Written by attorney Darl C. Gleed

New Hawaii Law Extends Tenants By The Entirety Protection to Trusts

Effective July 2012 a married couple (or reciprocal beneficiaries) who transfer property held as Tenants by the Entirety into their revocable trusts will continue to have the same asset protection they maintained holding the property as Tenants by the Entirety ownership.

For those not familiar with Tenants by the Entirety, it is a form of ownership afforded to married couples (or reciprocal beneficiaries) which carries the survivorship feature of joint ownership, but unlike joint ownership, is not subject to attachment by judgment creditors of either spouse. In other words, someone seeking a judgment against one spouse would not be able to reach any portion of the property held as Tenants by the Entirety. To reach the property, the judgment would have to be against both spouses.

The new law has some interesting features and traps for the unwary. Here is a summary of some of the most important ones:

  1. The property must have been held as Tenants by the Entirety prior to the transfer into the trust. It is not retroactive, so for clients with existing trusts, this will necessitate a transfer of the property out of the trust into Tenants by the Entirety, and then back into the trust. For couples purchasing a property, title should first be received as Tenants by the Entirety, with a second transfer after closing to put the property into the trust.

  2. It does not matter if the transfer is made to a single joint trust, or into two separate trusts for each spouse. However, the shares must be equal if the transfer is into two trusts.

  3. The trust name must include the first and last names of the couple. This may necessitate an amendment to an existing trust, perhaps adding an alternate trust name to include the actual first and last names.

  4. The deed must include certain notice language referring to the new statute and stating the intent to continue the creditor protection of Tenants by the Entirety.

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