(a) A trust instrument shall be irrevocable and shall expressly incorporate the laws of this State governing the validity, construction, and administration of the trust.
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Terms Used In Hawaii Revised Statutes 554G-5

  • Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
  • Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
  • Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Permitted transfer: means a transfer of permitted property by or from one or more transferors who own an undivided interest in the property to one or more trustees, at least one of which is a permitted trustee, by means of a trust instrument, regardless of whether consideration is exchanged. See Hawaii Revised Statutes 554G-2
  • Permitted trustee: means a person, other than the transferor, who is a resident of this State or a bank or trust company that is authorized to do business in this State, possesses and exercises trust powers, has its principal place of business in this State; and:

    (1) Maintains or arranges for custody of some or all of the property that is the subject of the permitted transfer;

    (2) Maintains records for the trust on an exclusive or nonexclusive basis;

    (3) Prepares or arranges for the preparation of fiduciary income tax returns; or

    (4) Otherwise materially participates in the administration of the trust. See Hawaii Revised Statutes 554G-2

  • Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
  • Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
  • Transfer: means the disposition, conveyance, or assignment of property, including the change in the legal ownership of property occurring upon the substitution of one trustee for another or the addition of one or more new trustees, or the exercise of a power that causes the disposition, conveyance, or assignment of permitted property to a trustee or trustees, but shall not include the release or relinquishment of an interest in property that was formerly the subject of a permitted transfer. See Hawaii Revised Statutes 554G-2
  • Transferor: means :

    (1) An owner of permitted property;

    (2) The holder of a power of appointment that authorizes the holder to appoint in favor of the holder, the holder's creditors, the holder's estate, or the creditors of the holder's estate; or

    (3) A trustee who directly or indirectly makes a disposition of permitted property. See Hawaii Revised Statutes 554G-2

  • Trust instrument: means an irrevocable instrument appointing a permitted trustee or permitted trustees for the permitted property that is the subject of a disposition. See Hawaii Revised Statutes 554G-2
  • Trustee: A person or institution holding and administering property in trust.
  • Trustee: includes an original, additional, or successor trustee, whether or not appointed or confirmed by court. See Hawaii Revised Statutes 554G-2
  • Veto: The procedure established under the Constitution by which the President/Governor refuses to approve a bill or joint resolution and thus prevents its enactment into law. A regular veto occurs when the President/Governor returns the legislation to the house in which it originated. The President/Governor usually returns a vetoed bill with a message indicating his reasons for rejecting the measure. In Congress, the veto can be overridden only by a two-thirds vote in both the Senate and the House.
(b) The trustee, in its discretion, may terminate any trust if and when its fair market value has declined to the extent that would make it uneconomical, imprudent, or unwise to continue to retain the trust, and shall pay and distribute the trust to the persons entitled to mandatory or discretionary income distributions as the trustee in the trustee’s absolute discretion shall decide.
(c) A trust instrument shall not be deemed revocable on account of the inclusion of:

(1) A transferor‘s power to veto a distribution from the trust;
(2) A power of appointment other than a power to appoint to the transferor, the transferor’s creditors, the transferor’s estate, or the creditors of the transferor’s estate that may be exercised by will or other written instrument of the transferor effective only upon the transferor’s death;
(3) The transferor’s potential or actual receipt of income, including rights to income retained in the trust instrument;
(4) The transferor’s annual receipt of a percentage not to exceed five per cent of the initial value of the trust assets or its value determined from time to time pursuant to the trust instrument or of a fixed amount that on an annual basis does not exceed five per cent of the initial value of the trust assets;
(5) The transferor’s potential or actual receipt or use of the trust’s principal due to the trustee acting:

(A) In the trustee’s discretion;
(B) Pursuant to a provision in the trust instrument that governs the distribution of principal and that does not confer upon the transferor a substantially unfettered right to the receipt or use of the principal; or
(C) At the direction of an advisor described in section 554G-4.5 who is acting:

(i) In the advisor’s discretion;
(ii) Pursuant to a provision in the trust instrument that governs the distribution of principal and does not confer upon the transferor a substantially unfettered right to the receipt or use of the principal; or
(iii) Pursuant to the transferor’s determination under section 554G-4.5(c) of a dispute, deadlock, or difference of opinion in favor of the advisor;

provided that for purposes of this paragraph, a trustee is presumed to have discretion with respect to the distribution of principal unless that discretion is expressly denied to the trustee by the terms of the trust instrument;

(6) The transferor’s right to remove a trustee or advisor and to appoint a new trustee or advisor;
(7) The transferor’s potential or actual receipt of income or principal to pay income taxes due on income of the trust if the trust instrument includes a provision allowing or directing the use of trust funds to pay income taxes due, or if the trustee acts in the trustee’s discretion to allow payment of income taxes due on the trust income;
(8) A trustee’s authority pursuant to discretion, direction, or the transferor’s exercise of a testamentary power of appointment to pay all or any part of the transferor’s debts outstanding at the time of the transferor’s death, the expenses of administering the transferor’s estate, or any estate or inheritance tax imposed on or with respect to the transferor’s estate;
(9) The transferor’s potential or actual receipt of income or principal from a charitable remainder unitrust or charitable remainder annuity trust, as those terms are defined in section 664 of the Internal Revenue Code and any successor provision; and the transferor’s right, at any time and from time to time by written instrument delivered to the trustee, to release the transferor’s retained interest in the trust, in whole or in part, in favor of one or more charitable organizations with a succeeding beneficial interest in the trust;
(10) The transferor’s potential or actual receipt of income or principal from a grantor-retained annuity trust or grantor-retained unitrust, pursuant to title 26 C.F.R. § 25.2702-3 and any successor provision, or the transferor’s receipt each year of a percentage specified in the governing instrument of the initial value of the trust assets or their value determined from time to time pursuant to the governing instrument; provided that the percentage received does not exceed five per cent; or
(11) The transferor’s potential or actual use of real property held under a qualified personal residence trust, as described in title 26 C.F.R. § 25.2702-5(c) and any successor provision, or the transferor’s possession and enjoyment of a qualified annuity interest, as described in title 26 C.F.R. § 25.2702-5(c)(8) and any successor provision thereto.
(d) A trust instrument may provide that the interest of a beneficiary of the trust, including a beneficiary who is the transferor of the trust, may not be transferred, assigned, pledged, or mortgaged, whether voluntarily or involuntarily, before the trustee actually distributes the property or income to the beneficiary. Any provision of this type contained in the trust instrument shall be deemed to be a restriction on the transfer of the transferor’s beneficial interest in the trust that is enforceable under applicable nonbankruptcy law within the meaning of title 11 United States Code § 541(c)(2) of the Bankruptcy Code or any successor provision.
(e) If a trustee of a trust existing prior to the enactment of this chapter proposes to make a permitted transfer, but the trust instrument does not contain a power of appointment that conforms to section 554G-5(c)(2), the trustee may deliver an irrevocable written election to have section 554G-5(c)(2) apply to the trust and the nonconforming powers of appointment shall be deemed modified to the extent necessary to conform with section 554G-5(c)(2). The irrevocable written election shall include a description of the original transferor’s powers of appointment as modified, and the original transferor’s written consent to the modification. Consent of the original transferor to a modification of powers of appointment shall not be considered to be a permitted transfer.
(f) If, in any action brought against a trustee of a trust that results from a permitted transfer, a court declines to apply the law of this State in determining the validity, construction, or administration of the trust or the effect of a spendthrift provision of the trust, the trustee, immediately upon the court’s action and without the further order of any court, shall cease to be trustee of the trust and a successor trustee shall succeed as trustee in accordance with the terms of the trust instrument. If the trust instrument does not provide for a successor trustee or does not provide for an advisor or protector with powers to appoint successor trustees, a Hawaii court of competent jurisdiction shall appoint a successor permitted trustee upon the application of any beneficiary of the trust under any terms and conditions that the court determines to be consistent with the purposes of the trust and with this chapter. Upon the removal of a trustee pursuant to this section, the trustee who has been removed shall have no power or authority other than to convey the trust property to the successor trustee.

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