The "Empty Safe" Problem: Why Funding Your Trust is the Most Important Step
You’ve sat down with your partner, made the tough decisions about who will care for your children, and signed your beautifully drafted Hawaii Revocable Living Trust. You’re done, right?
Not quite.
Think of your trust as a high-tech, fireproof safe. It’s designed to protect your valuables and keep them out of the prying eyes (and long delays) of the Hawaii probate courts. But if you never actually put your jewelry, cash, or house inside that safe, it can’t do its job.
In the legal world, putting your assets into the safe is called "Funding the Trust."
1. Real Estate: The Land Court vs. Regular System Hurdle
In Hawaii, your home or investment property is likely your biggest asset. To "fund" your trust with real estate, we must record a new deed with the Bureau of Conveyances.
However, Hawaii is unique because we have two different recording systems:
The Regular System: Relatively straightforward.
The Land Court (Torrens System): This system is much more "picky." It requires specific language, and if you have a "Transfer Certificate of Title" (TCT), any change—like moving your property into a trust—requires precise documentation.
If you don't update your deed, that investment property you bought for your kids' future will still have to go through a year-long probate process before they can touch it.
2. Bank Accounts: Retitling vs. Beneficiaries
For your everyday checking and savings accounts at local banks like First Hawaiian or Bank of Hawaii, you generally have two choices:
Retitle the Account: You change the owner from "John Doe" to "John Doe, Trustee of the John Doe Trust." This gives your successor trustee immediate access if you become incapacitated.
POD (Payable on Death): You keep the account in your name but list the Trust as the beneficiary. This keeps it out of probate but doesn't help as much if you are simply sick or injured and need someone to pay the mortgage for you.
3. The "Forgotten" Assets
At Happy Life Legal LLP, we often see families forget the "little" things that add up:
Non-Retirement Investments: Brokerage accounts should almost always be retitled.
Business Interests: If you own an LLC for your investment property, you need an "Assignment of Interest" to move that business into your trust.
Life Insurance: Usually, you’ll want to update your beneficiary to the Trust so the payout can be managed for your children according to your trust’s rules (like those staggered distributions we talked about!).
Don't Leave Your Safe Empty
A trust is a powerful tool, but it only works for the assets it owns. At Happy Life Legal, we don't just hand you a stack of papers and say "Good luck."