 to finding your piece of the rock on ThinkTech Co.I.E. I'm your host, Abe Lee. I have been a licensed real estate agent since 1973. I'm the owner of Century 21 I-Proposal I.E. and work with close to 100 wonderful real estate agents in real estate sales. I started AB seminars in 1980. I have taught over 10,000 students to help them to get their real estate licenses and have taught continuing education classes for licensees to renew their licenses every two years. Our show is dedicated to helping buyers and sellers understand the process involved in a real estate transaction. Our special guests have talked about legal issues, escrow, title, getting a loan, and we'll be talking about surveys and home inspections and contracts within trust, which we're gonna focus on today and much, much more. My special guest today is a fellow named Ethan Okura. This handsome young man happens to be my wife's nephew. So we do have family ties here. So if he's handsome, he's gone after my wife's side of the family. But Ethan, thank you so much for being with us today. Thank you for having me, Abe. It's an honor to be here. It is really great. Now, I can tell a little bit more about Ethan's background, but I'm gonna let him give you his background, his family, et cetera. But I will tell you that Ethan graduated from Brigham Young University in Provo, Utah and went to Columbia University, is it? Yeah, in law and got his law degree and practicing New York and then came back to Hawaii to work with his father who happens to be also an Okura. And he started Ocarina Associates and Ethan has taken over. So we're really grateful to have him. He is a wealth of knowledge in estate planning and was in trust. And he has some specialty areas that very few attorneys specialize in. So Ethan, when we start off with, give us your background, your family, where you grew up and that kind of stuff. Sure, well, thank you, Abe. I grew up in Hilo on the Big Island, which is where my father and Abe's wife, my aunt, were born and raised. I went through Hilo Union Elementary School, Hilo Intermediate School and Hilo High School, all on one street and didn't know anything other than that small town until I went away for college on the mainland, as Abe mentioned. My father started the law practice there in Hilo. And after a few years working in New York City at the largest law firm in the world at the time, I got tired of being in the office until four in the morning and decided to come back to Hawaii and join my dad's practice. So I've been here back in Hawaii since 2005, focusing exclusively on estate planning law and related areas. And what's interesting is some of my friends, when I asked them about their estate planning and was in trust, they go, oh, Ethan was my attorney. So unbeknownst to me, they've already gone to Ethan and to Samford. So that's a really good testimonial to them. So Ethan, tell us, also I understand that you're a singer, a dancer and a fencing champion. Well, I wouldn't go so far as to call myself a singer or a dancer in public, but I have done some singing and some dancing, some musical theater productions, but it's been a few years since I've done any of that publicly. Okay, thank you. So tell us, what made you decide to become an attorney? No, that's a really good question. When I was young, my father always recommended that I go into business and not become a lawyer where you might be tied to a billable hour. And when I was graduating from college, I was thinking about going on to get an MBA or a JD, some kind of advanced degree. I always knew I wanted to do something more in education. I just wasn't sure what. I didn't think I wanted to go to med school because I didn't think I'd be comfortable with the blood and guts, that wasn't for me. And a PhD seemed too narrow for my broad variety of interests. So it was really between an MBA and a JD. And to be honest, the reason I went with law school is because it would give me one more year of school, three years of graduate school, instead of two years before I'd have to go find a real job and stop being a student. So I kind of fell into it. Okay, so now, what kind of, what's a specialty in the legal field? Cause you do have a specialty. Yeah, that's a good question too. We don't have specialty designations in the bar in the state of Hawaii, like some states do. But for the most part, we don't. And when you look at medical practice, there is a specialty that is part of your training, right? When you graduate from medical school, you might go on to do a residency and you specialize in some kind of medicine. And the medical field has realized that it's important to specialize because there's just too much knowledge to be a generalist in today's world. And the same thing does apply in a practical sense with the law. That if you're not a specialist, it's really hard to be excellent as a lawyer in everything. It's impossible to be an expert in everything. But we haven't really specialized and there's a fiction that you can just be a lawyer and you're a generalist and you can do anything and really you can practice in anything and train yourself how you want to practice. But if you don't specialize, it's really hard to do an excellent job for your clients. And so the specialists in law tend to be self-restricted specialization where you do what you do well and you narrow your practice by choice rather than some designation that you get from the bar saying, hey, you're now licensed to do this thing. So what areas do you specialize in? We specialize in estate planning generally. So that would include wills and trusts, probate, estate settlement, planning for... Well, I guess it kind of takes us into the field of what is estate planning and why do we do it? What things are we trying to prevent? To some degree, we do tax planning as it relates to the estate and we do protection from creditors and divorce. And so there's kind of a broad range of things but essentially it's how do we protect our assets, what we work so hard for, provide it for your family or loved ones or charities or who you want to provide for when you pass away and make sure you're taking care of in case you're becoming capacitated. So that's what estate planning is about. Great, thank you. So tell us, let's start with the basics. What is a will? Great, so a will sometimes called a last will and testament is your final wishes, what you would want to happen with your assets when you pass away. That's what most people think of it as. And there are some other features that are important in your will as well. For younger couples where they may not have a lot of assets yet but they might have minor children, your will can name the guardian and that's the person who's going to take care of your minor children if you were to pass away. The will also can specify what you want to happen with your final remains, whether you prefer to be buried or cremated or whatnot. So the will is your final wishes as put down in writing that will be enforceable by law after you pass away. Okay, now I understand and I'm not an attorney but I've been in real estate long enough that you die with a will, you die testate. If you die without a will, you die interstate. So either way, does it go through probate? And what is probate? That's a great question and yes. So whether you have a will or not does not affect whether you need to have probate and that brings up your question, what is probate? Probate is a court process and the point of probate is to prove the validity of your will. An interesting fact here, the word probate comes from the Latin root word to prove or to test or to try and so what we're doing is proving that the will is valid. So that's what probate court is for. The main idea if we wanna think about it is when you own assets and in your case, you deal a lot with real estate. So for many of your clients, they own a home. If you have real estate, the way you transfer ownership is by signing the deed, right? And when you can sign the deed, you can transfer it over to the new owner. Well, when you can't sign anymore, you become incompetent, someone could use a financial power of attorney to sign the deed on your behalf and transfer it for you. But once you pass away, the power of attorney is no longer valid and no one can sign the deed to transfer ownership of the property until we go to probate court and have the judge appoint someone to represent your estate, represent your you after you pass away and then that person has legal authority to sign on behalf of dead person in order to transfer assets like signing a deed or getting access to bank accounts. That's the purpose of probate. Now, when is probate required? As you mentioned, you might have a will in which case you are testate or you might not have a will in which case you are in testate. The testate in testate, if you're in testate, that means you haven't specified who you want to get things and the law of the state where you are domiciled, where you live when you pass away, will dictate who gets what if you don't have a will. So I've heard another estate planning attorney put it this way. Everyone has an estate plan, whether you know it or not. It's just that you might have one that was written by the state of Hawaii and it might not be what you want to happen. So if you don't have a will, then you have an estate plan that may or may not be in a line with your wishes. Whether or not probate is relevant depends on the type of assets you own and how they're held at the time of your death. If you own any real estate in your own personal name and there's no joint owner or an owner as tenants by the entirety for married couples, then when you pass away, it can't go to a joint owner and typically that would have to go through probate in order to transfer it to your heirs when you pass away. There's one exception to that. It's recent since about 10 years ago, we have what's now called a revocable transfer on death deed that lets you name a beneficiary, a pay on death beneficiary, kind of like you have with your retirement accounts or life insurance or even some bank accounts where you can say, when I die, I want to transfer this asset on my death to this beneficiary and you can name them in ahead of time. So now we can do that with real estate in Hawaii, which is nice to avoid probate, but if you don't have a revocable transfer on death deed and there's no joint owner or owner as tenants by the entirety, then typically it'll have to go through probate when you pass away unless it's in a trust. Maybe I'm getting ahead of myself here introducing trusts without anything. So let's finish up on the probate then. I've heard that probate takes time, it costs money and it's public knowledge. Is that something that people want to try and avoid? Absolutely. In the most cases, when I talk to clients about probate and they say, well, what's so bad about it? It's not that it's awful and many people do have to go through probate because they didn't prepare adequately. Well, when they find out that generally public, probate is a publicly available process. So people can look up what your will said and who gets what generally under probate. That's something most people want to avoid. They don't want their business being known publicly by others. It's inherited a bunch of money. There's also the expense of legal fees. Most people don't want to pay lawyers more than they have to. And so if you plan ahead, you can pay them a little bit in advance so that you don't have to pay them more later when the probate comes in. And then there's a time factor. Whenever you get the court involved, things can really slow down and that's something to avoid as well. Okay, great. So there's, I mean, the law dictates who gets what if you don't have a will? Correct. And of course, if you have a will, then it dictates who gets it and it's proven in court through probate and the judge basically makes the final decisions based on the documents, right? That you folks draft it up. That's exactly right, Abe. Yeah, okay. So now let's get to the other part, which is the revocable living trust or otherwise known as an RLT. So tell us more about why you would recommend a trust versus a will. Although both are necessary, one's probably better than the other. Yes, so a lot of people will think, hey, if I have a trust, then I don't need a will, right? And they think of it as either or, do I need a will or do I need a trust? And the reality is you get a will as a basic plan and it's not quite as good in most cases as having a trust. And if you have a trust, you'll also have a will, something called a poor over will. And the reason is whatever you put into your revocable living trust, once you pass away, if there's anything you forgot to put in the trust, the poor over will can catch that and put it into the trust. So you'll have a trust and a will on one hand or just a will on the other hand. And the reason we'd want to have the trust, the revocable living trust, threefold. One, if you pass away and you have your assets all held in trust, they do not have to go through probate court. And the reason is that the trust has yourself, usually as the initial trustee who can manage the trust during your lifetime while you're competent. And if you become incapacitated or pass away, your trust will name a successor trustee. Usually your spouse or close friend or family member, sometimes a professional trustee like a bank. And the point there is that once you become incapacitated or pass away, the successor trustee can step in and does not have to go to court usually to get appointed. And now we avoid the court probate process in that manner. And the successor trustee can just take over managing the trust assets. So that's the huge advantage of having a trust over just a will. Okay, now what's involved in a process? Let's say I come to you and go, hey Ethan, I have a house, I'm married, I have kids. Sound familiar? What do you recommend? And how do you start the whole process? What's the process like? Well, it'll vary depending on which attorney you work to. With our law firm, if someone calls in saying, hey, I think I need a trust or someone's told me I need to do an estate plan, what do I do? We have an estate planning questionnaire form that we have prospective clients fill out that gives us some background information about their family and their assets. And then we schedule a meeting to sit down and see what might be an appropriate plan for them. In that meeting, the attorney will determine do they need a trust? Is that appropriate for them? In some cases where the only assets that a client has is some money in a bank account, no real estate, no large investments, they have less than 100,000 in total of assets, then that can avoid probate even without a trust. And so sometimes in those cases, a will is sufficient. That's all you might do a will and a power of attorney and a healthcare directives. But for most people who have bought a home or who have more than 100,000 in savings, then the trust is a useful tool that we have. And so we'll recommend setting that up and we'll hammer down the details of who should step in to manage things if something happens to you. Then we take a couple of weeks to draft up documents once we've worked out all the details, clients will come back to sign those documents that actually creates the trust. And then the final step is funding the trust where we have a deed to transfer real estate into the name of the trust, the trustees of the trust, or we give instructions to clients to change their bank accounts into the name of the trust or stock accounts and maybe even the beneficiaries of their life insurance. And so that's the whole process of getting that initial trust created, funded and set up ready to go in case anything were to happen. So I understand that a trust of voice probate is what you said. For any assets that are titled in the name of the trust, yes. Okay, so that means that nobody knows who got what in a trust. There's a big privacy benefit of having a trust, yes. Okay, now I've heard people say, well, you know, I'm having a trust because it's protected against creditors and liabilities. Is that a true statement? Yes and no. As is the case with most questions you ask a lawyer, the answer is it depends. Now with a revocable trust, there is no creditor protection during your lifetime while it's revocable. What revocable means is you can revoke or cancel the trust. And if you revoke it, then all the assets come out of the trust and come back to you personally. And so there's no creditor protection for that because if you were sued, the judge can have the creditor step into your shoes and force you to revoke that trust, get those assets back, so you can pay off the creditor, whoever you owe money to. However, once you've passed away and the trust becomes irrevocable, the trust could just end and distribute out assets to your spouse and kids, or it could continue on and hold the assets in trust. And once it becomes irrevocable, now you can have some creditor protection for your beneficiaries that if they were sued or go through divorce, that there can be a great degree of creditor protection built into the trust depending on how we design it and what rights they have. If they can't just unilaterally revoke it, then it can provide a strong degree of creditor protection. So that's a common mistake that people make is they think once I've set up a revocable trust I'm protected from creditors. That's generally not true. But there are things we can do while you're still alive to even create a trust now and protect it from your creditors. But that's more of an advanced estate planning topic, something we call a domestic asset protection trust. It's a type of irrevocable trust. Which we're gonna have in a second session. So I wanna make sure that people stay tuned because this is such a fascinating topic and it's so complex sometimes that we cannot do it in 30 minutes at what we have. So we're just touching the tip of the iceberg as they say. So Ethan, if someone were to die in America today, is there an estate tax exemption amount from estate taxes and how much is it and what's gonna happen to it in the future? Great question. So most people have heard the term death tax somewhere in the news or in the past. And that's what you're referring to Abe there with the estate tax. So the estate tax is a tax on the assets you own at your death or control at your death. And there is a large exemption now. On the federal level, we can have $12.9 million and be free of death tax or estate tax. When we're looking at the state of Hawaii, the exemption is only, and I'll say only in air quotes here, $5.49 million. So for most middle class people, they don't have to worry about an estate tax or a death tax anymore. Until you're a multimillionaire, you're not gonna exceed the exemption under current law. And although the federal laws got a pretty big exemption right now, it's a temporary doubling of the estate tax. In 2017 with the Tax Cuts and Jobs Act, it went from $5 million adjusted for inflation to double $10 million adjusted for inflation. So that's $12.9 now. But that law will sunset December 31st, 2025 and starting in 2026, maybe cut back in half. So it'll be closer to six and a half million under the current law than 12.9. Okay, so that means that every American or husband and wife could have 12.9 million each that they would not be subject to federal estate tax and 5. whatever it is times two. So it's really for a husband and wife, right? Okay. And I know that you've talked about, and this is a little more complicated, maybe we can do it in another session, is that if one spouse doesn't use up all the exemption amount, it can pour over to the surviving spouse so they can have more assets to protect in case they die. But then if we lose that 12.9 million and goes to 5.7 million, you'd have to do some estate planning beforehand for people that are at that threshold where they could have an estate tax. That's right. So for clients who have more than 5.49 million assets or even more than 10 million in assets, some strategies that people are looking at doing now is having, especially with married couples, it's easy to use up the 12 million for one of the spouses now by putting assets into a trust that can continue on that's out of their estate. And then when they pass away, even if the exemption gets dropped down lower than 12 million, the IRS has stated they're not gonna claw back any excess that was used during the window of time now when it was higher, whether you did it as a gift during life or you actually passed away and used it up. And so one strategy for some wealthy couples is to take advantage of the higher exemption now before the sunset and it drops down in 2026 and still preserve all of the exemption for the other spouse and use that now while it's higher. So that's one possibility to consider. And if you don't use it and you pass away, you did mention you can transfer it to the other spouse. This is called portability of the estate tax exemption. And that's something new in the last decade or so too. There's been a lot of changes in estate tax law since 2010, both for creditor protection, for the size of the exemptions, this revocable transfer and death deed to void probate. The whole estate planning arena is full of updates where there's a lot of tools at our fingertips that we didn't have maybe 15 or 20 years ago. And again, there's a little more complicated, but before you had to have a A trust for the husband, a B trust for the wife, and then you could not have it in joint tenancy or tenants by the entirety. And I think Hawaii law changed that you could have both trust and tenants by the entirety protection. So that's something you do too also, I'm assuming. That's correct, yes. So before you had to choose between getting the protections of tenants by the entirety, which when you own real estate as a husband and wife as tenants by the entirety, the creditors of one spouse, let's say just the husband gets sued, they can't touch any of the property that's held by the marital unit, the tenants by entirety property. And so if both spouses are sued, of course, then they could come after this property that's owned by both of them, but tenants by the entirety provides protection from the sole creditors of one spouse. And you had to choose between holding property outside of your estate's tenants by the entirety or putting it in trust and losing that tenants by the entirety protection. Well, in 2011, we updated that in the state of Hawaii. So now you can have the choice of putting your property into trust as long as it's a revocable trust and both spouses have an equal right to the property and the spouse's names are in the trust name, then we can keep that tenants by entirety protection even while we're putting it in trust. So you get the benefit of both worlds, the creditor protection from tenants by entirety and the probate avoidance of having it in trust. And that's for the next session that we're gonna have. One last thing, I know you specialize in being able to, for people that need help with say welfare or nursing home care, and you specialize in protecting the home and not losing it and still get benefits from, I guess, I don't know what you call it, but can you touch a little bit on that so that we can put the people's appetite for the next show? Sure. So the largest threat we've found today for the average family in Hawaii is losing their assets not to estate tax or death tax or probate, but really it's spending all their money on their healthcare if they end up in a nursing home, which averages about 10,000 a month in cost. And so to the extent they can qualify for government benefits to pay for their long-term care through the Medicaid program and be able to shelter their home to protect it from a lien by the state on Medicaid, then they can preserve their family home for their children. We know how hard it is now for kids to buy a home. It's so expensive to buy a real estate in Hawaii now that many times it's intergenerational family living and we pass the home down through the family. So we've found ways to try to help people legally within the loopholes allowed in the law to get qualified for long-term care without spending all of their money first and without losing their home to a lien from Medicaid. And there are some constraints on how that's done and the timing to do it, but there are ways to do it legally so you can protect your assets for your kids or grandkids and not have to spend everything on your healthcare and lose what you worked so hard for during your life. I wish we had more time, but we will on the next session. So people stay tuned and look for Ethan's second phase because it's gonna be really fascinating with what I call the more complicated issues. So thank you so much, Ethan. You're terrific. And as usual, you are a wealth of knowledge. And thank you so much for viewing the show. You can watch this show on Think Tech Hawaii, it's archived. So just look for Ethan Okura on Think Tech Hawaii and you'll be able to see him. And if any of you are interested in learning more about real estate classes, I'm at www.ableseminars.com and we would welcome any questions you have or learning more about the real estate process. Thank you so much for being with us today, Ethan. You're wonderful. Thanks, Abe. Okay, thanks a lot, folks. See you next time. Thank you so much for watching Think Tech Hawaii. If you like what we do, please click the like and subscribe button on YouTube. You can also follow us on Facebook, Instagram and LinkedIn. Check out our website, thinktechawaii.com. Mahalo.