 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 100 wonderful agents in real estate sales. I started Abe Lee seminars in 1980. I have taught over 11,000 students to help them get the real estate licenses and I teach continuing education for licensed agents to continue to get their license every two years. Our show is dedicated to helping buyers and sellers understand the process involved in a real estate transaction. A special guest will talk about legal issues, escrow, title, getting a loan, surveys, home inspections, insurance, contracts, wisdom trust, and much, much more. We're really privileged today to have Brian Lee for the third time because what he talked about was so interesting, we ran out of time. So Brian, thank you so much for being here today. You're welcome. Glad to have you. So in case the viewers didn't see the first two videos, give us a little background about where you grew up, your family, and how you got interested in insurance, and specifically estate planning. Well, I'm a local boy, grew up in the housing and come from very humble backgrounds. My father was a carpenter and basically I was in the insurance business in 1970, 71. And I guess most people would say that I was successful, but I got disenchanted not with the business so much as the fact that I wanted to help people. So even though I was making a very good living selling insurance, I changed my operations and went into the service area and doing corporate planning, succession business planning. I eventually got trained and got certified to teach all the CPAs in America for accreditation, for CE credit, as well as the CFPs in America and also ended up teaching for the Hawaii Association of Realtors and currently are teaching the GRI courses. So I've been around for a long, long time. I knew Brian when he first started, but actually he started before me. We worked for the same company many, many decades ago, like in the early 70s. I've known Brian that long, if you can believe it, but I have found that over the years, Brian is a self-taught expert in certain areas that very few people have working knowledge of. And even things like ESOP, preschool, what the heck is that, or succession planning, or things of that nature that Brian works on and he's excellent at it. So Brian, about how many estate plans have you done so far? Closes I can think is the design work will 5,000. Amazing. Amazing. Okay. So the last time we talked, we ended up on number five on our 15 point estate planning. So we can start off with number six, which is distribution of who gets what and when and where. So maybe you can start us off with that number six point distribution of assets. Okay. Well, Abe, you know that unfortunately, just to give you some background, over 99% of all the estate plans in America is the same thing. Basically, set up husband and wife, for example, and something happens to the husband, the estate plan was designed to take care of the wife, something happened to the wife, then everything will be split up among the children. As a consequence, the estate plans in America does not accomplish what the parents really want because the options was not given to them. The reason why distribution is such an important part of the estate planning process is because when you ask this basic questions, how many of you upon your death would transfer all of your assets to your children? They will always say yes. How many of you would go into business with your brothers and sisters? Oh, no, I don't want to go into business with my brothers and sisters. Well, guess what happens? Because of the fact when more husband and wife dies and your estate plan says upon the second death, everything is divided equally among the children, then you get the problem. Well, what primarily causes the problem? Well, basically real estate. Now, what people don't realize is real estate has a very unique aspect to it. It is the only assets in America, which I say has its own bill of rights. As you know, the bill of rights is connected through the Constitution and gives every citizen the right to do certain things. One of the things is that it basically tells us what the United States government will do for its citizens. Well, real estate has that same management controls. For example, if three people own a piece of property and one of them wanted to sell and the other said no, under what is called summing of petition rights, if the other two people don't want to sell them, then they can actually go to court and the courts would probably, 90% of the time, when you're moving higher, permit the property to be sold as an auction. These are rights that you got in real estate as a landowner. Because it says, paraphrasing, no landowner could keep all the other landowners captive. These problems are what you inherit as a sibling when mom and dad dies and the properties are divided equally among the children. Many of them say, well, our children, we get together. Oh, yeah. They all get together and they all enjoy each other's company until they get married, get divorced, get sued, go through bankruptcy. So sibling rivalry is a big issue. The majority of the civil lawsuits, pretty close to 40%, is allocated to sibling rivalry and the great majority happens to do with real estate. So you love your children, you want to treat them all equally. And one of the things is we split everything equally. But you know, divorces are pretty prevalent in America today. If your estate plan says that upon second death, everything will be split equally, you're asking for problems. You could use the trust as part of the estate planning tool because the trust is the only vehicle that you can convert a wish and a desire and in fact make it enforceable. Oh, what does that mean? Can I treat my children equally? Yes, you can. Can I treat my children equally and make sure that the property is governed by the trust and not by the individual beneficiaries? Yes, you can. Can I make it so that in case one of my children get divorced, that it was not, the property would not be affected by a divorce? Yes, you can. So these are some of the things that you can include in your trust document if you do correct design planning. Most people say, oh, gee, but my kids, they get along. They get along just like all the other people in the world until they don't. And divorce can be very, very costly. I'm sure there's people in this room, in this telecast, that has been through a divorce I've heard and it becomes a very big problem. So distribution becomes one of the most major important parts of estate planning, protecting your children. What about some other issues in distribution? Well, if you give a child an asset and they get in trouble, whether they get divorced, whether they got drug problems, all of these different issues, it will affect and the effect of which would hurt all of your children together. Proper planning can eliminate or minimize some of these issues. And that's very, very important. You must have the language. Here's something else for you to consider. Is it logical to you that you, you who have taken 20, 30, 40, 50, 60 years, sometimes two generations to acquire your wealth and do it in less than two hours? Well, why is two hours such an important factor? Because the average estate plan takes two hours. So in other words, you're taking two hours to make the decision that can last 80 to 90 years. And that, to me, is impossible. There are so many pieces of information that you need to glean from your estate planning. Remember what I said in the past for those of you who has been on this telecast or has heard me speak somewhere. It is not the answer that you should be concerned with. It's the question. The most important part of any educational system is redundancy, because that's the basis of learning to be redundant. On the same token, though, the most important part of my classes is to make sure you ask the right questions at the right time. If you do not know the right questions to ask, how do you know if the answer is going to solve your problems? But then again, this is where we come to the crossroads. If you don't know what options are available to you, how do you know how to solve the problem? And that's a big question. If an estate plan takes you two hours to complete, how can you answer some of these questions and go over it and get educated? You can. So it's really important to sit down with somebody who will take the time to understand that family dynamics and where you want to go. You see, all of you who have more than one child will face that problem. You will always face that problem. And if you have real estate, you compound that problem. We love our children and people always will come in my office and they will always tell me two things. Hey, Mr. Lee, I want to make sure that I'm fair and I want to make sure it's equal. But when you think about it, we are never equal. We don't spend the same amount of time. We don't spend the same amount of money. Somehow our maker made all of us different. For those of you who have children, you know you might have three children. All of them are different. They have different needs, different wants, different talents. And we tend to go under the squeaky wheel theory. There's a squeaky wheel who will pay attention to it. Some of us have children with exceptional talents who spend more time or money. On the other hand, some of us might have a child that has challenges. Again, we spend more time, more money. So the estate plan cannot be the same for everybody. And that's why distribution is such an important factor in the estate planning. You must take into consideration if you want your plan to work, to take individually how your children can benefit. And it takes time, several meetings. So if you want your estate plan to work, spend the time, devote the time to getting it correctly. You must invest the time. Remember this. This is probably the most important decision you make for the benefit of your family. You have you, those of you who have real estate, I congratulate you. I congratulate you because it takes a big step to buy real estate. The single most largest asset for the average family is your home. Don't mess it up by dividing it equally between your children. No, I didn't say don't give it to your children, but don't give the real estate as a whole and divide it by the children. Leave it in the trust. Let the trust control the property so that in the event your children should get sued, they go through divorce, go through bankruptcy, get sibling rivalry, or alienation, which means something coming from the outside trying to get their assets. The trust can provide the correct protections for the benefit of your family. In some cases, your children may not like it. I can tell you, in every case, if they're going through a divorce, they're going to wish they had it. So take the time, spend the time, the effort, and maybe a little bit more money to have the design done the way that you would like to have it, because it's really important for you to address those issues. Hey, Brian, can you believe it? We're halfway through. Oh, is that correct? It's a really interesting area. I do remember you saying, have your children control it but not own it. Correct. So I think if people are interested in learning more, they should contact you for that part. Let's go on, because we have a few minutes left. We probably have to have you come back again. But let's talk about asset protection for a few minutes and then to do a state reduction. Okay. Well, asset protection is another big area. Let me just kind of divert a little bit so that I can set this up. For those of you who are professionals, for example, an engineer, doctor, you know, dentists, you folks have a licensed practice. That means if you mess up, you personally liable. And the only thing between you and the creditor is going to be malpractice insurance or ENO insurance. By you creating an asset protection entity like an LLC operation or a limited partnership does not protect you against personal liability. Well, I mean, what do you mean? I thought this could help me. Well, it could in a way, but you need to understand conceptually what we're doing here. You cannot protect you. The first line of defense will be your ENO insurance or your malpractice insurance. So when the doctor would come to me and say, I'm concerned about this, I say to him, doc, I cannot protect you personally about it. But what I can do is I can protect the asset so that in case you get sued and you lose, they cannot touch the asset because the asset will be protected. So that's what it is really important. LLCs are very important. For those of you who have real estate and LLC is probably the best way to go. A limited partnership is not a good way to go. And the reason for that is because the general partnership has joint and certainly liability. Even though you own 1%, you're 100% liable for all the partners. A corporation, listen to me. You want to make sure you do this. Never, ever, never, ever buy real estate and put it into a corporation. There are so many things that can go wrong with it that you never want to. And for more information, you need to call me because I need to take about 15, 20 minutes to explain why. So those are some of the things that you must make sure with asset protection. By the way, when I talked about the distribution, which is just about 10 minutes ago, another thing that you can do is you can set up a trust called an asset protection trust that will provide that kind of protection. That kind of protection, which means if you get sued, go to bankruptcy, divorce, all of these can be protected by setting up the trust correctly and provide these kinds of controls. Now, I want to explain something really quickly. I know I'm running out of time. What people don't realize is this. There's two kinds of the lawsuit comes in two areas. One is that if you set up an entity and the entity owns the property and you get sued, the suit can come in two ways. One is an inside lawsuit. The second one is an outside lawsuit. When we set up an entity like an LLC to own a property, we're not protecting you against a lawsuit that's coming inside. In other words, a slip and fall rule. So if you have a property, somebody falls down and sues you, that's an inside lawsuit. The entity does not protect you. It's the insurance that's going to protect you, your property and casualty insurance. Then why are we setting up an entity? Because of an outside lawsuit. Well, Brian, can you give me an example of what an outside lawsuit is? Sure. Driving your car down the street into a massive accident, you lose, they sue you. The settlement is much greater. They go through your insurance. Now they're going to come to you and get the rest. But when you have like an LLC there, that's an outside lawsuit. The LLC now provides the protection that is necessary for them to not get inside. Now I cannot talk to you in depth about the LLC and how it protects you because that itself, I give a two-hour clash just on asset protection regarding LLCs and all the different ramifications of it. But these are called asset protections. Also, when you and your wife die, you can set up your trust in such a way that if in fact your children get sued, it is protected. Now that's another area in and of itself. But since I'm talking to you about you, you people today, I need to cover this one important area. Hawaii is very unique. There's four ways of owning real estate in Hawaii. One is called severality. That means you own the property by yourself or you own your interest in a property by yourself. That means that that property right there by yourself is subject to a lawsuit. Secondly, you can own the property jointly with somebody else with right of survivorship. Again, that is subject to a lawsuit. You can lose the property. Thirdly, you can own the property with somebody else because if you own the property in tenancy and common, the third way, you got an undivided interest. And if you own half of the property as an example, and you lose a lawsuit to me, I can get at it. But the fourth is where I'm headed for. If you happen to be married, and I am not talking about what is called domestic partnerships and gay marriages and so forth, I'm talking about husband and wife. If you have a husband and wife relationship, you can own your property in Hawaii called TE. The three characteristics are, you got to be married, can't sell the property without your wife's or spouse's permission. And number three, if you get sued and you lose, the creditor cannot take the property nor can they lean on the property. Therefore, many of you, you want to own the property if you're married in tenancy by the entirety. When you own the property in tenancy by the entirety and one of you gets sued and you lose, the creditor can't come out of you. Now, there's a little glitch you got to consider. Many of you have estate planning. In order for the estate plan to work better, you've been asked to change the ownership from TE to tenancy in common so you can fund the trust. When you do that, many of you are going to be concerned because I said the three characteristics are you got to be married. Well, when you change from TE to tenancy in common, you lose the marriage issue. But our legislators was right enough that somebody brought to their attention that that is a bad thing. So in 2012, our legislators passed a new law. And here's what they said. If you first own your property in TE and then you change it to TC, tenancy in common, to fund the trust separately, there's a provision you can put inside of the property called the 509 provision. When you do that, your deed will say and you have to have it on the deed, it'll say that this property is immune from the creditors of one of the people who own this property that if there's a lawsuit, they cannot touch the property, which is very, very, very important. Additionally, here's something that very few people know about. If you lose your spouse and you get sued and the property has the 509 and it's in the trust and it's in tenancy in common, the law says that the property will carry over and the surviving spouse is also covered by that law, protecting that. Now A, I know of no one that knows that because nobody asked a question. So that's important that under the distribution based on TE and also TC, if you have the 509 provision in there, you will be protected. So asset protection, very, very, very important. Remember, professionals, you cannot protect yourself unless you get private insurance for that. But on the same token, you can protect the property. So protect the property and you can then be covered and you can also make sure you can sleep better at night. Abe, I think I covered asset protection in the time that you gave me. Yeah. Well, we have one more thing that we want to talk about real quickly. Yes. Estate reduction and freezing. I know you could spend a lot more time on that. If you can give us just a summary of what this entails. Okay. Well, when I give a seminar, one of the questions I ask the people is, I already gave you here to find out how much taxes you're going to pay and what the laws are. Everybody starts to raise their hand. I said, well, let me put it this way. Less than three tenths of one percent of the American public will ever pay any federal transfer tax. Ooh, you mean not even one percent? Not even a half percent? No. Why? Because today, in order for you to pay any federal transfer tax, your estate got to be about 13 million dollars. And if you're married, it's about 26 million dollars. So there's not that much of a problem. But for those of you who have large estates, that is extremely important that you do what is called estate reduction and freezing techniques. That means if you have an estate that's close to the taxable rate or if your state is over, there are some things that we can do to not only freeze it but eliminate the estate taxes. People come to me, for example, and I had a guy that comes to me and said, Brian, you know, my estate is 42 million dollars. My accountant told me I have to pay this huge taxes. Is he correct? I said he is correct if you don't do anything. So I showed that person and his accountant how we can actually eliminate the estate taxes and freeze some of it. So no matter if it appreciates, it will never be includeable in his estate. So these are what is called estate freezing and reduction techniques. It does take a lot of time. It's probably the most expensive way of helping you to eliminate the taxes. But it's well worth it because you're saving millions and millions and millions of dollars. Dave, I think I'm just close to running out of time over here. We are, right? Unfortunately. So we may have to have you come back because we still have a few more items to do. But if you are interested and want to know more, Brian's website is ebus consulting LLC, I believe. Yes. Yeah. And then you can also email me and I can send you Brian's contact information. But you can also Google Brian Lee. He's all over the websites. So you can find him. Brian, thank you so much for spending time with us. I know that you take days to cover some of these topics, but I think it's good to give people a glimpse into the intricacies of good estate planning. And if your estate is less than the 26 million Brian talked about, you still need distribution and trying to avoid sibling rivalry and those kind of things. So Brian, thank you so much. And we'll have you come back again. We need more time with you. Oh, well, I'm happy to do this, Abe. And you know what? Everybody should consider looking into their estate plan because it can cause major, major, major problems in the future. But ladies and gentlemen, thank you for coming in. If you need something, you know, give us a call. We can always at least point you in the right direction. Thank you. And for those of you that are interested in knowing more about real estate, then go to AbeLeeSeminars.com. And of course, to get all of the archive shows that we've done and other people have done, then go to Think Tech Hawaii. And you can see all the previous shows that I've been taking. Thank you so much. Aloha. Have a great week.