By Devon Haia, Esq. Equal Justice Works Disaster Resilience Fellow and Staff Attorney
Whether property was recently purchased, or passed down through generations, ʻohana can use a family land trust as a legal shield to protect and preserve their land for future generations.
A trust is a legal tool used to hold title to assets. Every trust has a creator, at least one trustee, and at least one beneficiary. When an asset, such as land, is placed in a trust, title to the land splits: the trustees hold legal title and the beneficiaries hold equitable title. Legal title means the trustees can make ownership decisions for the property, such as signing a lease agreement. Equitable title means a beneficiary has the right to benefit from the property, such as splitting profit from rental proceeds.
The terms of a trust, laid out in the trust document, can dictate how the trustees must manage the land. The creators of the trust can establish clear guidelines and restrictions on how the land is to be used, which can help prevent misuse, overdevelopment, or loss. Trustees are obligated to act in the best interest of the trust and the beneficiaries. State law is the default where a trust instrument is silent.
In traditional land ownership, any person with an undivided interest in the property can sell their interest to an outside party. For example, if a property is equally owned by five siblings, one of the siblings can sell their 20% share to anyone they want. However, if the land is placed in a trust by the siblings, the trust instrument can dictate how and to whom any beneficial interest may be sold or passed. Further, if one family member with an ownership interest is irresponsible with financial management, a land trust, depending on the circumstances, may keep creditors at bay.
A trust agreement can also dictate a clear path to resolving any internal family disputes over management of the land – preventing any concern about conflict resolution.
Lastly, putting land into a family land trust prevents ʻohana from having to go through the courts to ensure title is passed to the next generation. Probate can be an expensive and lengthy process. Terms of the trust can dictate how the trustee and beneficiary interests pass from one generation to the next without having to go through probate.
This legal tool provides a way to manage family assets collectively and ensure their preservation and use for future generations.
E Nīnau iā NHLC provides general information about the law. E Nīnau iā NHLC is not legal advice. You can contact NHLC about your legal needs by calling NHLC’s offices at 808-521-2302. You can also learn more about NHLC at nativehawaiianlegalcorp.org.
