Hawaii

Hawaii estates are heard in the Circuit Court of the circuit where the deceased lived. Hawaii
has adopted the Uniform Probate Code, so the familiar routes apply: informal probate through
the registrar on the paperwork, formal probate before a judge where something is disputed, and
unsupervised administration by default once appointed.

The Hawaii estate tax — with a feature almost no other state has

Hawaii levies its own estate tax, with an exemption of $5.49 million. That is well below the
federal figure, so more Hawaii estates are taxable than families expect, particularly given
property values here.

But Hawaii is one of only two states in the country — the other is Maryland — that allows
portability of the state exemption between spouses. A surviving spouse can elect to inherit
the deceased spouse's unused Hawaii exclusion, sheltering roughly $10.98 million for a married
couple.

The election has to be made timely, on a return filed for the first spouse's death, even where
no tax is due. Miss it and the second exemption is gone. Confirm the current figures and the
filing requirement with the Department of Taxation.

Non-residents are caught too

Hawaii taxes the Hawaii-situated real property of non-residents. A mainland family with a
condominium here may have a Hawaii filing obligation they never anticipated.

Leasehold land

A significant share of Hawaii residential property is leasehold rather than fee simple. What
passes to the beneficiaries is the leasehold interest, with whatever term remains — establish
which you are dealing with before valuing anything.

Before distributing

Let the creditor period run, file the Hawaii and federal returns, and make the portability
election if it applies.

A Hawaii will must be in writing, signed by the testator (or by another in the testator's
conscious presence and at their direction), and signed by at least two witnesses. The testator
must be 18 or older and of sound mind.

Holographic wills are valid

Hawaii follows the Uniform Probate Code standard: a will is valid whether or not witnessed if
the signature and the material portions are in the testator's handwriting. The rest can be
printed.

Hawaii goes slightly further than some UPC states: extrinsic evidence is admissible to show
that the document was intended as a will — including, for a holographic will, the portions that
are not in the testator's handwriting. That is a genuinely forgiving rule, and it means a
part-printed, part-handwritten document has a better chance here than in a stricter state.

Valid still is not advisable. A handwritten will does nothing about the estate tax, and in Hawaii
that matters more than in most places.

Make the portability election part of the plan

Because Hawaii allows portability of its $5.49 million exemption, and because the election
must be made on a return filed after the first spouse's death, the plan has to anticipate it.
A will drafted without regard to that — or a family that simply does not file after the first
death because no tax was due — can lose an entire exemption.

This is the opposite problem from Oregon or Minnesota, where the answer is a credit shelter trust.
In Hawaii, portability often makes simpler outright gifts workable, provided somebody files.

Also

• Name an alternate personal representative and waive bond.
• Establish whether your home is fee simple or leasehold; the will should account for it.
• Review after a marriage, divorce, birth or a move to Hawaii.

Yes. A Hawaii personal representative is entitled to reasonable compensation for services
performed, under the state's Uniform Probate Code.

What "reasonable" turns on

The size and nature of the estate, the time actually required, the complexity and difficulty of
the work, the skill and any special expertise it demanded, the responsibility assumed, and the
results achieved.

Records decide it

With no percentage in the statute, contemporaneous time records are the argument. Dated
entries showing what was done and how long it took, from the first week.

Unsupervised means unreviewed, not approved

Under Hawaii's default unsupervised administration nobody examines the fee as it is taken. Any
interested person may petition the Circuit Court afterwards, and the burden of justifying the
amount sits with the representative. Agree it in writing with the beneficiaries first.

If the will fixes the figure

A will provision governs. Under the UPC framework the representative may also renounce the will's
provision before qualifying and take reasonable compensation instead.

The estate tax angle

Compensation is taxable income to the representative but a deductible administration
expense against the Hawaii estate tax. Because the Hawaii exemption is $5.49 million —
well below the federal figure — a meaningful number of estates here are actually taxable, and the
deduction is worth something real.

Weigh it against Hawaii's high state income tax rates, which apply to the fee. Where the
representative is also a beneficiary of a non-taxable estate, taking a fee is usually a plain
loss. Where the estate is taxable, it can go the other way. Ask an accountant to work both.

A Hawaii personal representative is reimbursed from the estate for the reasonable expenses of
administration, separately from compensation. Where the estate approaches the $5.49 million
exemption these are also deductible against the Hawaii estate tax.

Normally claimable

• Funeral, burial or cremation or scattering at sea, and a reasonable reception.
• Circuit Court filing fees, certified letters, certified death certificates, and publication of
  the notice to creditors.
• Attorney's fees, and accountant's fees for the final Form 1040, any Form 1041, and the Hawaii
  estate tax return — including a return filed purely to make the portability election,
  which is money extremely well spent.
• Appraisals of real property, which decide whether the estate is taxable at all, and which in
  Hawaii must establish whether an interest is fee simple or leasehold.
• Carrying costs on estate property until sale: insurance — including hurricane and flood
  cover — property tax, utilities, security, landscaping, and lease rent on leasehold
  property, which continues regardless.
• Condominium and association fees, which are substantial here and do not pause.
• Termite treatment and humidity control on an empty property. A closed-up house in this
  climate deteriorates quickly, and prevention is far cheaper than repair.
• Cleaning, clearing, storing, and shipping contents to the mainland, which is expensive and
  frequently unavoidable.
• Inter-island and mainland travel on estate business.

Normally not claimable

• The representative's lost wages, meals near home, or personal spending.
• Costs run up for one beneficiary's convenience rather than the estate's.
• Improvements beyond preparing a property for sale as it stands.
• Anything without a receipt.

The rule that decides it

Open an estate bank account and run everything through it.

Hawaii's informal probate makes routine estates manageable for a family member. The state estate
tax and the property market create the main cases for something more.

Consider a professional when

• The estate is near or above the $5.49 million exemption, which Hawaii property values reach
  more readily than families expect. The portability election in particular has to be made on
  a timely return after the first death — a professional who knows to file when no tax is due
  is worth their fee several times over.
• The family is spread between Hawaii and the mainland, which is extremely common. A
  representative on the mainland administering a property here, across time zones and with
  inter-island travel, will struggle.
• The estate includes leasehold property, or land held in ways particular to Hawaii, where
  what actually passes needs establishing before anything is valued.
• There is agricultural land, a family business, or vacation rental property subject to
  county-level restrictions that need checking before it is sold or transferred.
• A non-resident owned Hawaii real property and a Hawaii filing obligation arises.
• There is conflict among the beneficiaries, or a beneficiary is a minor or incapacitated.

What it costs

Corporate fiduciaries charge a negotiated percentage with a minimum annual fee. Attorneys
generally bill hourly. Because Hawaii prescribes no percentage, ask precisely what the basis will
be, in writing.

Middle ground

Appoint a family member — ideally one resident in Hawaii — waive bond, and let them retain a
Hawaii attorney and an accountant at the estate's expense. If there is a surviving spouse, get
advice about the portability election immediately, not eventually.

A named representative who does not want the job can decline before appointment.