Our Litigation Department provides a wide range of skilled legal representation to fiduciaries, beneficiaries, creditors and other parties who have some legal relationship with the trust or probate estate. We handle various trust and will construction actions where the interpretation of a trust instrument or last will and testament may be at issue. We also participate in complex trust and estate accounting actions as well as a wide range of other issues involving fraud, embezzlement, theft, undue influence, lack of capacity where the legal ability of the person executing the instrument is called into question. Our cases involve a broad range of disputes often involving sophisticated and even novel legal issues. Much of our trust and estate litigation does not strictly involve trust or will instruments, but also involves disputes concerning the proper ownership and possession of life insurance proceeds, joint bank accounts, stock brokerage accounts, pension funds, individual retirement accounts as well as real estate.

We also handle many cases involving complex real estate and business disputes regarding family-owned assets throughout the State of Hawaii. We are known for litigating some of the largest family trust disputes in the state, involving well-known families and family-owned and created businesses in Hawaii. Our cases may range in value from a few hundred thousand dollars (in the case of a dispute concerning an estate with a modest-sized home) to cases valued in the tens of millions of dollars. No matter how complex or basic the case is and no matter how much is stake in terms of dollar controversy, we treat every case seriously and with the utmost professionalism.

Probate is the legal process that occurs upon a person’s death to administer his or her estate and transfer assets to those beneficiaries named in the will or to the intestate heirs at law if there is not will. It involves a petition to the court by providing a Will and requesting an appointment of a Personal Representative. A Personal Representative is someone who will have legal authority to settle claims against the estate and disburse the decedent’s property in accordance with the will. Letters Testamentary are issued to the Personal Representative to prove his or her legal authority to deal with institutions such as banks and title companies on behalf of the decedent. During this process, a court will determine the validity of a will and who the heirs to the estate are.

• Lack of testamentary capacity (lack of ability to make a wil or execute a trust)
• Lack of donative capacity (lack of ability to make a gift)
• Undue influence
• Fraud in the inducement of the making of a trust/will instrument
• Disinherited spouses – petitions for determination of elective share
• Trustee removal actions
• Petitions for instructions
• Petitions for orders compelling trust terminations, accountings, and distributions
• Theft/embezzlement (of bank accounts, retirement benefits, savings, stocks, etc.)

The law requires that all individuals who make or execute a will or a trust or other estate planning documents have the requisite degree of mental capacity, also referred to as testamentary capacity, in order to make a validly enforceable estate planning document.  In order to have testamentary capacity, a decedent must be able to: (1) understand the business in which he or she is engaged, i.e. the effect of making the will or trust; (2) understand and know the nature and extent of his or her property; (3) to know his or her next of kin and natural heirs of his or her bounty and (4) to have sufficient ability to perceive the relationship between the estate planning document(s), one’s property, and the testamentary or inter vivos plan of distribution.

In short, testamentary capacity requires that one know generally what they have in the form of assets; who their relatives or next of kin are; and that the purpose of the estate planning document(s) is to leave various assets to individuals in a coherent plan.  A coherent plan does not mean that the plan of distribution is necessarily fair, but rather, it must only be logical in terms of matching the assets with the described plan of distribution.  Thus, the level of cognitive function required to have testamentary capacity is quite low in comparison to the degree of cognitive functioning required for other types of capacity, such as capacity to contract or the capacity to manage one’s own daily financial affairs.

Moreover, the measure of testamentary capacity must be judged at the time the individual executed the estate planning document(s), not before or after.  This is important because even people who are suffering from delusions or insane beliefs may have lucid intervals at the time that the estate planning document is executed and can therefore still form a coherent plan and have testamentary capacity. For these reasons, proving a document invalid, due to the lack of testamentary capacity is quite challenging and is, in fact, a relatively rare occurrence.  It almost always necessitates expert testimony by the decedent’s former treating physician or by a forensic psychiatrist opining that the individual lacked capacity at the time the estate planning document(s) was executed. Because of the low threshold of testamentary capacity and the difficulty of proof, experienced law practitioners often rely on undue influence to void the estate planning document(s) rather than attack a testamentary or inter vivos instrument on a theory of lack of testamentary capacity.

In analyzing the testamentary capacity, the law in most states generally recognizes the basic principle that capacity is typically measured in the sliding scale. That is, the more complex the instrument, or the more complex the decision, the greater amount of capacity is required for the law to recognize that the individual had the legal ability to undertake the action. A person may need for example a lower amount of testamentary capacity to execute a simple will, but a greater amount of capacity to execute a complex trust with multiple assets in different forms which is being disbursed to various individuals under different terms and conditions. There are other various types of capacity that the law recognizes and our law firm has litigated virtually all of them. For example, there is contractual capacity to execute a document; there is general capacity to handle one’s day-to-day finances; there is capacity to consent to medical treatment (what is commonly referred to as informed consent); there is donative capacity, which is the capacity to make lifetime gifts; and there are other miscellaneous capacities as well including the capacity to marry, the capacity to divorce and others as well. Each of these capacities reflects a slightly different standard and a slightly different definitional approach depending on the jurisdiction the clarity that psychologists and psychiatrists have been given by the courts varies greatly leaving sometimes subsequent room for analysis and interpretation of individual’s capacity.

In an age of advanced medicine, individuals are increasingly living longer, and as a consequence, people may outlive their full cognitive faculties.  As a result, people may be more susceptible to undue influence because they may spend many years of their life physically or psychologically dependent on others for their care and financial well-being.  Elderly individuals are sometimes faced with a situation in which they have been coerced, pressured or as the law says “unduly influenced” to change their estate plan.  This change often results in an unnatural bequest to a third-party who commits the undue influence.  In an undue influence case, the change in an existing plan or creation of a new plan alters the disposition of some or all of the individual’s assets upon death and does not reflect the individual’s own wishes or independent desires, but instead reflects the wishes of a third-party who will benefit from the new or altered estate plan.

With few exceptions, the law generally does not expressly allow one to bring a claim for undue influence until after the death of the maker of the estate plan, therefore, proving undue influence can be a difficult undertaking; it is almost exclusively proven by indirect and circumstantial evidence.  This is because undue influence, which is a form of fraud, is rarely done visibly where others may directly observe the subtle coercion and pressure that may occur over a protracted period of time and behind closed doors.  Proving undue influence can be a very fact-intensive investigation which may require a collection of a multitude of witnesses and requires the attorney to paste together a timeline of facts and circumstances which, by themselves, would seem innocent or benign, but in the totality of circumstances may lead to proving a strong circumstantial case of undue influence.

For these reasons, litigating undue influence claims requires extensive experience and expertise on the part of the attorney.  Often, experts such as forensic psychiatrists, physicians, psychologists, some of whom may not have even treated the individual while alive, may be called to testify and opine to the decedent’s susceptibility to undue influence and/or diminished capacity, which tends to prove that the decedent did not understand that he or she was being coerced or pressured at the time of execution.

Where mere persuasion ends and undue influence begins is not always clear.  After all, we are all influenced in our everyday lives.  We are influenced by the opinions of others, by our family, by the media, and we are influenced by our own life experiences.  The law of undue influence, however, in the area of wills and trust litigation, examines whether one has been coerced through outside pressure or influence of others which has deprived the individual of his or her own free will to the point where they are no longer expressing their own wishes, but are expressing, instead, the wishes of third parties. This is often a very subjective determination by the fact finder, whether it is a judge or jury.

Hawaii law and the law of other states examine several elements in determining whether undue influence exists.  These elements as expressed by the Hawaii State Supreme Court are:

Whether the individual who executed the instrument was susceptible to undue influence. This element is typically proven by examining the age and physical and mental health of the individual at the time of the execution of the instrument and alleged undue influence.  It may also be proven by analyzing the degree to which the individual relied upon the alleged influencer for financial assistance and/or custodial care.

Whether the alleged influencer had the opportunity to commit undue influence. With respect to this element, the court may look at such factors as the relationship of the alleged influencer to the individual and whether the alleged influencer had the ability, over a period of time, to commit the acts of undue influence without interference or the knowledge of others.

Whether the alleged influencer has the disposition to influence. For this element, the court may look at the motive of the alleged influencer and whether there are other factors, personality traits, or circumstantial evidence that leads one to believe that the alleged influencer had the motive and ability to commit the act of undue influence.

Whether the disposition resulted in a benefit to the alleged influencer. In analyzing this element, the court would review the result of the disposition to determine if, in fact, the alleged influencer received a “coveted result.”

These factors have evolved in the Hawaii courts to aid judges and juries in determining whether or not an existing estate planning document should be enforceable or essentially cancelled and rendered null and void as a result of undue influence.

In Hawaii, partly because of the nature or our state’s unique geographical isolation, undue influence cases are especially plentiful.  Often times, children move away from their parents, leaving them geographically isolated and creating a vacuum in which individuals, whether related or unrelated, may step in and take advantage of an unsuspecting, aging adult.

Sometimes undue influence cases can be very difficult to prove and present to a fact finder.  The mere fact that an individual wants to give more or less to a specific child or other third party may be reflective of many different considerations which have nothing to do with undue influence, pressure, or coercion.  There are many cases where individuals give a disproportionate interest or share in one’s estate plan as a token of gratitude or for other reasons, such as an unwritten bargain for custodial care, companionship, and other services in exchange for property at death.

For these and other reasons, our office sometimes recommends that estate planning for elderly people, particularly those being cared for by their children, be completed openly with frank discussion among the family members.  There is nothing improper with putting the reason for one’s wishes in writing or in some other method of documentation such as a videotape or recording, addressed to all relatives to explain one’s reasoning and motivation for a new estate plan.

Financial abuse against an elder is any act or pattern of an act that is committed against an elderly individual (typically a person age sixty-five (65) years or older, but in some cases may be younger) which involves an individual wrongfully taking property/assets from an elder without obtaining proper consent.

Some common forms of financial elder abuse include:

1. Undue influence
2. Embezzlement
3. Conversion of assets
4. Wrongful procurement of wills/trusts/deeds
5. Life insurance designee changes
6. Payable in death account changes

If you would like more information on elder law litigation in hawaii, please contact MacDonald Rudy.

Financial elder abuse cuts across all socio-economic, all cultural and ethnic levels and all educational levels.  Financial elder abuse is often committed against elders who are physically or cognitively impaired—and not necessarily both.  This is because these elders tend to be dependent on third parties for care and support, which allows a third party to isolate and take advantage of the elder’s unfortunate circumstance.

An example of a cognitive impairment which is commonly seen in those individuals subjected to financial elder abuse is dementia.  Those in the latter stages, or even middle stages, of dementia are most at risk.  However, even those suffering from mild cognitive impairment (such as the early stages of dementia) may be subject to abuse, especially when this cognitive abuse is combined with physical impairments.

Financial elder abuse also tends to happened when an elder is isolated from family members (either geographically or socially).  Again, this isolation makes it easier for the perpetrator to take advantage of his/her victim.

As the trustee or executor of a trust, your responsibilities include, among other things: collecting and safekeeping assets; investing principal appropriately; paying expenses of trust administration; preparing relevant tax forms; defending the provisions of the Trust against any litigation; contacting beneficiaries; taking a complete inventory of the estate and appraise all cash and non-cash assets; distributing income to the income beneficiaries and at Trust termination; and distributing principal assets to the remaindermen.

Generally, a trustee has the highest duty imposed by law to the beneficiaries. This duty, referred to as a fiduciary duty, means that the trustee must always act in the best interest of the beneficiaries, free of conflict of interest and self-dealing. If the trustee’s personal interest is in conflict with that of the beneficiary, he/she should immediately seek legal representation, discuss it with an attorney and the attorney must decide whether it is appropriate for the trustee to either seek clarification from a court or court approval for certain trust actions.

The trustee must manage and invest assets prudently as if they were their own. A trustee is free to delegate tasks and responsibilities, but the trustee must be prudent and careful about selecting advisers.

A trustee may not delegate in whole, his fiduciary responsibility to any third person unless this trust expressly allows for such delegation.

The trustee must keep all beneficiaries reasonably informed of the activities of the trust and prepare accountings in appropriate format to the beneficiaries as outlined in the trust instrument. There may be additional beneficiaries whom the beneficiaries may also have to account for upon request to provide similar such information. The trustee must make sure that the assets are made productive, and the trustee must deal impartially with all beneficiaries and not favor one class of beneficiaries over another unless expressly provided for in the trust instrument.

The trustee must file appropriate tax returns in a timely manner, and must distribute income and/or principal according to the terms of the trust.

Absolutely. A trustee can be held personally liable in the form of a surcharge, for committing waste or essentially having a trust lose money as a result of improper acts or lack of action on the part of a trustee. A trustee can only be forced to disgorge any profits if he or she acts in a conflict of interest benefiting himself or others.

How should a trustee minimize or prevent personal liability in administering its fiduciaries duties? Because trust cases can be extremely complex, and the character of assets may be very diverse, each trust administration really requires solid legal advice to make sure the trustee is acting properly at all times.

Many cases are brought against trustees because of the following:

Little or no communication between the between and beneficiaries. No annual meetings or reports and no accountings.

Inaction. Failure to make timely distributions and/or failure to make timely liquidation and monetization of assets where called for under the terms of the trust.

Conflict of interest. Trustees buying or attempting to buy property or otherwise take advantage of assets within the trust for their personal benefit, for the benefit of their personal relatives to the exclusion and detriment of other beneficiaries.

In short, if a trustee is uncertain about a proper course of action it is imperative that they immediately seek proper legal counsel to make sure that they are not breaching their fiduciary duty to the beneficiaries and thereby subjecting themselves to personal liability, liability that may far exceed any trustee fee or commission that they are entitled to under the law and/or any portion of the trust that they are entitled to under its own terms.

The courts, and of course, the beneficiaries, take proper administration of the estate very seriously. It’s not uncommon for an administrator to try to voluntarily remove themselves when they find themselves unable to deal with the duties at hand. It’s also possible for an administrator to be involuntarily removed by the courts if they are deemed to be causing harm to the estate either through improper or prejudicial action, or even through a lack of action.

Often times, a fiduciary, such as a trustee of a trust or personal representative of an estate, may need instructions to be given by the court in cases where it is unclear what the proper scope of duties and/or responsibilities are under a given trust instrument.  Although the court cannot properly sit and give protection to a trustee in administering its duties in the normal course of events, there are circumstances which arise from time to time, in which there is a legitimate legal “gray area” in which the trustee may be forced to proceed.   In that event, our firm will assist with your filing a petition for instructions with court and ask for as much guidance from the court as possible, so that the trustee can act properly and confidently without threat of attack from potential disgruntled beneficiaries or heirs.

Sometimes it is necessary for a fiduciary to ask a court to deviate from the expressed terms of a trust or will.  This may be for a variety of reasons, including, but not limited to, change in circumstances of beneficiaries, change in circumstances in the nature of the bequest, such that following the literal meaning of the instrument may be difficult or impossible.  In these types of petitions, the law firm would seek a change in the language of the instrument which, although different from the expressed terms of the trust or will, most clearly matches the settlor’s intent, given the present facts and circumstances that the fiduciary faces.  Petitions for reformation or deviation of trust instruments are sometimes required in order to correct a scrivener’s error or mistakes in technical drafting.

Often times it is necessary for a fiduciary to sell real property.  In the trust context, it may be possible to obtain court approval of a sale and, after giving notice to all interested parties, the trustee can appropriately go forward and conclude a sale in the terms and conditions outlined in a petition.

Similarly, during the probate administration of an estate, a Personal Representative must gather assets and pay the debts of the estate in such a way that will permit the beneficiaries to receive the maximum inheritance. A Personal Representative may be urged to sell property of the estate in order to pay debts, or he or she may be directed by the provisions of a will. The sale of probate property may be subject to court approval.

Probate administration involves the winding up of a decedent’s estate. This process may be done informally or formally with court supervision. During this process, a Personal Representative must account for decedent’s assets, pay creditors and settle all claims, and then disburse the assets to beneficiaries in accordance with the decedent’s will. A Personal Representative may also be responsible for filing a tax return on behalf of the estate and paying the estate tax. Like a trust administrator, the Personal Representative acts in a fiduciary capacity and may be held liable to any loss suffered as a result of his or her failure to properly administer the estate.

Conservatorships are court-supervised proceedings in which a third-party, typically an individual, is given the fiduciary responsibility to manage the financial affairs of an “incapacitated person.” An incapacitated person is either (1) a minor, someone under the age of 18, or (2) an adult who, because of a physical, mental, or health impairment is unable to receive and evaluate information or communicate decisions related to his or her management of his or her financial affairs.

Conservatorships are initiated upon a petition to the court by an interested person, typically a family member or close friend of the incapacitated person. The petition is typically filed along with a copy of a physician’s certificate that states that the incapacitated person is no longer capable of managing his or her financial affairs.

If the court determines that a person is, in fact, incapacitated, the court will appoint may appoint the petitioning party as the conservator, to be put in charge of all the financial affairs of the now “protected person.”  Property and all other assets of the protected person are legally titled in the name of the conservator, as conservator of the protected person.  The conservator typically provides a monthly budget and must provide periodic accountings to the court, which may be approved by the court upon notice to all interested parties.

The conservator should submit to the court, a very detailed and comprehensive budget, which presents all funds available to the protected person and the anticipated expenses related to their general health, care, maintenance, and welfare.  Our attorneys are experienced in this area and are able to assist clients in presenting a detailed and comprehensive budget to the court.

A conservator should prepare an accounting for the protected person that details the principal receipts, income, and expenditures of the protected person.  The court will determine the frequency with which the conservator must file these accountings.  A guardian should prepare an annual report of the protected person’s health, condition, living arrangements, and other information as ordered by the court.  Our firm has prepared many of these accountings and is able to prepare required documentation for the Court’s required review of the conservatorship and guardianship activity.

Conservatorships are one of the most prevalent types of litigated cases in the probate courts in the state of Hawaii.  It is the author’s belief that the chief reason that conservatorships are often so heavily litigated is the fact that these types of cases are often two cases in one. The first case is control of the assets while an elderly parent or other close family relative is still alive. The second case is often the result of some type of litigated pre‑death will or trust contest because often there has already been improper or illegal changes in the estate plan which helps to bring about the action in the first place.

The fact that the protected person or object of the conservatorship is still alive, and is present and visible in the lives of those that are concerned, makes these cases among the most bitter contracted and expensive types of trust and estate litigation cases.

At this point in time the law in many jurisdictions is unclear as to the scope and breath of a conservatorship. Generally, under the law in virtually every state, a conservator has the right to amend or cancel an existing estate plan. For these reasons, both sides fear that lack of control over the protected person may mean a disinheritance at the end or during the conservatorship battle. Often litigated conservatorships contain allegations of both physical abuse and financial abuse against the protected person.

The advantage of litigating while an individual protected person is alive is that the person can be evaluated medically, and often psychiatrically, to make a case of susceptibility to undue influence or perhaps lack of capacity. This is in contrast to a situation where a person passes away, and a forensic psychiatrist who has never met the individual may be forced to reconstruct an individual’s legal capacity from the review of medical records. As time goes by and memories fade, witnesses become disbursed and hard to track down. This illustrates the point that it may be more cost effective to challenge conservatorships before the testator or settlor passes away.

As the population continues to age and people live longer, and often outlive their mental faculties, the need for conservatorships and the presence of disputes around an elder person’s financial affairs is on the dramatic increase.

Petitions for conservatorship are often filed after suspicion of elder abuse or other financial abuse against an aging individual.  For this reason, conservatorships are often accompanied by other procedural tools such as petitions for an accounting and requests for additional discovery as to the soon-to-be protected person’s financial history.

Petitions for conservatorship also may uncover acts of undue influence in which wills, trusts or other estate-planning devices have been executed by an individual, who had diminished capacity such that one or more of the elements of undue influence are also present.

A guardianship is a legal proceeding in which the Court appoints a person to protect the incapacitated person by helping the incapacitated person meet necessary requirements for physical health, safety, or self-care.  An incapacitated person is either (1) a minor under the age of 18, or (2) an adult, who because of a physical, mental or health impairment is unable to receive and evaluate information or communicate decisions related to his or her ability to maintain his or her necessary health, safety, welfare, and maintenance.