If you aren’t already aware, HB207 proposes to increase the top Hawaii estate tax rate from 15.7% to 20.0%. The increase would retroactively apply to decedents dying after December 31, 2017. For large estates, a 4.3% increase could represent millions in additional estate tax.

Furthermore, under SB2821, Hawaii’s applicable exclusion amount (“exclusion”) would remain at $5M indexed for inflation per individual under the federal law as it existed on 12/21/17 (i.e., the day before the federal Tax Cut & Jobs Act (Act) passed). To further complicate matters, it is unclear whether the 2018 Hawaii exclusion would be $5.49M (the amount as indexed for inflation in 2017) or $5.6M (the 2018 exclusion announced by the IRS under federal law as it existed on 12/21/17). What we do know is if Hawaii chooses not to conform to the Federal exclusion of $11.18M per individual, we will be decoupled from the federal estate tax for the first time since 2011-12.

The Center for Professional Advisors by HCF is happy to provide you with the following “emergency kit” in the event that SB2821 passes.

• To refamiliarize yourself with the use of “gap” trusts and the Hawaii QTIP election, please click on my attached article regarding the Hawaii Estate Tax. Disregard pages 1-8 and focus on pages 9-12 and page 15 in connection with estate planning when the federal exclusion is greater than the Hawaii exclusion.
• The State Department of Taxation authorized the use of a separate and independent Hawaii marital deduction and QTIP election in Tax Information Release 2010-10, attached.
• For more information on SB2821, check out https://www.capitol.hawaii.gov/measure_indiv.aspx?billtype=SB&billnumber=2821
• For more information on HB207, check out https://www.capitol.hawaii.gov/measure_indiv.aspx?billtype=HB&billnumber=207&year=2018

More Resources

• Curtis K. Saiki, Thoughts on Managing an Invasive Tax, Hawaii Bar Journal Vol. 14 No. 13 (2011)
• State of Hawaii Department of Taxation Tax Information Release No. 2010-09 Re: Hawaii Estate and Transfer Administration, Marital Deduction, QTIP Election, Extension to File the Return, and Basis in Property Received from a Decedent

As always, the Center is committed to providing you with timely and useful tools. Other resources are now provided through our “Center for Professional Advisors” app that is available for download through Apple ITunes or Google Play.