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Hawaii Revised Statutes Section 572-24 is Hawaii's spousal liability statute and states that a spouse is liable for the debts incurred by the other spouse for all necessaries for themselves, one another or their family during marriage.
The Hawaii Intermediate Court of Appeals affirmed the plain reading of Hawaii Revised Statutes Section 572-24 in Queen's Medical Center v. Kagawa. The ICA stated that "the statute is a legal command that each spouse 'shall be bound to maintain, provide for, and support' the other spouse and 'shall be liable for all debts contracted by one another for necessaries...during marriage'". As a matter of public policy, promoting a definite and clear spousal duty, "best informs husbands and wives of the extent of their obligations...and encourage providers to extend necessaries to needy spouses." In Kagawa, the husband and wife had separated, but not legally divorced. The husband incurred medical expenses related to a medical emergency and ultimately died. The ICA held that the medical services provided by Queen's Medical Center were necessaries for which he was indebted. Since husband and wife were still legally married at the time the debt was incurred, the wife became responsible for the medical debt upon the husband's passing. In the context of probate, the surviving spouse is generally not liable for the individual debts of the deceased spouse. However, an exception exists for debts incurred that fall under the category of necessaries. The ICA has made it clear that the medical debt of the deceased spouse is considered a "necessary" and, therefore, is the responsibility of the surviving spouse. As an aside, the ICA noted that relieving support obligations under Hawaii Revised Statutes Section 572-24 based on the wrongful conduct of a spouse would contradict Hawaii's partnership approach to family law. Therefore, fault or misconduct (such as infidelity) would not eliminate a spouse's obligation of support under Hawaii Revised Statutes Section 572-24. We've previously discussed the concepts of Marital Separate Property and Marital Partnership Property. In this post, we'll review the basics of a prenuptial or premarital agreement and how it affects estate planning. For the purposes of this post, "prenupital" and "premarital" are used interchangeably.
In Hawaii, premarital agreements are governed by the Hawaii Uniform Premarital Agreement Act, which was enacted in 1987 and codified under Hawaii Revised Statutes Chapter 572D. The following are some important points to keep in mind for prenuptial agreements:
Effect upon property. A prenuptial agreement can define the rights and obligations of the parties with respect to property whenever and wherever located and acquired. This usually means that the parties will designate their individual property as separate property and any joint property as martial property so that "Marital Separate Property" and "Marital Partnership Property" is clearly defined. As discussed in an earlier post, this can drastically alter property distribution in the event of a divorce, depending on the parties' financial positions prior to and after the divorce. Effect upon spousal support. A premarital agreement can modify or eliminate payment of spousal support and alimony upon divorce. Effect upon death. In Hawaii, a surviving spouse has a statutory right to claim an "elective share" of her deceased spouse's estate, which is basically a right to a percentage of the deceased spouse's estate. The "elective share" is meant to prevent a spouse from disowning the other spouse and leaving her destitute if there is an imbalance of wealth between them. A premarital agreement can eliminate a spouse's right to an "elective share". This means that the surviving spouse has no right to the deceased spouse's estate, except for what is provided in the deceased spouse's will or trust or transferred via intestate succession. Spouses will often provide for each other in their testamentary instruments, but a premarital agreement gives them the latitude to dispose of their assets without being constrained by the statutory obligations imposed by the Hawaii probate code. In a prior post, we discussed how property is classified between "Marital Separate Property" and "Marital Partnership Property" ("MPP") in Hawaii during a divorce. In this post, we will review how MPP is categorized and distributed.
In Hawaii, it is important to note that Hawaii Revised Statutes Section 580-47(a) affords the family court wide discretion when dividing MPP. The Hawaii Supreme Court has espoused using business partnership principles as guidance when divvying up MPP and, therefore, treats a marriage like a business partnership. While the Hawaii Supreme Court has recognized that "there is no fixed rule regarding property division other than what is provided in Hawaii Revised Statutes Section 580-47", the family court may use something called the Marital Partnership Model, which is based on the Hawaii Uniform Partnership Act, as guidance. As a result, MPP in a divorce is placed into one of five categories and where a piece of property is placed will generally determine how the property is ultimately distributed. Remember, these are only general guidelines and there is no guarantee of a 50/50 split. The court has the discretion and equitable authority to divide MPP as it sees fit. The following are the categories established by case law in Hawaii: Category 1: The net market value [NMV], plus or minus, of all property separately owned by one spouse on the date of marriage, but excluding the NMV attributable to property that is subsequently legally gifted by the owner to the other spouse, to both spouses, or a third party. What this means: Hopefully, 100% of premarital property owned by each spouse will be returned to the respective parties. The NMV is determined at the date of marriage. Category 2: The increase in the NMV of all property whose NMV on the date of marriage is included in Category 1 and that the owner separately owns continuously from the date of marriage to the date of the conclusion of the evidentiary part of the trial [DOCOEPOT]. What this means: Appreciation from all Category 1 property will likely be divided between the two parties with a 50% cap for non-owner spouse. NMV determined at date of divorce. Category 3: The date of acquisition NMV, plus or minus, of property separately acquired by gift or inheritance during the marriage but excluding the NMV attributable to property that is subsequently legally gifted by the owner to the other spouse, to both spouses, or to a third party. What this means: Hopefully, 100% of gifts and inheritances acquired during marriage that weren't separated are distributed to back to the owner-spouse. NMV is date of acquisition. Category 4: The increase in the NMV of all property whose NMV on the date of acquisition during the marriage is included in Category 3 and that the owner separately owns continuously from the date of acquisition to the DOCOEPOT. What this means: Appreciation of Category 3 property will likely be divided between the two parties with a 50% cap for the non-owner spouse. NMV is determined at the date of divorce. Category 5: The difference between the NMVs, plus or minus, of all property owned by one or both of the spouses on the DOCOEPOT minus the NMVs, plus or minus, includable in categories 1,2, 3, and 4. What this means: This is basically the catch-all category where the "leftover" property goes. Usually this includes joint marital property and all jointly and separately owned property purchased with marital funds or resulting from marital efforts. Categories 1 and 3 are considered the parties' "capital contributions" to the marriage/partnership and according to partnership law, are likely to be returned to the respective parties. Categories 2 and 4 are "during the marriage increase in NMVs of Categories 1 and 3 properties" and are considered "partnership profits" to be generally shared equally. The Supreme Court of Hawaii has stated that "if there is no agreement between the husband and wife defining the respective property interests, partnership principles dictate equal division of the marital estate where the only facts proved are the marriage itself and the existence of jointly owned property." Having a valid premarital or post-nuptial agreement can help protect each parties' personal assets (and their appreciation during the marriage) by qualifying them as Marital Separate Property and also provide a framework for how MPP will be divided and distributed in event of a divorce. Though statistics vary, it is generally thought that around 30-40% of marriages in the U.S. end in divorce. Obviously people don't get married with the goal of legally separating in the future, it is a possibility that should be considered. For those who are already married or couples contemplating marriage, understanding how property is divided and distributed in a divorce in Hawaii is an integral part of estate planning.
In this post, we will review how property is categorized and divided by the court during a divorce. In Hussey v. Hussey (1994), the Hawaii Intermediate Court of Appeals provided three classifications of property, which are as follows: Premarital Separate Property: This is property owned by each spouse prior to their marriage/cohabitation. When two people marry, this property becomes either "Marital Separate Property" or "Marital Partnership Property". Marital Separate Property: This property is owned by one or both of the spouses at the time of divorce and can be described as follows. A. All property that was excluded from the marital partnership by an agreement in conformity with the Hawaii Uniform Premarital Agreement Act. B. All property that was excluded from the marital partnership by a valid contract, such as a post-nuptial agreement. C. All property that... 1. Was acquired by the spouse-owner during the marriage by gift or inheritance, 2. Was expressly classified by the donee/heir-spouse-owner as his or her separate property; AND 3. After acquisition, was maintained by itself and/or sources other than one or both of the spouses and funded by sources other than marital partnership income or property. Marital Partnership Property: All property that is not Marital Separate Property. These classifications are important to understand because they are the starting point in determining what property is available to be divided between the spouses. Marital Partnership Property is the property is available to be divided and distributed between the spouses at the discretion of the court. On the other hand, Marital Separate Property cannot be distributed to the non-owner spouse or used to "offset" any award of Marital Partnership Property to the other spouse. It has, in effect, been excluded from the marital partnership. However, the court may take into consideration the amount of Marital Separate Property each spouse has and "alter" the final distribution of the Marital Partnership Property based on the "respective separate conditions of the spouses." This is within the court's discretion and equitable powers. For soon-to-be wed or married couples, understanding how property is classified in divorce proceedings highlights the importance of having a premarital agreement or post-nuptial agreement so that Marital Separate Property is clearly defined. For gifts and inheritances to be classified as Marital Separate Property all the above-mentioned conditions must be met. If a spouse does not expressly state the gift or inheritance is separate property or uses marital assets or efforts to maintain the gift or inheritance, that gift or inheritance will be likely be classified as Marital Partnership Property and divided accordingly. |
AuthorSamuel K.L. Suen is an attorney based in Honolulu, Hawaii specializing in estate planning, probate, conservatorship and guardianship matters. Archives
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