 Welcome to Finding Your Piece of the Rock on Think Tech, Hawaii. I'm your host, Abe Lee. I have been a licensed real estate agent since 1973. I'm the owner of Century 21 Eye Properties, Hawaii, and work with close to a hundred wonderful agents in real estate sales. I started Abe Lee seminars in 1980. I've taught over 11,000 students to help them get their real estate licenses. And I also teach continued education to licensees to renew their license every two years. Our show is dedicated to helping buyers and sellers understand the process involved in real estate transaction. A special guest will talk about legal issues, escrow, title, getting a loan, surveys, home inspection, insurance, contracts, willed and trust, and much, much more. We're really fortunate to have Brian Lee back again with us because he was such a hit the last time about estate planning. So we want to bring him back to talk about what we call the 15 areas of estate planning that Brian has refined in his estate planning. So Brian, I know some people have heard about your background. I want you to tell us a little bit about your background, where you grew up, and then we'll get into the questions. Well, Abe, you know, I'm a blue collar guy. I was brought up in Manoa housing. So that goes way back. Now I took the exam. I did pass. So McKinley had me go to their school. And that's basically my background. I'm a local boy. But my business actually had me on the mainland two weeks out of every single month since the late 80s until about seven years ago. So we have an expanded practice. Our practice is not only in estate planning, but business exit strategies, tax planning, you know, asset protection and some of the things which we cover in here what we're about to speak on. One thing, what I am not is I am not an investment advisor. So I do not advise people on how to invest their money. Well, besides being married to Susan, your wonderful wife and three beautiful children and grandchildren, your claim to fame at McKinley High School was you scored the winning touchdown against Puno and broke their unbeaten record. Is that right? You know, Abe, it's been so long time ago. Yeah, in fact, one of the young sons of my football player asked me what position on the line that I play. I told the kid, get out of here. Brian was running back in case you didn't know. Anyway, I used to watch Brian a little older than me. But anyway, Brian, how many estate plans have you done in your career, roughly? I probably designed over 5,000, you know, plans, different kinds of plans. I got, I got called upon by law firms and CPA firms to go out and do design work. And that's what really kept me busy in the last 20 years, I would say. Now, we know that you do a much more sophisticated stuff like ESOP and other things that most people don't know about. But let's talk about the 15 areas of estate planning that you've developed over the years, which really talks about very important aspects of good estate planning. So maybe we can start off with supplemental planning and about durable power of attorney, advanced healthcare, working donations and things of that nature when we start there. Sure, sure. You know, when you talk about supplemental planning, people talk about the estate planning like, hey, it's if I die, you know, but the chances of you dying is substantially greater than you getting disabled, or you might need help in some physical or medical area. So supplemental planning is extremely important. Now, there are several areas of supplemental planning. For example, there's a thing called the durable power of attorney. And recently, because of COVID, we found that the durable power attorney is like giving somebody the right to sign for you because you can. And it could be because of a medical problem, or it could be because you're not there and you might be in a distant country. And some of these things that has to be signed is time sensitive. Well, what we found out recently is that in order for you to have a durable power of attorney executed, and if it's a springing power of attorney, springing means it springs into action because of something happening, you're going to have to have like a physician come in there and declare you like incompetent or don't have the ability to sign. In today's environment, it is really difficult to get someone or doctor to come in. In fact, we had a case where a particular gentleman had a business and he was in a care home and he had Alzheimer's. Well, we couldn't get anybody to come in. I mean, we looked all the different doctors. We finally had to get a clinical psychologist to spend two days, over $3,000 to write a report so they could actually go and get the durable power attorney transferred to the wife. So now what we do is release the rights to the power individual has the power so they can sign right off, right off the bat. Okay. Okay. How about other things like advanced healthcare decisions for minor children, nomination of a conservator or Medicaid planning? You know, a lot of people understand advanced care directive because every time you go to the doctor or to the hospital, they ask you, do you have an advanced healthcare directive? And that basically gives somebody the right to sign on your behalf because if you're under anesthesia, okay, you can't make any decisions that doctors don't have the right to ask you anything. But the other thing that I think is important is the fact that, you know, you have minor children and emergency purposes, you know, the emergency people will tend to the children. But we found that, and I'll give you an example, that you could be away, you and Sally and you might have some minor children and one of the kids might have, you know, a sore stomach and it could be that it was appendicitis, which is not conclusive, but a parent or somebody with the advanced healthcare directive for minor children could make the decision. In my case, that was brought up in real life because my daughter Amber had such a bad pain and the doctor said, you know, we don't really have conclusive, but you're going to have to make a decision. And I said, doc, what would you do? He said, I would, it's a simple operation. We did. And he came out and he kind of laughed and he said, you know what, since we opened her up, I'm glad we ended there because we went there and here it was ready to rupture. Had it ruptured, she would have to stay in the hospital for two weeks. Those kinds of things you want to have most of the times, the parents that have children below the age of 18, it never gets done. So it's just a simple document. And this is the same document you send over to your pediatrician. And they have a software called Epic, they'll put it in and then your parents or whoever you choose can make that decision for you. Another thing that a lot of people are not aware of a lot, we all know somebody that had Alzheimer's. And once you get Alzheimer's, you've basically been declared mentally not capable of making any decisions. So basically a conservatorship is going to be established. And in Hawaii, once a conservatorship has been established, that means that conservator, that particular individual, is going to make all the decisions, what kind of healthcare you get, what you eat, where you're going to live, what kind of medical services is going to be performing you. The problem that we have is that if we don't prepare that in advance and you have some other child fighting each other thinking that one might want to maneuver themselves to change any of the planning, you have a major problem there. So advanced healthcare planning part of it is the nomination of conservatorship. And that's really important also that I think people want to take a look at. There's a little bit more, but as we go down, I don't think we have time to cover everything. But I think if you jump to the next one, it is supplemental planning that I think takes into consideration all the other paperwork it gets on. Most of the timing, the thing that really throw us against the wall is that when people die, we cannot get all the information. 90% of the time, the people don't know where and what's there. So they're going to have to go in their parents, you know, kind of in the drawers, in the corners and look for all of these things and they don't know. So they ask me, how do I know? I said, well, you can order a year's worth of canceled checks and that might give you information. But one of the things that we do that we think is important is we do a mock estate settlement. In other words, now we don't do it for all of the clients, but some of the clients that we find is necessary is we call all the advisors together. We call all the advisors together. I get all the information and I said, today your mother died. Let's see what we have. So we have each one. I have the CPA in there. I says, tell me what do you have? I have the investment advisor there. Tell me what you have. I have the pension person inside there. Tell me what you have. And so everybody's giving their pieces and then we try to decide whether we can settle this immediately. What's missing? And you'd be surprised, Abe. There's so much information that is, they don't know about, you know, simple thing about even claiming a life insurance policy. You got to know where to go. You know, so that's a supplemental planning. When it comes to cost, you know, it's interesting. It is so much more expensive if you don't address all the issues up front. For example, many of the law firms will be here and I don't blame them. They spend an inordinate amount of time just talking about probing. And you know, the problem people don't have is today's society very transient. You know, we travel all over the different places. And if you domicile in Hawaii, that's a word that I use here because that's the word that the government use. It's not residents, it's domicile. Domicile is a word that's basically based on intent. And that's where you're going to settle your estate, where you vote, where you pay your taxes, where you have your driver's license, where's your kids go to school? That is domicile. That's where you want to settle your estate. But the law is a funny, funny, funny thing on this stuff because the law says wherever the property resides, that's where we're going to have probate. And so if you have property in Utah and Arizona, you have another kind of probate and that's called ancillary probating. Well, what's wrong with ancillary probating? Ancillary probating can cost three to four times more expensive than regular probating. And the problem could be eliminated just by one signature and you avoid all of that. Another thing that people don't understand is that probate, the cost of probate, there's three things affiliated or associated with probating. Number one, anybody who's been through a divorce knows if I go down to the county office, I can get the divorce papers, all the accusations, all the threats, all the monies, all the kids, everything's their public knowledge. Probate is exactly the same thing and it's located in the same department. The second thing is the time, the delay of probate. See, when you have probate, it's tied up. You can't do anything. If you're going to sell a property or move a property, you have to petition the courts for that. And the last thing, which is, of course, the big issue is the cost. Probate, not like taxes, is determined on the gross amount, not the net amount. And if you go like ancillary probating, there's two, three times more expensive on the probate side. So as far as that is concerned, those are big issues in front that you don't have to die, that you're going to get in your lifetime. So I think it's important that you sit down and talk about it. Here's a question that came up before. According to the federal tax code, if there's probate, who gets paid first above everything else? Well, Abe, you know, the person that's going to get it paid is the biggest charitable organization in the world, and that is the federal government going to get paid first. Well, actually, I got a little bit cheered up on that. Attorneys really get paid first. Attorneys get paid first, and then the taxes get paid in that order. So that's the way it goes. When I went to your seminar, that is one thing I learned, is all the debt before the IRS, the state, the attorneys get paid the probate fees first. Then if there's any money left over, then they split. That's correct. There's another force, there's another part of the law, as far as taxes concerned. You know, people think inheritance tax, Hawaii doesn't really have an inheritance tax. They have a transfer tax, but you know, it's just words, because inheritance tax is basically any individual who inherits is responsible for paying the taxes. Well, in Hawaii, it's not what we receive. It's what the estate has to pay. They take it out of the estate, and then they pass it on to the beneficiaries. That's the only difference. But a lot of people too, they come to me and they said, I'm worried about these transfer taxes. Well, quite honestly, you know, the rate now for the federal side, we all pay federal and state is $13 million. So the rounding it off is $13 million per person. So if there's a husband and wife that's $26 million net, what percentage of the people actually pay federal estate tax? The figure is three tenths of 1%. So for the average person in Hawaii, there's not going to be paying any taxes. Now there's a state tax, and it's about $7 million or $14 million. That's still kind of high. So rest assured, you must have a pretty nice size estate. And if you're going to be over that amount, you need to talk to someone like me because of the specialized planning. We can reduce the taxes given some time, you know, probably up to about $40 million. You can actually eliminate the taxes. We give you a little bit of time. So those are some of the things. The things that I worry about more is the guardianship. You've got a lot of young people that have children. And the problem that we have is that if both the husband and wife gets to a position where in fact they would die and they have minor children, there's going to be two parts to this. One is the guardian of the person, and the other one is the guardian of the estate. The guardian of the person is infinitely more important. Why? Because that person that is being selected, who show love, affection, guidance, traditions, you know, all of these things, what church you go where you live. And you want to keep the children together. When parents don't make plans like this, there's two sets of grandparents and brothers and sisters all fighting. But who ends up paying for this, the estate? And that is the most important part is that person. The second thing is going to be the guardian of the estate. So the state is responsible. So what they do is they appoint what is called an administrator. The administrator oversees the finances. They want to make sure the money is going to be allocated for the benefit of the children. So the administrator, they would set up an account and there would be so much money coming out. And every time the guardian of the person needs additional money, we have to petition the court, court costs, attorney's fees. But you know, with all that in mind, that is not the biggest problem. You know what the biggest problem is? And if parents is listening to this, here's the biggest problem. What would you have done at 18 years old if you receive a million dollars? Because the law says if you have not done any estate planning and you're not around, your children will inherit your inheritance at 18. That means they get to do whatever they want with the money by doing proper planning. You will determine when the children will get that. Not the law, you. Okay. And that's why it's really important to do guardianship planning, which by the way, I found out that very, very, very, very few people will do that. I know I'm running out of time, so I wanted to just highlight some areas if you don't mind, Dave. Well, I remember, I remember, I remember when you and I were in a meeting, there was a local guy with a wife from the mainland, and they were talking about guardianship. And the husband says, I want my kids to be raised by my family. And the wife said, heck, oh, I don't want my kids to go to New Jersey or somewhere. And the husband said, you're kidding me. So they have to determine who really will be the guardians of the kids. And where are they going to live? That's very interesting. Yeah. What's even more interesting is this. Today, the amount of divorces is very high. But guess what? About 70% of divorces have children. So now you might have situations when we're doing a state plan, which is not unusual, where it's yours, mine, and ours. You know, so you got three different groups of beneficiaries, and I've actually had couples come in me and we start talking. And it's going to be, it's like, wait a minute, I don't agree with you. And it's like they're going to get a divorce. And it's very difficult as a planner to be sitting in here and watching these two people fight about, you know, who's going to take care of the kids, how are they going to take care? Where are they going to take care? And what's a proper one is this. I don't want my kids to go to your church. You know, it's a, it's a tough situation. And we've had it all. Another one is a big asset protection asset protection today. It conjures up all kinds of ghostly matters, so to speak. All those of you who are listening to this program, if you have a license to practice, like if you're an attorney, an engineer, a doctor, a physician, no matter what you do, you can't protect yourself against your trade. The only thing you can have is ENO or malpractice insurance, but you cannot set up an entity to protect yourself against a lawsuit. Now people ask me, well, how come my doctor set up a professional corporation? He's trying to protect himself against his employees messing up also. That's one of the big reasons. So a lot of times when somebody who's like an engineer comes to me and they want to, they want to protect themselves, one of the things we do is, since we can't protect them, we protect the asset. We make it as very difficult for someone to sue them. And especially with today's limited liability company is a classic example. And because of what is called a charging order, we can design many, many, many different scenarios of asset protection. And a lot of people don't realize it though, but Hawaii has a pretty good protection because of the way that we own property. For example, the husband and wife has the right to protect property ownership because of the tenancy by entirety protection there. And we're one of the very few states that you could have not only real estate, but you could have other assets owned in TE, where some states only real estate, ours could have partnerships, could have all different kinds of assets in there. And the other thing what people don't realize is that in 2012, our legislators gave us the right to change from TE to tenancy in common, so we could fund our trust, but still keep the TE protection in the trust so that if one of them should get sued, then it'll have protection. And I'll give everybody a piece of information they never ever thought about, but it's important to know. If, for example, you and Sally had this trust that was set up, and you split it up, one went into yours, the other half went into Sally's, and we know the protection was there. But remember the three characteristics of TE property is you got to be married, can't sell the property without the permission of your spouse. And number three, if any one of you gets sued and you lose, the creditor cannot go against the property. Now what happens if you die? That's a question. If you die, and now we had that protection there, one of the requirements is you got to be married. How can you be married when you're dead? So here's a piece of information that I think the public would enjoy or at least have. Under the law, if you have this property in TE and then you change it to tenancy in common with the provisor of the special 509 provision, if you die and the property is in a trust, until Sally dies, that trust will enjoy the same protection as if you're alive. And very few people know that. Wow. Now we don't have two minutes left. So we've covered six of those 15, Brian. So it looks like we're going to have to have you come back. And maybe the next time you can focus starting with distribution, because I've heard you talk about that, about not owning the asset, but controlling the asset. And that's a huge difference. And I know you've talked about that many times in the seminars I've been to. So any last parting words of wisdom, Brian? Well, I think it's this, estate planning is not about dollars and cents. It's about emotion. It's about tradition. It's about family dynamics. Okay. So because, you know, all of this stuff leads to these kinds of problems. When you take a look at civil lawsuits, the majority of the civil lawsuits, if you're going to categorize it over 40%, is sibling rivalry. See, because we love our children. We don't take into consideration, they don't want to be partners with each other. So we can talk about that the next time, because that is a huge, huge issue. Brian, I'm sorry, folks. I have laryngitis, if you can't tell, because I just came back from California last night and somehow my grandchildren gave me a cold, but my voice got affected more than anything else. But what I really like to do is to have Brian come back again, because we do have other parts of the 15 areas of estate planning that we'd like Brian to cover. So stay tuned, folks. There'll be another part to it. And if you're interested about getting a real estate license, go to ablyseminars.com. Otherwise, go to Brian's website, eBiz Consulting LLC or something. I think we've already posted that before. So look up Brian Lee. Here we go, eBizConsulting.com. Okay, Brian, thanks so much. Really appreciate it. Anytime, babe. Okay, take care. Okay, bye-bye, guys. Bye.