macdonald-rudy-law-firm

My Relative Just Died in Hawaii. I Do Not Live in Hawaii and I Have No Information on His Assets or His Estate. Please Help!

Fri, 11 Oct 2024 08:59:00 GMT

This law firm receives phone calls almost daily from inquisitive relatives living on the mainland or overseas regarding the death of a relative.
The potential client only tells us that they have no information other than a notice of death and perhaps where the location of the body is. Now, understandably, they want to know:

Did he or she die with assets?
Who has the authority to provide for cremation or burial services?
What are the assets?
Where are the assets located?
Did the person leave a Will or a Trust?
Who should be notified of the death?
Who should be put in charge of collecting the assets?
Did the caller inherit anything?

The answer to these questions can be difficult, and full answers would be the subject of a very long dissertation. This is particularly true when a decedent has been living alone, without close relatives, family members, or friends who are familiar with the decedent’s personal and financial affairs.
This article attempts to walk the reader through some of the issues that one confronts when trying to identify assets and locate a Will or Trust that the decedent may have left behind.
Generally, the first place to start is to obtain an Order from the Probate Court or what is called an “Affidavit for Collection” for estates that are known to be below $100,000 in assets and own no real estate in Hawaii. Generally, Affidavits require a fair amount of knowledge regarding a decedent’s financial affairs. Either of these legal instruments will allow a relative or an individual to legally act on behalf of the decedent’s estate. This individual would have the legal authority to approach various institutions and third parties that may hold assets. The goal of the personal representative who is put in charge by the court is to collect assets, pay debts, and distribute the assets according to a Will or a Trust, or pursuant to Hawaii’s laws of intestate succession, which determines where assets go when a decedent does not have a written Will or Trust.
It takes approximately one month to receive an order from the court authorizing an individual to act on a decedent’s behalf. That appointed individual does not have to be a resident of Hawaii or even the United States. Our law firm charges a flat fee to assist in the appointment process. Once a personal representative is appointed, if possible, it is suggested that the personal representative visit the decedent’s last place of residence to begin the laborious process of going through the decedent’s belongings and mail to find clues as to where assets may reside. Accessing a decedent’s email account and computer hard drive may be required to ascertain the location of mutual fund accounts, stock brokerage accounts, pensions, savings accounts, checking accounts, and other assets.
In the case of real estate, law firms can perform a title search, and title companies can determine whether an individual holds real estate in the State of Hawaii.
Law firms do not investigate a decedent’s computers and piles of mail in cases where a personal representative cannot travel to Hawaii. However, third-party services are available to do this type of work.
In terms of insurance policies and annuities, there is a national depository for insurance policy information with certain participating insurance companies and financial service companies. There is a national insurance policy locator service on the web at NAIC.org. By filling out the forms and submitting them over the Internet, you may be able to locate a potential life insurance policy or annuity belonging to the decedent.
With respect to local bank accounts, once an individual has the authority from the probate court, it may be desirous to contact all the local banks to determine if the decedent left a checking or savings account.
It may also be possible to write to the Internal Revenue Service to get a copy of the decedent’s last tax return, which could provide clues as to where investments were located.
A law firm or other individuals can check the local probate court records to see if a Will has been admitted to probate. Also, in the case of private trust agreements, which are not registered with the court typically, the Probate section of the Hawaii State Bar Association may be able to assist in contacting various estate planners in Hawaii to see if a Trust was prepared and executed by the client of an attorney licensed to practice law in Hawaii.
Once an individual has been appointed personal representative, they only have the authority to commence and take possession of the decedent’s body and provide for funeral arrangements and/or cremation if the will authorizes them in writing to do so or the priority statute discussed below permits them to take control. Hawaii law has a statute, HRS § 531B-4, which sets forth a priority list of individuals who have the right to control the disposition of a decedent’s remains and the location, manner, and conditions of disposition of those remains. If a decedent’s Will or Trust designates someone to take control of their funeral and burial, that person has priority above everyone else. If no other relatives exist, any person willing to assume responsibilities may take possession of the body and direct disposition after attesting in writing that a good faith effort has been made to notify the decedent’s next of kin under the statute. In summary, if an individual does not have proper estate planning when they pass away, a relative can be faced with the time-consuming and challenging task of locating assets and dealing with the administration of the decedent’s estate. Law firms can provide invaluable assistance in this process, but they are not a substitute for doing the necessary “boots on the ground” work in Hawaii. Individuals who do not have the ability or time to travel to Hawaii may wish to seek to appoint an independent personal representative or corporate fiduciary in Hawaii to undertake much of the investigative work. As a result, a relative or other interested person may be required to advance fees or costs that would be reimbursable from the estate if assets are found.
If you would like to start the informal probate process with our law firm, please contact us at (808) 523-3080 to start the process of estate administration and appointment of a personal representative for a decedent who dies with assets in Hawaii.

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

Tue, 13 Jun 2023 19:46:00 GMT

It has always perplexed the Firm’s lawyers, why serious responsibility for an elderly parent’s welfare and estate is so often reposited in the weak link in the family. Parents are very protective of their ne'er do well child. That child frequently is unemployed and often lives at home with his or her elderly parents. Often these are the sons and daughters whom the other siblings (or the elderly parent) appoint with the most significant responsibilities. Do not forget elder abuse is a crime of opportunity and this is when parents may be at their most vulnerable to undue influence by an unscrupulous caregiver.

These caregivers are often unprepared to take on the taxing role of Trustee or Personal Representative and are least likely to understand their role as attorney-in-fact, Trustee or Personal Representative. Somehow, whether their name is on a bank account or credit card, or they have other access to their parents’ funds, they come to view their parents’ assets as their own. This is one of the most frequent fact patterns we see in elder financial abuse cases, and I refer to it as the “Black Sheep Syndrome.”

In this scenario, fellow siblings who have not faced the acute situation of caring for a 70-, 80-, or 90-year-old frail and infirm parent are desperate to address the situation of their parents’ care. In an attempt to create a win-win situation with a Black Sheep sibling they agree to let the Black Sheep sibling financially and personally care for their mother or father.

A Black Sheep sibling can best be described as someone in the age range between early fifties to mid-sixties who is typically single or divorced, with a history of unemployment or other poor job performance and possibly financial woes of their own. They may also have had a history of alcohol or drug abuse, which has rendered them unemployable and will render them unreliable. They have few financial assets of their own, and their current living situation would be best described as unstable (if not for the financial assistance of the parent).

The naive brothers and sisters of Black Sheep siblings attempt to create a win-win situation for both the parent and the Black Sheep, and they just assume that the Black Sheep will honestly or fairly carry out their parent’s final wishes. When the parent is in need of custodial care and wishes to age in place, typically in the family home, the fellow siblings believe that they can avoid this costly expense of private care in an assisted living environment. Collectively, they determine that they will be able to save and preserve their own inheritance and essentially give the Black Sheep sibling a stable home environment. Sometimes this means a modest salary, and the chance at a healthy nurturing relationship with their elderly parents. Unfortunately, honest and naive siblings do not contemplate the pitfalls of such a relationship.

This scenario often creates a disastrous situation. The Black Sheep sibling almost immediately provides no or less than desirable care, can be left totally unsupervised with a parent, and quickly gains access to a parent's bank accounts and other forms of savings and may even have the family home transferred to their own names. In doing so they commence to embezzle cash and property, although they will rationalize spending that money as necessary for parental care. However, if the situation goes on unnoticed for several years, and the elderly parents’ estate permits, the Black Sheep can end up spending hundreds of thousands of dollars on their parent’s estate, far more than a professional caregiver would cost.

It will seem self-evident in hindsight that the naive siblings made a poor decision. Potential clients frequently come to our office suffering the emotional pain of a parent’s death and then are stunned that the Black Sheep has never complied with their original compact. We rue appointments when a group of siblings come to our office and tell us a woeful, sad story of this kind that inevitably results in the lack of physical and financial care that ought to have taken place owing to their good intentions in supporting the Black Sheep sibling as caregiver.

If the Black Sheep sibling is living in the home of the elderly parent their lives inevitably become enmeshed and often it is difficult to unravel the dysfunctional relationship that arises between the Black Sheep and the aging parent. The Black Sheep sibling will have entrenched herself or himself in the family home, making it difficult to legally extract them. Moreover, owing to the difficulty of the caregiving role, the Black Sheep sibling will become resentful of the other siblings, some who may live far from the family home.

“Entrepreneurial” and manipulative Black Sheep siblings take mom or dad to an estate planning attorney and have health care powers of attorney and other powers of attorney executed in their favor, making it especially difficult to unwind the legal relationship. In these situations, parents feel duress that if they do not make the Black Sheep sibling the holder of these legal powers, they will stop caring for them. Often, particularly with very old parents or non compos mentis parents, parents will not be able to make the decision of their own free will. The Black Sheep, of course, feels that they are so overwhelmed and overworked they deserve this money, irrespective of what their parents’ wishes are.

Once the Black Sheep sibling seizes control, gaining access to bank records and other important documents that are in an aging parent’s name alone, it is often difficult and sometimes requires emergency court filings and hearings before a judge to unravel the mess created in this situation.

Even in situations where siblings believe they have a firm understanding of their expectations with the Black Sheep, things can go wrong quickly. Owing to the difficulty of this task, the Black Sheep family member quickly feels entitled and denial quickly seeps into the abusive situation.

It cannot be overstated that is never an opportune time to institute a social experiment with a Black Sheep sibling in the hopes that he or she may possibly be a good fit in their new role as a caregiver and trusted fiduciary. Quality caregiving is difficult and requires experience. A senior’s caretaker must have a history of dedication, honesty, and empathy in working with elderly individuals.

Just as a sibling would interview professional caregivers inquiring about their references and past employment, the same metric should be used in evaluating the Black Sheep sibling. It is simply too much to expect the Black Sheep sibling to "clean up their act," and in cases of drug addiction and alcoholism it is impossible. Responsibility for caretakers can be a strange, novel and stressful situation for anyone, let alone overseeing a sibling that lacks the skills to work with elderly individuals.

Entitlement of an individual is a very powerful tool that a perpetrator of elder fraud uses to justify virtually any action against an elderly individual. They simply do not view the situation as a win-win for everyone, but simply as an opportunity for their “put upon” selves to be rewarded. Remember, financial elder abuse is a crime of opportunity. If an unsuitable person has access to a parent’s funds, the temptation will be too great to pass up. Responsible siblings that end up being legally responsible for a parent's care must be realistic in any caregiving situation particularly in a Black Sheep situation.

If you want to attempt to provide a win-win situation for an elderly parent, it should only be done on a trial basis with strict monitoring. Simply assuming or hoping for the best is not the solution. We recommend in these types of situations to have paraprofessionals monitor the situation weekly, sometimes with surprise inspections and at least a monthly review of an elderly person's finances to ensure that they are not being victimized. The caretaker may likely resist financial and personal oversight, and that is a sign there may be elder abuse going on.

Also, it is critical that before this trial period starts a complete estate plan is executed by the aging parent. Alternatively, and at a minimum, a conservatorship should be instituted, or a parent that is already incapacitated and lacks the requisite ability to execute their own will or trust. Protecting the elderly from abuse requires vigilance.

It is not foolish to give someone a second chance in life, particularly a sibling, but it is not responsible if you do not monitor trust and verify what is occurring in the caregiving situation. Therefore, what at the outset appears to be a simple and economic solution to a serious problem, results in an outcome that can be not at all what the family expected. These situations can cause an irreparable rift in family relations and cost more of the beneficiaries’ share of their parents’ estate than merely hiring a professional caregiver. Finally, and most importantly, it will not result in the care one’s elderly parent deserves.

Is a Handwritten Will Valid in Hawaii? By Michael D. Rudy, Esq.

Tue, 13 Jun 2023 19:37:00 GMT

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.

Even before the paucity of in-office lawyers during 2020 and 2023 owing to Covid, it was challenging to serve many senior citizens located in nursing homes or otherwise isolated. It can be difficult to gather witnesses, paralegals and even visiting attorneys to prepare even a simple Will.
Consequently, many elderly individuals were forced to use "do it yourself" handwritten wills. The Probate Court was then left to interpret the Testator’s acts regarding the issues of enforceability, intentions, and documents.
The discovery by a third party of a Holographic Will after the death of a decedent can result in a legal quagmire over its authenticity, Testator intent and the interpretation of the handwritten instrument. The Personal Representatives of Decedents who have been alone or estranged from their families, can find themselves in possession of a Holographic Will and may expect disputes over the document from relatives, caregivers, and even relative strangers. Therefore, a careful and well-planned case must be mounted. It is up to the attorney, working with clients, to uncover evidence that will allow the denominated Person Representative to prevail.
As set forth above, Hawaii law provides that handwritten wills that are not witnessed can still be valid and offered for probate if the signature and material portions of the will are in the testator's handwriting. The requirement of authenticity is typically proven by someone who is familiar with the maker's handwriting. Alternatively, the handwriting may be identified by a handwriting expert using near contemporaneous samples of the maker's handwriting as contained in letters, checks, other written documents, or instruments in the maker’s own writing and performing a signature comparison of same
Typically, in a Holographic Will dispute, the main point of contention is whether the document contains evidence of the Testator’s requisite testamentary intent to make the will. The question before the court is whether the material portions of the will contain sufficient language expressing the intent of the maker of the will and that the instrument is sufficient evidence of the Testator’s irrevocable intention to leave or dispose of the property according to the Holographic Will found at the maker's death.
Courts and judges across the country that admit Holographic Wills interpreting Hawaii's expansive law on the subject have universally held that there need not be any formal legal language to establish testamentary intent. Phrases like "should anything happen to me” or when I leave" constitute the required demonstration of testamentary intent. Even words or phrases in a document describing the instrument as someone's last will and testament can be enough to satisfy testamentary intent.
However, vague references to making a will in the future such as "I intend to change my will and leave my property to X" have been held insufficient as well as merely making a promise to make a will at a later date. Alternatively, the phrase "I want you to have it all" is considered a valid will with requisite testamentary intent when signed.
The interesting and developing part of the law with respect to handwritten wills is whether the will even has to be signed or dated at all. In 1996, Hawaii joined just five other states -- Connecticut, Hawaii, South Carolina, Washington, and Wisconsin -- in the United States along with the countries of Australia, Israel, and Canada in enacting Hawaii's version of the “Harmless Error Rule” regarding wills that is now codified in HRS §560:2-503. The Statute states:

Contested Conservatorships

Sat, 03 Jun 2023 09:43:00 GMT

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.

Choosing the Right Trust & Estates Litigation Law Firm in the Aftermath of COVID

Sat, 03 Jun 2023 09:26:00 GMT

trust and estate litigation

MacDonald Rudy

Filing Creditor Claims Against the Estate or Revocable Trust

Tue, 25 Oct 2022 23:18:00 GMT

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.

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.

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.

Hawaii Probate Rules. See Probate Rule 63, all supporting documentation not required.

MacDonald Rudy O'Neill & Yamauchi

(808) 523-3080

mrudy@macdonaldrudy.com

Early Intervention in Preventing Family and Closely Held Business Litigation

Thu, 09 Jun 2022 16:22:00 GMT

It has often been said that family wealth which has been created in the first family generation completely evaporates by the third family generation.

The old adage "from short sleeves to short sleeves in three generations” is commonly used to describe situations where family wealth, which is typically created by a family business, is completely dissipated by the third generation.

This is commonly true among many of Hawaii’s even most successful family owned companies.

There are a variety of reasons why family businesses implode by the third generation. There are both external and internal factors that create this phenomenon.

Many of these external reasons are due to ever changing market conditions for a company’s goods and services. Local family businesses face stiff competition from suppliers with cheaper products. In addition, technology from outside companies continue to provide more efficient, less expensive, and improved services to the public. The Company may become the victim of ever increasing labor and real estate costs which makes competition against out-of-state suppliers of goods and services difficult, if not impossible.

There are, however, many internal factors that may spread and damage an otherwise successful family business. These internal factors center around disputes between various family members over the future control, management, and goals of the business. In Hawaii, formal business succession planning can be sorely lacking, particularly among smaller companies with informal governance structures. In fact, even with competent estate planning attorneys and business advisors assisting the family business, business succession planning is often either completely ignored or poorly addressed.

Often, after the founding member or members have retired or passed away, a power vacuum develops. Growing numbers of family members in the second or third generation can dilute control and impede a positive and unified direction of the family business. This fractionalization often leads to lack of centralized management or diffusion of responsibility.

When an attorney or other advisor deals with family business disputes, they are often presented with particularly unique challenges and issues that are not usually present in larger privately owned or even publicly owned companies. In family businesses, many family members have different goals, desires, and abilities in managing the Company. Often, a family business by the second or third generation of ownership supports an ever increasing number of family owners, many of them, having different interests and responsibilities in the Company. Some family members wish to be highly active, while others may desire to receive passive income. Some members may want to liquidate or sell the Company as a going concern, while others may want to continue on and provide themselves a salary. Because of this, various owners, such as spouses or children from a prior marriage can have vastly different and conflicting needs, goals and desires.

These internal factors coupled with increasing outside external pressures, can inevitably crush a company by the third generation of ownership.

It is extremely important for individuals in a family business to identify disputes that may quickly develop after the death or retirement of a founding member or other key family member.

Once issues of management and control or other areas of tension and disagreement are identified, it is important to obtain competent legal advice before disputes reach the level of full blown litigation.

There are several common areas of family disputes. They include:

Multiple family members who are not involved in operating the business but desire equal profit participation with the other employee-owners.
Disputes as to a present or future opportunity to sell some or substantially all of the assets of the Company.
Valuation disputes contained in existing shareholder agreements or buy-out agreements among family members.
Disputes as to future control and management of the Company.
Disputes between a Founder’s spouse and adult children from a previous marriage over corporate operations.
Failure to provide corporate records or information in order to keep shareholders or members fully informed.

Litigation is an expensive, inefficient and time consuming forum in which to resolve family member disputes regarding a family business. It puts the business at risk and may subject the Company to irreparable harm since it is essentially airing, in public, the Company’s private negative history.

Litigation can also lead to the disorderly and unorganized liquidation of a company resulting in a tremendous loss of value in the Company’s going concern value.

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.

For more information, please contact:

MacDonald Rudy

1001 Bishop Street, Suite 2800

Honolulu, Hawaii 96813

Telephone: (808) 523-3080

Website: www.macdonaldrudy.com

It has often been said that family wealth which has been created in the first family generation completely evaporates by the third family generation.

This is commonly true among many of Hawaii’s even most successful family owned companies.

There are a variety of reasons why family businesses implode by the third generation. There are both external and internal factors that create this phenomenon.

These internal factors coupled with increasing outside external pressures, can inevitably crush a company by the third generation of ownership.

It is extremely important for individuals in a family business to identify disputes that may quickly develop after the death or retirement of a founding member or other key family member.

There are several common areas of family disputes. They include:

Multiple family members who are not involved in operating the business but desire equal profit participation with the other employee-owners.
Disputes as to a present or future opportunity to sell some or substantially all of the assets of the Company.
Valuation disputes contained in existing shareholder agreements or buy-out agreements among family members.
Disputes as to future control and management of the Company.
Disputes between a Founder’s spouse and adult children from a previous marriage over corporate operations.
Failure to provide corporate records or information in order to keep shareholders or members fully informed.

Litigation can also lead to the disorderly and unorganized liquidation of a company resulting in a tremendous loss of value in the Company’s going concern value.

For more information, please contact:

MacDonald Rudy

1001 Bishop Street, Suite 2800

Honolulu, Hawaii 96813

Telephone: (808) 523-3080

Website: www.macdonaldrudy.com

Is It Possible To Break a Trust Created For My Benefit By My Parents or Grandparents?

Sat, 05 Mar 2022 05:00:00 GMT

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.

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.

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.

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.

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.

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.

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.

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.

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.

The Top Ten Warning Signs Of Elder Financial Abuse

Tue, 14 Jul 2020 09:30:00 GMT

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...

Who has Legal Ownership of the Contents of a Safe Deposit Box Upon the Death of the Initial Depositor or Lessee?

Thu, 11 Jun 2020 09:29:00 GMT

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...

Hawaii’s Elderly Population Vulnerable to Financial Abuse During Difficult Financial Times

Sat, 11 Apr 2020 09:28:00 GMT

Hawaii’s stay-at-home/work-at-home response to the coronavirus pandemic, unfortunately, brings additional concerns to Hawaii’s sizeable elder population beyond protecting their own physical health. Financial exploitation of elderly citizens by those closest to them has always been a serious concern. There is a prevalent myth that elderly individuals are most commonly victims of financial fraud and abuse committed by strangers who are unknown to them. This is not true. Statistics demonstrate that financial abuse against an elderly individual aged 65 or above is far more likely to be committed by a known and a trusted family member or other individuals who are well-known to them rather than by an unknown individual. The number of assets wrongfully taken by a known family member can be sizeable and catastrophic. There are many types of financial exploitation. In Hawaii, many of the most common examples of financial abuse are embezzlement of checking and savings accounts, gaining access to retirement...

Pleading Practices in Hawaii’s Probate Courts

Thu, 15 Feb 2018 09:26:00 GMT

Founding partner, Michael D. Rudy, discusses pleading practices in Hawaii’s Probate Courts. One of the most difficult aspects of litigating trust and estate cases in Hawaii, particularly in their early stages, is the lack of guidance that the Hawaii Probate Rules provide a practitioner in dealing with a degree of specificity that is required in the initial petition. A poorly drafted petition is likely subject to dismissal or other adverse outcomes in the initial stages in the probate courts. Any estate planner or litigation attorney who routinely practices in the Hawaii probate courts realizes that the Hawaii Probate Rules were enacted in 1995, with various amendments thereafter, and provide only a limited guide of the procedures of probate court litigation. This is despite the fact that will and trust cases are some of the highest fact-sensitive, complex cases that involve significant assets for individuals. In the beginning stages of evaluating a case, a client and his or her counsel may be left...

The Magnitude of Financial Elder Abuse in Hawaii

Sat, 16 Dec 2017 09:25:00 GMT

Founding partner, Michael D. Rudy, discusses financial elder abuse and the staggering number of unreported cases of abuse. As our population ages, financial abuse perpetrated against our elderly citizens has reached epidemic proportions. There are thousands of cases each year of financial abuse committed against elderly citizens in various forms, including embezzlement; conversion; theft; fraudulent use of credit cards; improper home equity lines or mortgages; fraudulent deeds, wills and trusts; and improper use of joint accounts. This financial abuse has a wide range of implications for heirs and family members. To offer a sense of the scope of the problem of financial elder abuse, consider the following: About one in five Americans age 60 and older will become a victim of financial exploitation during their lives. Based upon various Mainland studies there are 44 times more unreported claims than there are reported claims of financial elder abuse to agencies such as Hawaii Adult Protective Services...

Using Powers of Attorney To Deal With Trust Assets

Wed, 04 Oct 2017 09:24:00 GMT

Founding partner, Michael D. Rudy, discusses the use and misuse of powers of attorney when dealing with trust assets. With the widespread use of revocable trusts in estate planning, financial institutions occasionally find that they are presented with powers of attorney which the holder uses to attempt to withdraw cash, securities, or other forms of assets from accounts. Our firm has seen several instances where individuals have either not been named a successor trustee or have failed to accept the successor trusteeship position, yet have actively used the power of attorney to extract significant funds from trust bank accounts. The misuse of a power of attorney often happens when an elderly individual is incapacitated and the holder of power of attorney begins to make withdrawals. What happens if the power of attorney is used to extract trust assets and the withdrawals are for an improper purpose (e.g. a vacation to Europe for the holder of power of attorney)? Is the financial institution liable?

The “Lucid Interval”

Wed, 13 Sep 2017 09:22:00 GMT

Founding partner, Michael D. Rudy, discusses the “lucid interval” and explains that the occurrence of a lucid interval in moderate or advanced dementia cases is wholly unsupported by medical science. Recently, my firm was involved with a case in which a petition was filed in the probate court alleging that the testator (maker of the will or trust) was severely stricken with advanced dementia and Alzheimer’s disease when he had executed his trust instruments. An argument was made that the trust documents were patently void due to the testator’s lack of testamentary capacity when said trust documents were executed. The court declared that competency is difficult to ascertain and stated “you know we all have our good days and bad days when we sign documents.” This statement observation has virtually no basis in neurocognitive science. Research over the last several decades has not supported the fact that patients with advanced dementia, particularly those with Alzheimer’s disease, are capable of having...

The Use of Physician Opinion Letters In Estate Planning and Trust and Estates Litigation

Thu, 23 Mar 2017 09:21:00 GMT

Founding partner, Michael D. Rudy, discusses the use of physician opinion letters in estate planning and trust and estates litigation and the universally misunderstood term “legal capacity.” By far the most misunderstood area in trust and estates litigation is the term “legal capacity,” which is a term I have found to be universally misunderstood by clients, physicians, social workers, attorneys, and even judges. Physician letters or opinions are often used to determine whether a patient has the “legal capacity” to make his or her own financial decisions or execute a will or trust. These letters are often provided to third parties including attorneys, investment advisers, and bank representatives. However, many physicians — including psychologists, psychiatrists, neurologists, and primary care physicians – do not have knowledge of the necessary testing and expertise required to offer an accurate and informed medical/legal opinion as to their patient’s “legal capacity” to perform a specific task...

Contracts To Make A Will — Are They Ever A Good Idea?

Thu, 09 Feb 2017 09:19:00 GMT

Founding partner, Michael D. Rudy, discusses contracts to make a will or devise and why you should consult an estate planning attorney. We live in a society where marriages often end in divorce, which has led to an influx of conflicts between children from one marriage and a second (or third, or fourth) spouse. In fact, multiple successive marriages can vastly complicate estate planning. Without proper planning, disastrous results may ensue, which may include effectively disinheriting children from the first marriage. Approximately one-third of our firm’s trusts and estates litigation practice involves disputes between a child from a decedent’s previous marriage and a spouse from a later marriage who is often attempting to claim his/her legally protected share (i.e. elective share) of the decedent’s estate or attempting to otherwise disinherit the child from the first marriage of the deceased spouse. These disputes often arise from alleged oral contracts to make a will, trust, or another request where...