Monday, June 29, 2020
In June 2020, the Hawaii Supreme Court ruled on the case of In Re Elaine Emma Short Revocable Living Trust Agreement, which had a complicated fact pattern. There were a couple of clear takeaways from the case: make sure there are findings of fact in any order entered in a contested probate proceeding, and the terms of a trust will not supersede Hawaii statutory law.
The facts of the case are as follows:
Elaine created the Elaine Emma Short Trust Agreement. The Trust had been amended several times, and upon her death provided that the trustee could only distribute income, and not principal, from her sons' (David and William's) respective subtrusts as necessary to meet their needs for "health, education, support, and maintenance," as determined by the trustee in its sole discretion.
In August 2015, First Hawaiian Bank (FHB), the trustee of the trust, filed a petition for instructions regarding distribution and termination and for modification of the Trust in Hawaii probate court. Specifically, FHB asked the Hawaii probate court to modify the terms of the trust to permit discretionary distributions of principal to David. The Cooks (Elaine's brother's children) were identified as contingent beneficiaries in FHB's petition.
The Cooks opposed the proposed modification arguing that the language of Elaine's trust was not ambiguous and that FHB's attempt to change the language should be rejected as improper. The Cooks then requested information regarding the accounts of the trust. FHB objected, arguing that the Cooks were not yet in a position to receive income and were contingent remainder beneficiaries not entitled to the requested information pursuant to the terms of the trust.
The Hawaii Probate Court granted FHB's petition, modifying Elaine's trust. The probate court's order contained no findings of fact as to whether Elaine's Trust contained ambiguity regarding distribution of principal. The court also concluded that FHB did not have to provide records to the Cooks.
The Hawaii Supreme Court stated that the Probate Court should include findings of fact in orders in contested trust cases to avoid abuse of discretion and to further assist appellate review. Further, the Court held that the terms of a trust that are inconsistent with a rule of law do not prevail over the law.
See, Hawaii Supreme Court: Terms of Trust Do Not Override The Law, Probate Stars, June 26, 2020.