On February 23, 2011, Governor Abercrombie signed into law Senate Bill 232, which makes civil unions legal in Hawaii, starting January 1, 2012. Although the law says that a civil union is not a marriage, it gives partners in a civil union the same legal rights and responsibilities that a husband and wife have in marriage. I will discuss how wills, trusts, inheritance rights and estate planning are affected for partners in a civil union.
First, it is important to understand the reciprocal beneficiary law, created by the Hawaii State Legislature in 1997. Partners who register with the State Department of Health as reciprocal beneficiaries gain about 50 to 60 rights out of approximately 160 rights which married couples have under Hawaii law. In the area of estate planning and inheritance, the law appears to give reciprocal beneficiaries all of the rights that married couples have in Hawaii.
Let me list some of the ways inheritance rights and estate planning are affected by both the reciprocal beneficiaries law and the civil unions law. Under both laws, if a person dies with assets in his or her own name, the surviving partner is entitled to claim a homestead allowance of $15,000, an exempt property allowance of $10,000, and a family allowance, usually of $18,000.
If a person dies without a will, the surviving partner has the same right of inheritance as a surviving spouse. The intestacy law applies only to property which is not distributed by a will, trust, joint ownership, or beneficiary designation. If the person dies with no living descendent but has a living parent, then the surviving partner gets $200,000 plus 3/4 of the balance of the assets. If all of the person’s descendants are descendants of the surviving partner and if the surviving partner has one or more other descendants, then the surviving partner gets $150,000 plus 1/2 of the balance of the assets. If one or more of the descendants of the person are not descendants of the surviving partner, then the surviving partner gets $100,000 plus 1/2 of the balance of the assets.
If a person dies leaving assets to someone other than the surviving partner, the surviving partner can claim an “elective share.” An elective share is a percentage of the combined assets of the deceased partner and the surviving partner, including life insurance death benefits and some assets transferred to other people. The percentage which the surviving partner can claim depends on how many years they have been registered as reciprocal beneficiaries or united in a civil union. For example, the surviving partner is entitled to 3% after one year, 30% after 10 years and 50% after 15 years of union.
Another important property right available to both reciprocal beneficiaries and couples in a civil union is the right to own property as tenants by the entirety, a right traditionally reserved only to married couples. Unlike jointly owned property, no part of tenancy by the entirety property can be transferred or mortgaged unless both owners sign the deed or mortgage document. Also, tenancy by the entirety property is protected from lawsuits against one of the partners. The person bringing the lawsuit can go after tenancy by the entirety property only by having a good reason for suing both partners, and by getting a judgment against both partners.
Having a civil union does not give the partners any rights under federal laws, including federal estate and gift tax laws. Although a married person can give to a spouse any amount of assets without any gift tax consequence, a person cannot give a civil union partner more than $13,000 a year without filing a gift tax return and using up part of the person’s exemption from estate tax. Therefore, a person should seek advice from an estate planning specialist before putting property into joint tenancy or tenancy by the entirety with a civil union partner.