HB 928

Report Title:

Uniform Probate Code; Incapacitated Spouse

Description:

Amends the uniform probate code to allow an incapacitated surviving spouse or reciprocal beneficiary to receive an elective share of the decedent's augmented estate upon the regaining of capacity by that person.

HOUSE OF REPRESENTATIVES	H.B. NO.	928
TWENTY-FIRST LEGISLATURE, 2001
STATE OF HAWAII

A BILL FOR AN ACT

relating to the uniform probate code.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that under current law, if a surviving spouse or reciprocal beneficiary is incapacitated, a custodial trust is set up to pay for that person's medical expenses, and the remainder reverts to the decedent's estate for distribution to the beneficiaries. However, if the surviving spouse or reciprocal beneficiary regains capacity, that person is not eligible to receive an elective share, although that person would have otherwise been eligible to receive that share if the person had never been incapacitated. In order to prevent this unfair result, the purpose of this Act is therefore to amend the uniform probate code to allow an incapacitated surviving spouse or reciprocal beneficiary to receive an elective share of the decedent's augmented estate upon the regaining of capacity by the surviving spouse or reciprocal beneficiary.

SECTION 2. Section 560:2-212, Hawaii Revised Statutes, is amended to read as follows:

"§560:2-212 Right of election personal to surviving spouse or reciprocal beneficiary; incapacitated surviving spouse or reciprocal beneficiary. (a) Surviving spouse or reciprocal beneficiary must be living at time of election. The right of election may be exercised only by a surviving spouse or reciprocal beneficiary who is living when the petition for the elective share is filed in the court under section 560:2-211(a). If the election is not exercised by the surviving spouse or reciprocal beneficiary personally, it may be exercised on the surviving spouse's or reciprocal beneficiary's behalf by the spouse's or reciprocal beneficiary's conservator, guardian, or agent under the authority of a power of attorney.

(b) Incapacitated surviving spouse or reciprocal beneficiary. If the election is exercised on behalf of a surviving spouse or reciprocal beneficiary who is an incapacitated person, that portion of the elective-share and supplemental elective-share amounts due from the decedent's probate estate and recipients of the decedent's nonprobate transfers to others under section 560:2-209(b) and (c) must be placed in a custodial trust for the benefit of the surviving spouse or reciprocal beneficiary under chapter 554B, except as modified below. For the purposes of this subsection, an election on behalf of a surviving spouse or reciprocal beneficiary by an agent under a durable power of attorney is presumed to be on behalf of a surviving spouse or reciprocal beneficiary who is an incapacitated person. For purposes of the custodial trust established by this subsection:

(1) The electing guardian, conservator, or agent is the custodial trustee;

(2) The surviving spouse or reciprocal beneficiary is the beneficiary; and

(3) The custodial trust is deemed to have been created by the decedent spouse or reciprocal beneficiary by written transfer that takes effect at the decedent spouse's or reciprocal beneficiary's death and that directs the custodial trustee to administer the custodial trust as one created for the benefit of an incapacitated beneficiary.

(c) Custodial trust. For purposes of subsection (b), chapter 554B must be applied as if section 554B-6(b) thereof were repealed and sections 554B-2(e), 554B-9(b), and 554B-17(a) were amended to read as follows:

(1) Neither an incapacitated beneficiary nor anyone acting on behalf of an incapacitated beneficiary has a power to terminate the custodial trust; but if the beneficiary regains capacity, the beneficiary then acquires the power to terminate the custodial trust by delivering to the custodial trustee a writing signed by the beneficiary declaring the termination. If not previously terminated, the custodial trust terminates on the death of the beneficiary;

(2) If the beneficiary is incapacitated, the custodial trustee shall expend so much or all of the custodial trust property as the custodial trustee considers advisable for the health, education, maintenance and support of the beneficiary and individuals who are legally entitled to support by the beneficiary. Expenditures may be made in the manner, when, and to the extent that the custodial trustee determines suitable and proper, without court order but with regard to other support, income, and property of the beneficiary and benefits of medical or other forms of assistance from any state or federal government or governmental agency for which the beneficiary must qualify on the basis of need; provided that the custodial trustee shall not make any distributions of the principal of the custodial trust unless the custodial trustee determines, in the trustee's discretion, that the remaining assets of the surviving spouse or reciprocal beneficiary cannot or should not be first used instead for the spouse's or reciprocal beneficiary's benefit. The custodial trustee may make such a determination when, for example, the sole remaining asset of the surviving spouse or reciprocal beneficiary is the spouse's or reciprocal beneficiary's residence, or similar factors would exist that would make use or liquidation of the surviving spouse's or reciprocal beneficiary's own assets inappropriate;

(3) Upon the beneficiary's death, the custodial trustee shall transfer the unexpended custodial trust property in the following order:

(A) Under the residuary clause, if any, of the will of the beneficiary's predeceased spouse or reciprocal beneficiary against whom the elective share was taken, as if that predeceased spouse or reciprocal beneficiary died immediately after the beneficiary; or

(B) To that predeceased spouse's or reciprocal beneficiary's heirs under section 560:2-711.

(d) Regaining capacity. If the incapacitated surviving spouse or reciprocal beneficiary regains capacity, that person may terminate the custodial trust in the manner described in subsection (c)(1), and shall be entitled to receive the full amount of the surviving spouse's or reciprocal beneficiary's elective share as determined under section 560:2-202."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________