Hot Off the Presses: 2 New Laws

Hope you are all enjoying this lovely Memorial Day weekend. I am, thanks in part to having just learned about two new laws that have been sent to the Governor for signing. Each of these laws, if passed, will make our planning here in Hawaii much easier.

The first of the two actually solves a common dilemma for married couples (and reciprocal beneficiaries) – whether to continue to hold property as “Tenants by the Entirety,” keeping the creditor protection provided by that type of tenancy, or to put the property into a revocable trust, losing the T-by-E characteristics but obtaining the advantages of the trust. If this law passes, then it will no longer be necessary to choose; a couple will be able to put their “T by E” property into their trust (or even separate trusts), and still keep the creditor protection afforded by the Tenancy by the Entirety form of ownership.  (There are a few ‘hoops’ that have to be ‘jumped through’, however, so it is critical that this be accomplished with the assistance of a knowledgeable attorney – among other things, the trust(s) must be named properly, and there must be special language in the property deed.)

Couples who have already placed their property into trust(s) will probably have to re-deed it back into Tenancy by the Entirety, possibly rename their trust(s), and then put the property back into the trust(s), to get the benefit of the new law. Still, it will be great to have this extra option in our planning toolbox here in Hawaii.

The other new statute is yet another “second try” law, a phenomenon that seems to be getting more common. First there was the Asset Protection Trust law, which was horrible when first passed in 2010, and then not-so-bad after the Legislature fixed it up in 2011. Now we have “Hawaii Estate Tax, Version 2.0,” which seems to fix some of the more complicated and difficult-to-implement (not to mention plan for) aspects of the Hawaii Estate Tax (referred to in a previous post as the ‘Zombie Tax’). Although I have only perused it VERY briefly, and much more study is necessary, its major thrust seems to be bringing the Hawaii exemption in line with the Federal Estate Tax exemption, so that we will once again not be a “decoupled” state. This will make planning easier, as the trust provisions that help married couples eliminate tax on the death of the first spouse will no longer have to take into account a Hawaii exemption that could be lower or higher than the Federal exemption.

Now, if we could just get some certainty and stability in the Federal Estate Tax laws, we might be able to relax a little about all this tax nonsense and focus on what’s really important – helping people pass on their legacies, memories, and values to the younger generations.

 

Published in: on May 27, 2012 at 8:57 pm  Leave a Comment  

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