Hawaii Fee Simple vs Leasehold: What Estate Planners Must Know

Your parents bought a condo in Waikiki 30 years ago and want to leave it to you. But when you check the deed, it says "leasehold" — and the ground lease expires in 12 years. Can they put it in a trust? Can a Transfer on Death Deed bypass probate? The answer depends entirely on which type of ownership they hold, and Hawaii's property landscape makes this question more complicated than almost any other state.

Fee Simple vs. Leasehold: The Core Difference

Fee simple is full ownership. You own the building and the land underneath it, indefinitely. You can sell it, transfer it, put it in a trust, record a TODD, or pass it to heirs. There is no expiration date on your ownership.

Leasehold means you own the structure (your condo unit, your house) but lease the land from a landowner under a long-term ground lease — typically 55 to 99 years. When the lease expires, ownership of the structure reverts to the landowner. You can sell, transfer, or inherit the leasehold interest during the lease term, but its value decreases as the expiration date approaches.

Hawaii has a higher proportion of leasehold property than any other state, a legacy of the islands' historical land ownership concentration. Large landowners — including the Bishop Estate (Kamehameha Schools), the Queen Emma Foundation, and private trusts — hold ground leases under thousands of residential properties across Oahu, Maui, and the Big Island.

Estate Planning Implications

Fee simple property is straightforward to include in an estate plan:

• Transfer it into a revocable living trust to avoid probate
• Record a Transfer on Death Deed to pass it directly to a beneficiary
• Hold it in joint tenancy with right of survivorship so it passes automatically
• Hold it as tenancy by the entirety (married couples and reciprocal beneficiaries) for both automatic transfer and creditor protection

Leasehold property creates additional complications:

• Lease assignment restrictions. Many ground leases require the landowner's consent before the leaseholder can transfer the interest — including transfers into a trust or to heirs. Check the lease terms before adding it to a trust.
• Declining value. As the lease term shortens, the market value drops. An estate plan based on a leasehold condo's current value may be misleading if the lease expires within 15 to 20 years.
• No TODD option in some cases. A Transfer on Death Deed transfers the owner's interest in real property. If the ground lease restricts assignment, the TODD may be unenforceable without the landowner's prior approval.
• Lease renegotiation uncertainty. Some leases include renegotiation clauses that reset the lease rent at market rates. A property your parents paid $800/month ground rent on could reset to $3,000/month at the next renegotiation date, fundamentally changing the asset's value.

Hawaii Property Ownership Types for Estate Planning

Beyond fee simple and leasehold, how property is titled determines whether it goes through probate.

Sole ownership. Property in one person's name alone always requires probate if the owner dies — regardless of value.

Joint tenancy with right of survivorship. Two or more owners hold equal shares. When one dies, their share automatically passes to the surviving joint tenant(s) without probate. But joint tenancy exposes the property to each owner's creditors during their lifetime.

Tenancy by the entirety. Available only to married couples and reciprocal beneficiaries in Hawaii. Functions like joint tenancy with an added layer: neither spouse can sell or encumber their share without the other's consent, and creditors of one spouse alone cannot reach the property.

Tenants in common. Each owner holds a distinct, divisible share. When one dies, their share passes through their estate (will or intestacy) — it does not automatically go to the other owner(s). This is the default if a deed does not specify the type of co-ownership.

What to Check Before Adding Property to Your Estate Plan

1. Pull the deed from the Bureau of Conveyances and confirm whether the property is fee simple or leasehold
2. If leasehold, read the ground lease terms for assignment restrictions, lease rent renegotiation dates, and expiration
3. Check the recording system — Regular System (liber/page) or Land Court (Certificate of Title)
4. Verify the title configuration — sole ownership, joint tenancy, tenancy by the entirety, or tenants in common
5. Calculate remaining lease term for leasehold property and factor the declining value into your estate plan

Ignoring any of these steps can lead to a transfer that fails at recording, a property stuck in probate, or an heir inheriting a leasehold interest worth far less than expected.

The Hawaii Basic Estate Planning Kit includes a property ownership verification worksheet and step-by-step instructions for transferring both fee simple and leasehold property into a trust, recording a TODD, or updating title configurations.

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