for holographic wills, portions of the document that are not in the testator's handwriting. It is interesting to note that since the outbreak of Covid in Hawaii in March 2020, this Firm has litigated more Holographic Will cases than it has in its 30 prior years of existence! This development is unsurprising since for several years, adults, particularly the elderly, were advised not to leave their homes. Additionally, statistics of thousands of Americans dying every day were an effective reminder for people to put their estate plans in order. Since not leaving the house precluded visits to attorneys’ offices, many people decided to handwrite their wills. Moreover, more lawyers than ever were working remotely, and the idea of gathering the testator, his or her attorney and two witnesses could not be easily accomplished. This sudden frequency of Holographic Wills appearing in probate courts this year may be attributed to individuals’ prior difficulty in obtaining an estate planner during Covid.

There is perhaps no other area of law which is as rapidly growing as contested conservatorships. The U.S. senior population is rapidly growing as it has been since 1900. From 2010 alone there has been an increase of 38 percent in Americans above the age of 65 compared to the rate of 2 percent growth in the under-65 population*. This represents a societal shift in which a smaller cohort of the under-65 population is left to care for the greater cohort of the over-65 population. According to the Administration on Aging, a division of the U.S. Department of Health and Human Services, rates are expected to climb to roughly 80.8 million residents 65 and older by 2040, more than double the number in 2000. In addition, the Administration on Aging also predicts a doubling of the number of even older residents by 2040, with the count of those 85 and older expected to grow from 6.7 million in 2020 to 14.4 million by 2040*. This development puts a strain on families and the judicial system as well as challenges a practitioner in this area. Contested conservatorship cases in Hawaii are court proceedings conducted and overseen by a probate judge or a civil judge acting as a probate judge. This proceeding determines whether an individual has the legally recognized capacity to manage his or her own financial matters. If the senior does not have capacity, there is a need for a third party or other entity to intervene and do so for them. The number of contested conservatorships in Hawaii and in other states is rapidly growing. The fact that people are living longer and living with appreciated assets such as real property, investments, savings, and other bank accounts necessitates that these assets might need to be safeguarded from someone who is in a position to exploit the senior. Conservatorship is a tool to protect the elderly individual from financial exploitation. These proceedings typically concern those between the ages of 70 to 100 and have been initiated by a child, sibling, or other close family relative. These proceedings are proliferating owing to the rampant abuse, financial and otherwise, of the over 65-population. The U.S. Department of Justice defines financial exploitation as the illegal, unauthorized, or fraudulent use, or deprivation of use, of the property of a vulnerable adult with the intention of benefiting someone other than the senior. Types of financial abuse include deception, intimidation, or undue influence by a person or entity in a position of trust and confidence with an elderly person or a vulnerable adult to obtain or use the property, income, resources, or trust funds of the elderly person or the vulnerable adult for the benefit of a person or entity other than the elderly person or the vulnerable adult. Additionally, trustees may not appropriate property for their own gain, which is a breach of their fiduciary duty*. Approximately 75 percent of contested conservatorships in which people fight over the control of the incapacitated adult are triggered by accusations of financial elder abuse. Legal action can be initiated upon such bases as embezzlement and theft of cash or property or fraudulently procuring through undue influence or fraud and the creation of invalid will, trust, or a power of attorney. All too often the perpetrator is a trusted friend or child, the law terms them “close confidantes” and in some cases these perpetrators are “fiduciaries” as well, such as a named personal representative, trustee, or attorney-in-fact. In these cases, financial exploiters confuse their role as close confidant or fiduciary with “owners” of the estate or trust. A fiduciary or close confidante must conduct themselves dutifully to benefit the settlor and beneficiaries*. A conservatorship may be viewed as a precursor to a will or trust contest. In conservatorship cases there are usually accusations of undue influence or breach of fiduciary duty that have prevented the senior from exercising his or her intent in drawing up the will or trust. The financial exploiter may produce amendments to trusts and codicils to wills that the senior did not intend or was not cognizant of. If the close confidante or fiduciary has not acted in good faith, trusts and wills are challenged. In response the litigants bring a petition, seeking to avoid or erase these illicit documents because they often unfairly advantage a single individual and possibly his or her family over the remaining members of the family (often are beneficiaries or interested persons in the matter). These proceedings can be very complex and nuanced, particularly if the elder is incapacitated or easily persuaded. They are often fact-intensive, and investigating the allegations can take a lot of legal time and money. Additionally, they also typically require one or more expert opinions from qualified third-party physicians, psychologists or psychiatrists that specialize in a unique field of forensic medicine. Forensic medicine is generally described as the intersection between law and medicine. A proper forensic medical expert must have a solid grasp of the legal requirements of capacity* that they are evaluating when they interview and assess an elderly individual. In a contested conservatorship, there are typically at least two mixed questions of law and fact in dispute. The first question is whether under Hawaii law the adult is incapacitated such that they cannot manage their own financial affairs without some lesser restrictive means i.e., other forms of less formal supervision under other than a third party (who would take over the legal ability for that individual to control his or her assets). The second question is who is the proper third party* to take control of the financial responsibilities of the adult in question. All too often, this question involves pitting one or more children of an elderly individual against one another as the court struggles to determine who is most fit to manage their parents’ financial affairs. The Court can, in order to avoid this delicate question, simply appoint a neutral third-party. In that case, there are additional attendant costs and management fees that must be factored into the court's decision. A discerning attorney experienced in the field is required to understand the intricacies of a contested conservatorship case. Additionally, a case that at the outset seems fairly simple, can turn into a complex one. In one respect, as in chess, the lawyer must think several moves ahead in order to be prepared for the twists and turns of the case. First and foremost of the lawyer’s tasks is fact gathering and trying to assess the validity of one or more accusations of wrongdoing against an adult individual. That person, owing to his own incapacity, may not be able to help in the fact-finding. At the same time, the practitioner must find capable experts who have the education and experience to navigate the complexities of the law and medicine. The results of the expert’s medical findings will certainly influence that case, so these doctors must be staunch and discriminating expert practitioners. Many “so-called” forensic experts in Hawaii and elsewhere simply do not understand that an assessment requires a deep understanding of the legal standard and the correct medical diagnoses. Without this background a party cannot obtain the results required to prevail in a conservatorship contest. In litigating countless contested conservatorships over the past 30 years, I have found that finding a competent expert is one of the fundamental challenges presented to an attorney practicing in the area of elder law and trust and estate litigation. The pool may be wide, but only upon occasion is it deep enough to serve the purpose of the litigator. The doctor must have a reserve of knowledge in this specialized area. Simply passing the buck to a neutral third party in the event that two or more individuals contest who ought to be conservator is frequently ill-advised. Putting a complete stranger in charge of an elderly person's finances can be both stressful and cost prohibitive for both the senior and the person seeking the conservatorship. Nevertheless, courts often take the easy way out by simply appointing a neutral third party due to a variety of factors, including court time management and the court's overall patience with a family dispute. Contested conservatorships in this author's opinion are one of the most bitterly contested types of proceedings that exist in the law today. There are real human emotions, disappointments and frustrations that confront family members as they go through what can be a prolonged and emotional process. Therefore, attorneys that practice in this area must be keenly aware of the psychosocial issues as well as the legal issues in guiding clients through this emotionally charged event. With so much experience behind us, our attorneys provide a deft hand sorting out the differences among family members, some of which have been festering since childhood. Understanding the root of the dispute can be essential to solving it. No more than in elder law and trust and estates litigation and planning do lawyers require a diplomatic approach assessing the needs of real people. All law is in service; however, a slightly more personal level of service might be needed in these particular cases each of which is unique. _______________________________________________ *Linda Searing. The Washington Post., More than 1 in 6 Americans now 65 or older as the U.S. continues graying, February 14, 2023. *Ibid. *https://www.justice.gov/elderjustice/prosecutors/statutes. *Fiduciary duties include duty of care, loyalty, good faith, confidentiality, prudence, and disclosure. There is no measurable difference between the duties of a close confidante and a fiduciary. *To be “of sound mind,” the testator must, when executing a will, be capable of knowing and understanding in a general way the nature and extent of his or her property, the natural objects of his or her bounty, and the disposition that he or she is making of that property, and must also be capable of relating these elements to one another and forming an orderly desire regarding the disposition of the property. Bradley E.S. Fogel, The Completely Insane Law of Partial Insanity: The Impact of Monomania on Testamentary Capacity , 42 Real Prop. Prob. & Tr. J. 67, 77 (2007) *Conservator.

Hiring an attorney in a specialized field such as trust and estate litigation in the wake of COVID is challenging to say the least. This harsh truth is even more magnified in a small legal market such Hawaii with a population of just 1.5 million individuals. Here, locally, even prior to COVID, the pool of competent, experienced lawyers in nuanced and highly specialized fields such as trust and estate litigation were exceedingly limited. Now, owing to a number of factors, even fewer experienced and qualified legal professionals are available in this area. Several experienced attorneys have quietly retired in the last few years, and, owing to the vicissitudes of running a small practice. Their law firms have either closed their doors or their remaining lawyers have moved elsewhere. Remote work is laudable for a number of reasons, but there are downsides. Many young lawyers who could have received valuable training and experience working with senior lawyers do not have that opportunity. Remote practice can lead to a lack of strict or close supervision during the training of new lawyers. This is unfair to the client and to junior counsel. As a result of COVID and remote work, many younger attorneys have lost several years of valuable skills and training. They find themselves grappling with that fact. Given the typically small to mid level size of attorneys practicing in this area, junior associates find themselves working directly with clients, a task that they may not have genuinely been trained to do. Additionally, since the training is not as intensive their frame of knowledge and experience is concomitantly smaller. This fact may lead to a less than experienced response to certain matters. Clients fear this, but so does the judiciary and seasoned counsel; the law can be a minefield. Adding to these troublesome issues, over the last three years the hours and quality of training that these attorneys have received, and their interaction with other members of the bar has largely been conducted via Zoom video conferencing. This affects the quality of representation, because it deprives newer lawyers, indeed all lawyers, from observing subtle indicators that might be useful in litigating the matter to a positive result. In addition, clients have often retained counsel without any face-to-face meetings as engagement of counsel has been either by telephone conference or similar video teleconferencing. Generally, this makes clients less inclined to follow their lawyer’s advice and to question the glacially slow legal process. In essence clients do not have the opportunity to fully evaluate counsel. As a lawyer with some 30 plus years of experience, and memories of my own training by seasoned lawyers, it is my opinion that video conferencing, is a difficult mode for less experienced counsel to learn how to conduct an oral argument, depose a witness, let alone conduct an evidentiary hearing or even a trial. In addition, many of the more moderately experienced attorneys made the decision during 2020 to 2023 to downsize their practice by eliminating staff and other resources that provide quality representation to clients. Just because a practitioner is able, via a computer or other electronic means, to do a task does not mean it is the most cost-efficient and best way to get the thing done. This additional pressure has often inevitably led to attorneys taking fewer cases, requiring the same need for revenue notwithstanding. Many attorneys have been forced to take fewer cases and increase their hourly rates in order to stay in business. In essence, the client, who is the consumer of legal services, is paying for less. It will take many years for the trust and estate litigation bar to recover from the effects of COVID, and many clients, will continue to engage attorneys through remote means such as email, video conferencing and telephone conference calls. They will be forced to gauge what they can expect to receive in terms of value and quality of service affected by these shifts in the practice of law. As a matter of due diligence, a prospective client should always ask prospective counsel whether or not COVID has forced them to disengage from a prior firm, reduced their resources, and the level of training and experience that they have received in this specialized field. It is true, an attorney may not necessarily be less qualified because he or she is working from their kitchen table, but the client should know whether that is the case. Clients should also ask whether the attorney has back up, whom exactly they will be dealing with, how many cases the attorney is simultaneously handling and what they can expect in terms of communication and response time to their questions. Attorneys that have gone through one or two professional changes in the structure of their practice during the last three years, should explain how and why the client can expect the same level of legal service as a larger firm has with more lawyers and professional staffing. This is especially true in complex cases. It is our Firm’s experience that even cases that may seem routine, often turn into highly complex matters and require unanticipated significant resources that may not be available to every client. This goes to show that a sole practitioner requiring a smaller retainer than a larger firm will not necessarily be cost efficient in the long run. History has shown our Firm that approximately 25 percent of our cases concern taking over from other law firms that simply could not handle the size and complexity of the matter they undertook. Oftentimes, damage has been done by lack of attention to the case over a prolonged period of time, which has turned a "simple case" into an extremely complicated case that may or may not be salvageable. Moreover, attorneys that are working remotely, whether in the State of Hawaii or elsewhere, are increasingly being forced back into courtrooms, and require physical presence in front of the judge, because the judge, too, knows that Zoom does not necessarily provide the nuance that may be a major factor in the case. It is this author's opinion that many attorneys that must reappear in the courtrooms may be rusty or will not have the requisite fundamental knowledge, support staff, and even the desire to go back into the courtroom. There is stiff competition from increasingly hungry opposing counsel and a contested case is necessarily time consuming. A contested case is not a summary proceeding as many cases in probate court are. It could take months or years to sort out the client’s issue. So careful choice of litigation counsel is paramount. Our Firm, MacDonald Rudy , thought the best way to address the post COVID changes in the legal environment was to actually expand our firm to add personnel, both lawyers and paraprofessionals since qualified and experienced attorneys were retiring. The result is that the firm emerged from COVID a larger, stronger organization than ever before. We truly believe in training our associates as rigorously we have been trained. Junior lawyers as well as senior lawyers have the training to undertake complex cases and the analytical and intellectual support from their colleagues which can be case defining. We firmly believe that our services and experience place us far above other firms or attorneys advertising similar services in our field. A keen legal strategy and relentless counsel often proves well worth it for our clients.

Do you know someone who has recently passed away that presently owes you money, or will owe you money in the future under an agreement or contract? There are very specific legal procedures with short time limitations in which you must, under Hawaii law, present these obligations or debts, regardless of whether the debt has already become due at the time the individual passed away. Michael Rudy spoke to the Hawaii State Bar Association Collections Division on October 7, 2022, and spoke about these complex and highly technical rules that protect your rights when someone who owes you a debt or other obligation passes away. Filing Creditor Claims Against the Estate or Revocable Trust Hawaii State Bar Association Collection Law Section October 7, 2022 9:00 a.m. YWCA Laniakea – Fuller Hall 1040 Richards Street Honolulu, Hawaii 96813 Michael Rudy founded MacDonald Rudy over 30 years ago. The law firm concentrates on fiduciary, trust and estate, and real property litigation. For over three decades he has litigated complex trust and estate matters and contested conservatorships involving some of Hawaii's largest private trusts and high-profile individuals and families in Hawaii. I. INTRODUCTION Creditor-claim Procedure in the probate court of Hawaii is highly statutory. The procedure, however, is fraught with peril with very short time limits for presenting claims. The rules are nuanced, and occasionally complex issues arise as to whether there exists a claim or whether the claim was pre- or post- death, or administrative. This is true even for more specialized practitioners in the probate courts of which there are unfortunately relatively few and qualified practitioners that can assist when complex issues arise. Although there are relatively few known litigated creditor claims in the probate court, when specific technical or legal issues do arise, there is little or no UPC case law or practical guidance to refer to. This is true not only in Hawaii but in other jurisdictions across the country that have adopted in some form the Uniform Probate Code. Creditor-claim issues, when they do occur, frequently revolve around the following: Failure to identify a proper claim; Failure to promptly identify the fiduciary whether it be trustee or personal representative; Complying with applicable short statute of limitations; Assessing and determining pre- or post- death or administrative claims; Assessing non-exempt and exempt non-probate transfers; Determining proper choice of forum to litigate efforts in creditor claims. A. Do You Have A Claim? 1. The definition of a claim is very broad. Claims are any potential or actual contractual obligation, whether breached or not at the time of death. Example: partnership obligations, executory contracts, personal guarantees, promissory notes not yet due, torts that have occurred, but damages are unliquidated, etc. Virtually any existing legal relationship the decedent may possess, vis a vis third parties, may contain a possible claim subsumed within it. B. Determine that the type of claim, whether it be pre-death, post-death, or administrative claim. 560:3-803 All claims against either a decedent or decedent's estate, which arose before the death . Proceedings such as will contests, trust disputes, or other claims to specific estate or trust property or fiduciary conduct is not a claim for purposes of 560:3-803. This Section is typically straightforward and not usually a fertile ground to litigate. Bearing in mind, however, claims can be absolute or contingent, liquidated, or unliquidated and still be pre-death claims. They may be found on contract or tort or other legal basis. Claims that are not administrative but arise after death. Again, there are few litigated claims in such area, but claims such as a decedent’s personal indemnity, obligations of an estate, other such contribution claims would be an example. Post-death claims are due four (4) months after it is due or 18 months, whichever is the first to occur. Publication does not bar a post-death claim. Administrative claims must be adjudicated and paid before probate closes or prior to the trustee final accounting being submitted. Note : Claim to enforce a mortgage, pledge, or other lien upon property is not a claim. A potential deficiency judgment will be a post-death, or possibly pre death unliquidated and contingent claim. “The entry of a deficiency judgment against decedent's estate in foreclosure proceeding could not override or eliminate the mandatory provisions of the probate code's nonclaim statute, and therefore, the entry of the deficiency judgment merely constituted a valid debt against the estate that must also have been presented within the time limits of the nonclaim statute.” In re Est. of Hover , 407 S.C. 194, 754 S.E.2d 875 (2014); See, e.g., Harter v. Lenmark, 443 N.W.2d 537, 540 (Minn.1989); Meissner v. Murphy, 58 Or.App. 174, 647 P.2d 972, 974 (1982); Provident Inst. for Sav. in Jersey City v. W. Bergen Trust Co., 126 N.J.L. 595, 20 A.2d 437, 439 (1941). II. SHORT STATUTE OF LIMITATIONS Pro Tip : If you are a known creditor or reasonably ascertained creditor, you are entitled to actual notice of the four (4) month bar date. If you get actual notice of the bar date, it is 4 months after the first published notice or 60 days after the delivery of the bar date notice, whichever is later . But if you do not get actual notice, and you are a known or ascertainable creditor, the bar date for a claim is 18 months. In Hawaii there is no actual obligation to provide actual notice to a known or reasonably ascertainable creditor. But in order to pass constitutional muster under Pope, without actual notice, an ascertainable credit is not bound by the four (4) month short statute of limitations. Pro Tip : Fiduciaries typically ignore and abuse the ascertainable standard and actual notice requirement and thus the 18 month statute applies in many more instances than otherwise believed. How do I know if my client is a reasonably ascertainable creditor? A decedent's fiduciary must make attempts to reasonably ascertain a decedent's creditors through reasonably diligent search, such as a reasonably prudent person would make in view of the circumstances, and must extend to those places where information is likely to be obtained and to those persons would likely have information regarding decedents' creditors. See in re Estate of Loder 308 Neb. 210, 219-20, 953 N.W. 2d 541, 449 (2021). An example of a reasonably ascertainable creditor might be a medical care provider, hospice care that had provided previous medical services to an elderly or sick individual, in which the care provider gets no actual notice, but it is obvious care was provided. In that instance, the bar date without actual notice would be 18 months. Pro Tip : If a case is already filed in a court of appropriate jurisdiction, there is no need to file a proof of claim. III. WHERE TO FILE Deliver the claim to the personal representative with an affidavit in support to file the claim. Filing with the court with a copy to the personal representative. IV. FORM OF CLAIM Hawaii Probate Rules. See Probate Rule 63, all supporting documentation not required. “A creditor seeking payment from the deceased shall present a claim by (a) delivering the claim, with an affidavit in support thereof, to the person” Rule 63 - Presenting Claims , Haw. Prob. R. 63 ...an attempt is made in this rule to keep any court-filed documents with respect to presenting a claim as minimal as possible by not requiring that all supporting documentation be attached, but only that the claim be supported by affidavit. This rule does not prohibit the pursuit of claims by any other legal method. Pro Tip : There is no law on procedure for filing claims against a trustee of a revocable trust. Suggest always to file a claim in the estate and with a trustee or Jane Doe trustee, if necessary, with the clerk of the court at small estates in the First Circuit Court for decedent’s domicile there at death. If you choose to directly litigate without filing a proof of claim that is permissible, however, you need a defendant. You cannot sue a trust. You must sue a trust through a trustee. You cannot sue an estate. You must sue an estate or heirs directly. You must litigate a special administrator or personal representative. At some point, it may be necessary to file as a creditor, a creditor may as an interested party petition to open up a special administratorship, or a probate, or potentially even a conservatorship in the case of an incapacitated but living adult. The idea is to have an individual appointed as a defendant that can adequately represent the needs of the conservatorship, the estate, or in the cases of a revocable trust, the appointment of a successor trustee. A conservator, a special administrator or a personal representative can compromise claims with probate court approval. V. WHEN TO FILE A LAWSUIT Creditor litigation can be filed either in the probate court or the circuit court that has concurrent jurisdiction. A fiduciary has 60 days to reject a claim after presentment, or it is deemed accepted by the fiduciary. If the fiduciary rejects the claim, the creditor has 60 days after the denial to commence the lawsuit, unless the court extends the 60-day deadline for good cause, See H.R.S. Section 560:3-804, or if the fiduciary fails to notify the claimant of the 60 day bar date, Section 560:3- 806 states that the creditor then has 18 months to file the lawsuit. VI. WHAT ASSETS AVAILABLE? The Uniform Trust Code provides in 554D-505 that trust assets in a revocable trust are available to satisfy creditor claims notwithstanding the presence of a spendthrift provision in the trust. However, as stated above, the newly enacted Uniform Trust Code provides absolutely no procedures on filing claims against the trust. The Uniform Probate Code does set forth references to the 4-month and 18- month bar date that is a short and affects short statute of limitations for Claims against a trustee. Pro Tip : Practitioners that represent creditors, should assume that the procedural timing of presentation of claims applies with equal force to trust. However, there ostensibly is the argument that after a timely presentation of claim is made against the trustee, that the 60-day period for denial by a trustee in the following 60-day claim to file litigation subsequent to denial is not applicable to a trustee revocable trust. Claims are payable out of the assets of the probate estate (check filed inventory) subject to: housing allowance $15,000; exempt property allowance $10,000; family allowance $18,000 (but may be increased with court order); expense and administration; federal taxes; last illness medical expenses; state taxes. Non-probate transfers generally are not available for creditors since Hawaii has not adopted UPC § 6-415 or 6-102 which would otherwise make joint transfers available. There are other Hawaii statutes in play that also exempt certain assets from creditors of decedents such as life insurance, pensions, IRAs, and annuities. Joint bank accounts, payable and death accounts, tenancy by the entirety property, IRAs, 529 plans, life insurance are all equally exempt from a creditor after the death of the decedent or settlor. Jointly held real property exemptions in Hawaii are unresolved. Until the Legislature addresses this issue Hawaii courts should follow the common law principle that a creditor’s right against a joint tenant is extinguished upon the death of the joint tenant debtor. Hawaii has passed the Uniform Real Property Transfer on Death Act Section § 527-15 which makes the interest in the subject property available to claims against the estate if the probate estate is insufficient to pay claims. Pro Tip : Non-probate transfers, particularly death bed type transfers, are vulnerable to be set aside as a fraudulent transfer as to present creditors. See HRS §651C-4. Bearing in mind that the creditor and their counsel comply with the probate statute of limitations. Michael D. Rudy, Esq. For more information, please contact: MacDonald Rudy O'Neill & Yamauchi 1001 Bishop Street, Suite 2800 Honolulu, Hawaii 96813 Telephone: (808) 523-3080 Website: www.macdonaldrudy.com Email: [email protected]

If an individual family member or members find themselves embroiled in company litigation, it is even more important to retain competent counsel to preserve, to the greatest extent possible, the maximum value of a company's tangible and intangible assets that exist as a result of the efforts of many family members over the course of several generations. It has often been said that family wealth which has been created in the first family generation completely evaporates by the third family generation...

One of the most common questions we are asked, at MacDonald Rudy, is whether a trust can be “broken” or terminated prior to the time set forth in the applicable written trust agreement. This situation occurs when a trust has been created by a prior generation, typically a parent or grandparent who has passed away, and the next generation is receiving some economic benefit from the trust. In this situation, where the creator of the trust (the “Settlor”) has died, the trust instrument may provide only for income, and perhaps, discretionary principal for a child-beneficiary. Here, the beneficiary may have only limited ability to access income and principal in the trust. The beneficiary may be an older adult in need of additional principal and income for building or buying a home, sending a child to college, paying for catastrophic medical care expenses or other important needs. The trust, as written, may simply not have the flexibility to provide for any one or more of these exceptional needs. Moreover, the trust may terminate at the death of the child-beneficiary, or when the child-beneficiary reaches a specified age, precluding invasion of principal and/or all of the income until that time. In either case, the child-beneficiary does not have the unfettered right to gain access to the principal to make a major purchase or solve a financial problem that may have serious and negative economic impact upon his or her life. Often, the drafters of the trust did not anticipate or realize how little economic benefit an annual income-only trust distribution plan may have. Many trusts are mainly established to benefit the Settlor’s own children, and the Settlor’s grandchildren were to have only incidental benefit after the death of the Settlor’s children. Yet the income-only or discretionary principal distributions may be grossly inadequate to accomplish the Settlor’s known trust support objectives for the Settlor’s own children. Trust terms can also be highly restrictive upon the beneficiary, resulting in severe friction between the trustee and the beneficiary concerning distributions of principal and income and other important trust decisions that ordinarily are left to the discretion of the trustee. This friction can result in wasted time, money and resources, as a result of in-fighting between a trustee and a beneficiary. It can often be very difficult to remove a trustee, and thus we are routinely contacted by prospective clients to ascertain whether or not they have a legal ability to "break a trust," and have access to a beneficiary’s entire principal and undistributed share of income from the trust, and thus effectively end the trustee-beneficiary conflict. Hawaii has recently adopted the Uniform Trust Code, effective January 1, 2022, which constitutes a brand-new set of laws directly pertaining to trusts. Part of this new trust law instructs the courts, lawyers, and their clients as to the trust termination rights of a beneficiary with respect to gaining access to trust property held for the beneficiary’s benefit. Prior to January 1, 2022, in Hawaii, the law with respect to trust termination did not favor the beneficiary. This stems back to the old common law in England, where we derive much of our legal history. In England, when trusts were created by third parties for the benefit of others, such as a child or grandchild, those trusts often contained special provisions which were called spendthrift provisions, which did not typically allow for early trust termination. Spendthrift provisions generally prohibit a beneficiary from transferring, assigning, mortgaging or pledging trust principal. Under a spendthrift trust, the beneficiary typically has no right to take principal and income, unless the trust language specifically authorizes the trustee to make distributions to the beneficiary. The clause also prohibits a creditor from having any rights to claim a beneficiary’s trust property to pay a debt. Because the beneficiary lacks unfettered access to principal or income, without relying upon the trustee and the trust instrument to do so, and the trust prohibited a creditor from seizing trust property, the creditor under common law, had no greater rights than the beneficiary as to accessing trust principal held for the protection of the beneficiary. Hence, the assets of the trust held for the beneficiary were immune from creditor claims. It was often said that the spendthrift provision was one of the material purposes of the trust, in that its main purpose was to hold protected property in trust and ensure the trust’s continued existence and use for future generations. Starting in the latter half of the 1900’s, revocable trusts for the general population became more in vogue. Trusts were no longer for just the wealthy and upper class. As trusts became more popular, they were mass produced, and spendthrift provisions were typically boilerplate provisions. These provisions were included without any analysis as to whether the spendthrift clause was a material purpose of a Settlor at the time the trust was created. Therefore, the law with respect to trust termination began to change. Beginning in 2003, with the Third Restatement of Trusts, legal scholars changed the understood assumption that a spendthrift provision was always a material purpose of the trust. This former material purpose rationale was the basis for trust continuance, which ensured that a trust could not be terminated prior to its stated term, even with the consent of the beneficiaries, particularly where the Settlor was deceased. Additionally, the Uniform Trust Code (which is a model code for trust law, which all states are free to adopt, in whole or in part) also provided that beneficiaries could consent to a termination of a trust. The Court could grant such termination, as long as the termination was not inconsistent with any material purpose of the trust. Under the Uniform Trust Code, a trust can be terminated prematurely and its assets distributed by agreement of the beneficiaries, even if beneficiary consent is not unanimous, as long as the interests of non-consenting beneficiaries will be adequately protected. Although the trustee may oppose the trust termination in court, if all beneficiaries consent to the termination and it is proven that a material purpose of the trust would not be frustrated by an early termination, it would be more likely that a Hawaii court would grant such an early termination. As with many nuanced aspects of trust law, there may be challenges to such premature termination. These challenges lie, in part, in the fact that all beneficiaries must be adequately represented in Court, and if there are minors or unborn beneficiaries, which is often typically the case in a multi-generational trust, then an independent guardian ad litem may be appointed by the court to protect their interests. Consent to the termination often will result in some type of subsequent negotiation with the guardian ad litem to ensure that the minors and unborn beneficiaries would receive some economic benefit from the early termination of the trust. The economic benefit of having the class of the unborn or minors receiving a portion of the trust corpus, could justify a guardian ad litem consenting to the trust termination. Thus, Hawaii’s recent implementation of the Uniform Trust Code may have a profound, positive impact on the ability of beneficiaries to terminate a trust prior to its natural expiration, according to the trust’s written terms. In conclusion, it is believed that beneficiaries will begin to more frequently seek early termination of trusts by petitioning the courts in the State of Hawaii and employing Hawaii’s newly enacted Uniform Trust Code. This will undoubtedly increase the ability of beneficiaries to access principal and income to a degree, and at an earlier period of time not previously possible. An early termination may completely eliminate costly and unnecessary future trust administration expenses.

Our law firm has compiled data over the last 30 years of predictors that are warning signs that elder financial abuse is occurring or is about to be committed against an elderly relative. Unfortunately, this data has been gathered through years of client and witness interviews only after significant elder financial abuse has occurred. Typically, elder financial abuse is committed by someone who is very close to the victim, knows the victim very well, has access to the individual, and is a trusted individual. It is important to note that financial exploitation is fueled by motive and opportunity. It is no surprise that the typical perpetrator of elder financial abuse is not a professional caregiver or casual acquaintance of the victim, but a family member who has the motive and opportunity to commit elder financial abuse. Elder financial abuse or exploitation occurs in various forms. It includes theft or embezzlement of joint bank accounts, raiding stock brokerage accounts or mutual fund accounts...

The answer to this question is not clearly understood by most people, including experienced attorneys (and even experienced estate planning attorneys), judges, bank employees, and other individuals. Contrary to popular wisdom, the terms of a safe deposit box agreement with a financial institution typically describe a lessor/lessee relationship. As a result, most safe deposit box agreements only govern the use of the box; they do not govern the ownership of its contents. Thus, even if a co-tenant is listed on the safe deposit box agreement, it does not automatically vest ownership of the contents to the survivor, upon the death of one co-lessee. In fact, most safe deposit box leases clearly state in writing that nothing in the lease provides any transfer of ownership during the lifetime of the initial depositor or upon death. In short, by adding an individual as a co-lessee of a safe deposit box, the original depositor is not creating a joint tenancy with right of survivorship...