This may be a good time to review your estate plan with your attorney.  Hawaii recently enacted a new law effective July 1, 2012, extending tenancy by the entirety protection to transfers of real property to trusts.  This new law is applicable to spouses, reciprocal beneficiaries, and civil union partners.

Do you know how you hold title to your real property?  Hopefully when you and your spouse/partner purchased your new home, you took title as tenants by the entirety.  For a long time, Hawaii law has afforded you special protections if you did.  It is possible as spouses/partners you hold title to your property other than as tenants by the entirety.  The only way to be certain is to review the deed, which indicates how title is held.   Tenancy by the entirety is the only kind of title-holding device that provides special protections.

Among the characteristics of property owned in tenancy by the entirety are:  one owner, acting alone, cannot convey any interest in the property (in other words, both spouses/partners have to sign a deed in order to transfer the property to someone else); the property automatically passes to the surviving spouse/partner upon the death of the first to die; and the creditors of one spouse/partner cannot reach tenancy by the entirety property. 

Prior to the enactment of the new law, if spouses held property as tenants by the entirety and then transferred their property to their respective revocable living trusts (which is a very common estate planning strategy), they may have lost the creditor protection afforded by the tenancy by the entirety.    If one spouse/partner were to have a car accident or a business setback or otherwise incurred substantial debt, the formerly tenancy by the entirety property in that person’s trust might have been subject to creditors’ claims.  This result can now be avoided by including special wording in your trust agreements and in the deeds transferring real property into your trusts.  If you transferred tenancy by the entirety  property into your trusts prior to July 1, 2012, or if that special wording was not included in your trust agreements and deeds, you might want to revisit the question of how to make sure your property is protected by tenancy by the entirety.

The new law is an important reminder that laws change from time to time, and that your estate plan must be reviewed and updated periodically in order for it to work as intended for the best interests of yourself and your loved ones.

NOTE: My Maui associate, Roya Deyhim, co-authored this with me.

One Response to “New Hawaii Law Gives Tenancy by the Entirety Protection to Trusts”

Post a Reply