In the realm of estate planning, it’s crucial to be proactive and to put a plan in place that takes care of your family. A great way to accomplish this is to create a living trust. If you live in Hawaii and you’re weighing your estate planning options, a living trust just might be the best choice to protect your assets and your family. We’ll walk through the details of creating a living trust in Hawaii, but if you’d like professional help, consider consulting with a financial advisor.
The process of creating a living trust in Hawaii consists of six primary steps:
A living trust is a legal arrangement that allows a person to grant ownership of his or her assets to beneficiaries. It takes effect when you’re alive and remains in effect after your death. Each trust has a designated trustee who is responsible for dispersing the assets as the trust’s grantor wishes. You can name yourself as the trustee or give that power to someone else.
There are two basic types of living trusts. An irrevocable living trust is permanent. This means the grantor cannot remove any asset placed in the trust without first getting permission from every person named in the document. Property placed inside the trust is no longer under the grantor’s ownership. Thus, taxes are paid by the trust, not the grantor.
A revocable living trust, by contrast, offers more flexibility than an irrevocable living trust. With a revocable living trust, the grantor can alter the trust whenever he or she wants. The grantor maintains ownership of the assets placed in the trust, though, so they must pay taxes on them.How Much Does It Cost to Create a Living Trust in Hawaii?
Forecasting the cost of creating a living trust in Hawaii is a difficult task, as it depends on many factors. If you opt for a DIY trust, your costs will vary depending on which service you use, if you use an online service at all. Total costs can range as high as a few hundred dollars, or they may be less than $200.
If you enlist the help of an attorney, you’ll have the peace of mind that an expert is on the case. That peace of mind doesn’t come free, though. Attorney fees vary from firm to firm, but costs could end up exceeding $1,000.
When looking for a lawyer to work with, try to find someone with experience specifically in creating trusts. Just because a lawyer focuses on estate planning doesn’t necessarily mean they specialize in trusts, and this kind of specialization can offer major benefits.Why Get a Living Trust in Hawaii?
The most common reason for creating a living trust is to circumvent the probate process entirely. Probate is a potentially headache-inducing legal process that confirms a decedent’s will. With a living trust, however, your estate will avoid probate altogether.
While avoiding the probate process might be huge time saver in some states, there might not be as many issues in Hawaii. That’s because the state government has adopted Uniform Probate Code, which makes the probate process significantly easier. So if you’d only be creating the trust to avoid probate, it may not be worth it.
There are other reasons to create a living trust, including making it easier to leave property to a minor. Through this, you can instruct the successor trustee to look after the assets in question until the child comes of age.Who Should Get a Living Trust in Hawaii?
Anyone can benefit from creating a living trust, not just wealthy families with complex estates. That’s not to say the size and complexity of your estate shouldn’t be a factor in your decision.
In Hawaii, the Uniform Probate Code streamlines the probate process, so it might make sense to just use a will if your estate is fairly normal. Further, Hawaii offers a simplified probate process for estates worth less than $100,000. If you fall below this threshold, a living trust likely won’t be necessary for probate purposes.
Living trusts can also be more expensive and more difficult to create than a will. Additionally, there exists the potential for issues after you’ve died, as the time period to contest a living trust is longer than it is for a will. If you decide to forgo a living trust, just remember you’ll still need a larger estate plan.Living Trusts vs. Wills
You need a will regardless of if you create a living trust. If any of your assets don’t end up in the living trust, the will dictates who should inherit it. Just as a trust has capabilities that a will does not, a will can do things that a trust cannot. These include:
The following table provides an overview of the capabilities of living trusts versus wills:Living Trusts vs. Wills Situation Living Trusts Wills Names a property beneficiary Yes Yes Allows revisions to be made Depends on type Yes Avoids probate court Yes No Requires a notary Yes No Names guardians for children No Yes Names an executor No Yes Requires witnesses No Yes Living Trusts and Taxes in Hawaii
There is no inheritance tax in Hawaii, meaning your beneficiaries won’t have to pay a tax once they receive the assets you’ve passed along. There is an estate tax in Hawaii, though. However, the Hawaii estate tax only applies to estates that are worth more than $5.49 million. The tax is levied only on the amount above this threshold.
There is a also a federal estate tax that applies to estates that are worth at least $11.4 million ($22.8 million for couples).Bottom Line
Creating a living trust in Hawaii is an easy enough process to wrap your head around, but it’s also easy to get tripped up by some of the minor details. While you can certainly set one up by yourself, it might make more sense to get professional advice.
If you have a valuable or complex estate, you would benefit from a living trust. The Uniform Probate Code, however, simplifies the probate process for estates without a trust. So be sure to take into account all factors before finalizing your decision.Tips for Planning Your Estate
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