The Hawaii Intermediate Court of Appeals issued a ruling on May 28, 2026, regarding a family trust dispute that could significantly impact the inheritance rights of two brothers, Alexander and Eric Krieg. The court's decision centers on allegations of breach of fiduciary duty related to a trust established by their late parents, Karl and Marguerite Krieg. This ruling is important as it clarifies the responsibilities of trustees and the rights of beneficiaries under trust agreements.
The case, titled In re: Trust Agreement of Karl Krieg (Docket No. CAAP-23-0000689), began when Eric Krieg filed a petition in February 2022, claiming that his brother Alexander, as the successor trustee of their father's trust, breached his fiduciary duties. The dispute arose after significant property transfers made by Karl Krieg during his lifetime, which Eric contended were improper and detrimental to his interests as a beneficiary.
The background of this case involves the establishment of two revocable trusts by Karl and Marguerite Krieg in December 1993. These trusts were designed to manage their assets, including a residence in Kailua-Kona, Hawaii. Upon Marguerite's passing in June 2017, Karl became the successor trustee of her trust. He later transferred assets from Marguerite's trust into his own trust, which included their shared home. This transfer and subsequent amendments to the trust documents became the focal point of the legal dispute.
Following Karl's death in April 2021, Alexander took over as the successor trustee of his father's trust. Eric, who learned about the asset transfers only after their father's passing, filed for legal intervention, alleging that the transfers constituted a breach of trust. The case escalated to the probate court, where both brothers filed motions for summary judgment in April 2023. The probate court ruled in favor of Eric, granting him half of the interest in the property and ordering Alexander to pay Eric's attorney fees.
In its ruling, the court found that Eric had established a breach of fiduciary duty by demonstrating that Karl's actions as trustee were not justified. The court stated, "The presumption of regularity and good faith does not shield a trustee from the burden of justifying actions that harm beneficiaries." This ruling emphasized the importance of fiduciary responsibilities and the need for trustees to act in the best interests of the beneficiaries.
However, the Intermediate Court of Appeals identified an error in the probate court's decision. The appellate court determined that there was a genuine issue of material fact regarding whether the transfers made by Karl were necessary for his support, maintenance, and health. The court noted that the probate court had not properly considered the evidence presented by Alexander that suggested the transfers may have been justified under the terms of Marguerite's Trust.
The appellate court's decision included a directive to remand the case back to the probate court for further proceedings. The court instructed the lower court to conduct an evidentiary hearing to resolve the material fact issue regarding the necessity of the asset transfers. The court stated, "We vacate the Summary Judgment Order and remand for further proceedings consistent with this summary disposition order." This means that the probate court must reevaluate the evidence and make appropriate findings of fact regarding the transfers.
This ruling has significant implications for the parties involved. For Alexander, it allows for the possibility of defending his actions and potentially retaining the assets in question. For Eric, it means that the case is not definitively resolved in his favor, and he must now prepare for further legal proceedings to substantiate his claims.
The case also highlights broader issues surrounding trust law and the responsibilities of trustees. It underscores the necessity for trustees to maintain transparency and act in the best interests of beneficiaries, as failure to do so can lead to legal challenges and disputes among family members.
Moving forward, the probate court will need to address the issues raised by the appellate court. This includes conducting an evidentiary hearing to determine whether the transfers made by Karl were indeed necessary for his support and whether Alexander's actions as trustee were appropriate. The outcome of this hearing could further clarify the legal standards governing fiduciary duties in trust management.
As of now, it is unclear whether either party plans to appeal the appellate court's decision. The case remains pending in the probate court, where further hearings will take place to resolve the outstanding issues. The ongoing legal battle serves as a reminder of the complexities involved in trust management and the potential for family disputes to arise from financial matters.