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DailyFinance Cites Tips from McManus on Legal Decisions That Should Be Triggered When a Child Turns 18

Daily FinanceIn the eyes of the legal and financial world, an 18th birthday represents a major shift. Motley Fool Contributing Writer Michele Lerner’s latest DailyFinance story, “Parents: Are You Legally Ready for Your Kids to Be Adults?” utilizes tips from McManus & Associates to show families steps that should be considered when a child turns 18. From the article:

 John O. McManus, an attorney and founding principal of McManus & Associates in New York, says that parents need to be aware that once their children turn 18, regardless of how many things stay the same, legally, a lot changes. For example, parents of legal adults are no longer automatically able to access their children’s financial or medical accounts or information, and they won’t be allowed to make medical decisions on behalf of their offspring. However, parents can take steps to smooth the transition into adulthood, and to make sure they can continue to help their kids when needed.

Legal Tasks

McManus says that because parents cannot automatically take action to benefit their adult children in the event they need medical care or are incapacitated, he suggests that families:

  •  Have their adult offspring complete a health care proxy that give parents the right to make medical decisions if their child cannot.
  • Have them assign a durable power of attorney so that that parents can handle financial and legal issues on behalf of their kids if needed.
  • Complete an authorization for release of protected health information so that parents can provide this information to medical personnel and use the information to make decisions on behalf of their kids.

“These issues take on extra urgency if your child is away from home in college or out of the country on a semester abroad,” McManus said. In such cases, he recommends learning about the health care system in the country where your child will be living to understand the differences between private and public hospitals and any restrictions on international insurance. “Colleges will not release a student’s medical records, even to parents, if the student is over 18,” he said. “This may be extremely detrimental to a child’s well-being in a physical or emotional medical emergency. Advance planning can facilitate communication between the foreign hospital and parents.”

For advice about financial education and tasks that build on what children learn about money before turning 18, read Lerner’s full write-up here. For additional important legal matters to consider as a family, review our recent conference call, “Top 10 Ways to Protect Children Under 18 and Over 18, Stateside and Abroad.”

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McManus and Client Contribute Expertise and Color to Wall Street Journal Feature Story

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As part of our continuing effort towards thought leadership, McManus & Associates recently presented The Wall Street Journal with our impressions on the newest estate planning paradigm. The firm’s ideas helped shape a comprehensive, informative cover story in the Weekend Investor by well-versed Reporter Laura Saunders. The article, titled “The New Rules of Estate Planning,” also highlighted the Grevatt Family, one of our clients, for whom we employed a smart strategy in today’s environment.

The article is based on the reality that, for many families—generally individuals with less than $5 million in assets and couples with less than $10 million—the focus is now on minimizing capital-gains taxes and state levies. As pointed out by Saunders:

 Finally, last year, Congress set the top estate-and-gift-tax rate at 40% and raised the exemption to $5 million per person, adjusted for inflation. It now stands at $5.34 million and is expected to rise to $5.43 million next year. Lawmakers also changed the rules so that couples don’t need trusts to get their full break from Uncle Sam.

Even though many people won’t owe estate tax, their choices about which assets to hold until death will greatly impact how much they pay in capital gains. Today, strategy is critical because the top federal rate on long-term gains is two-thirds higher than in 2012 at nearly 24%.

From the article:

The high exemption also is prompting changes in gift strategies and trusts, says John O. McManus, an estate lawyer in New York.

Sharing with readers how to capture capital-gains savings, Saunders highlights a provision of federal code dubbed the “step-up” that cancels the long-term capital-gains tax on assets that a taxpayer holds until death. “The step-up automatically raises the owner’s cost basis for such assets—the starting point for measuring a taxable gain—to its full market value as of the date of death,” she writes. To add color to this estate planning opportunity, Saunders features a real-life step-up strategy employed by McManus. From the story:

The new focus on the step-up prompted Ren Grevatt, now 94 years old, to do an about-face in his estate plan. For years, says his son Jonathan, who helps his father with his affairs, planners suggested that the father give his children the family’s beloved seven-bedroom Vermont farmhouse to avoid estate taxes that could have forced a sale.Now Mr. Grevatt plans to keep the house until he dies. He and his 87-year-old wife, who live in New Jersey, bought it for less than $100,000 in the 1960s, shortly before he became a publicist for such rock groups as the Beatles, the Rolling Stones, Led Zeppelin and the Who. The house, which is in prime ski country with views of two lakes, has appreciated greatly.As the parents’ estates will total less than $10 million together, no federal estate tax will be due. By holding on to the house, however, the parents will enable their children to inherit the property at its current market value—and skip capital-gains tax of up to 24% on decades of appreciation.“I’m glad my father didn’t get around to giving us the house,” says the younger Mr. Grevatt.

Near the end of the article, Saunders summarizes:

Given that the top federal rate on long-term capital gains is nearly 24%, compared with 15% a few years ago, the best course for people who won’t owe estate tax is often to forgo the gift and wait for the step-up, experts say. That is why Mr. Grevatt and his siblings were relieved their father never gave his children the Vermont property outright.

Saunders also sheds light on an “estate trust”, which puts complex moves to work in order to provide a double step-up on a highly appreciated asset to a married couple after the first spouse dies. McManus commented on the approach:

“This strategy provides flexibility by enabling the surviving spouse to sell the asset sooner,” says Mr. McManus, the New York lawyer, who advised the Grevatts.

Included with the comprehensive article is a helpful chart showing amounts for estate tax on the assets of people who die, and inheritance tax on those receiving the assets, levied by nineteen states and the District of Columbia. Take a look:

where not to die - chart

To read Laura Saunders’ full article for the Journal’s Tax Report, click here.

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Forbes Discusses Death Taxes with John O. McManus

forbes-logo-pngEarly this year, bills A1281 and S1311 were introduced in New Jersey to “eliminate transfer inheritance tax and increase the filing threshold and applicable exclusion amounts under New Jersey estate tax in accordance with provisions of federal tax law.” NJ A397 was also introduced and, if passed, would repeal the New Jersey estate tax.

Forbes Writer Ashlea Ebeling spoke with McManus & Associates Founding Principal John O. McManus about the pending legislation for a recent news story. She starts off her article, “Where Not To Die In 2015,” by relaying a portion of the conversation:

Moving to New York to avoid state death taxes? Really. John McManus, an estate lawyer in New Providence, N.J., has a retired client pulling in $500,000 a year in income, with second homes in Florida and the Hamptons, who is planning to change his residence from New Jersey to his New York house in the Hamptons. Driving the decision: the sweeping changes New York made to its estate tax regime this year.

“When your bordering state is telling you, ‘Come on over!’ the pitch is compelling,” McManus says. “If New York has a more welcoming tax scheme, then people will say, ‘Let’s call me a New York resident.’” McManus says that he and his wife might make the New York move in retirement themselves; they already have a place in the West Village they rent out for now.

Ebeling goes on to explain that several states are “lessening the death tax bite by increasing the amount exempt from the tax, indexing the exemption amount for inflation, and eliminating ‘cliff’ provisions that tax the first dollar of an estate”—and there’s “action afoot in New Jersey to keep up with the pack.”

Will the bills be passed anytime soon? We can’t say with certainty, but it’s unlikely. So far, all three have just been introduced and referred to committees for review (they still have to pass both the Assembly and the Senate) – so that means only about a quarter of the process is complete on each. Also, $760M of the state’s budget comes from estate and inheritance tax. In the context of a $32.5B budget, that is very significant (more than the tax generated on the sale of homes/other real estate in New Jersey).

Check out Ebeling’s article and Forbes’ interactive map for more interesting updates on potential changes to death taxes, state-by-state. And to learn how you can best navigate changes on the horizon, give McManus & Associates a call at 908-898-0100 to review your estate plan.

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DailyFinance Shares How McManus Helped Clients Avoid Estate Planning Nightmares

Daily FinanceEstate planning nightmares don’t just exist in dreams. Writing for DailyFinance, Reporter Michele Lerner relays several real-life horror stories that arose—and certainly have been replicated in similar forms far and wide—due to families neglecting to have detailed conversations about inheritance plans. “According to the 2014 Intra-Family Generational Finance Study by Fidelity Investments,” Lerner writes, “64 percent of parents older than 55 who have at least $100,000 in investable assets and their adult children over 30 aren’t on the same page about when the right time is to have conversations about estate planning.”

For her article, “Avoid These Estate Planning Nightmares,” Lerner asked John O. McManus, founder of McManus & Associates, to share estate planning blow-ups that his clients have faced and how he helped them overcome each challenge. From the story’s section titled, “Cross-Country Squabbling Siblings”:

A client of John O. McManus, an estate attorney and founding principal of McManus & Associates in New York City, had a client whose daughter lived on the West Coast and son and daughter-in-law lived close to her on the East Coast. The children had joint power of attorney, and the daughter would sign blank checks so that her brother and his wife could pay for things their mother needed without constantly needing her signature.

“The son wrote his wife checks from his mom’s account as a salary to pay her for taking care of his mother, which caused some tension between the siblings,” says McManus. “Due to the son’s history of run-ins with the law, the daughter was wary of letting him have too much power over his mom’s estate.”

Ultimately, the mother named the daughter as sole executor. But after the mother passed away, the daughter-in-law took things out of the house that she claimed were hers or were “intended for her” by the deceased mom. “The daughter called the cops to have the daughter-in-law arrested when she would not leave the home of the decedent,” says McManus.

McManus was able to get both parties to agree that the daughter-in-law could go through the house with the estate sales team to select items that she claimed were left to her, and the company would value these items to be deducted from her share of the deceased’s estate.

To avoid situations in which relatives fight over individual property, it’s best to include a written list of items of value with designated recipients in your will.

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New Jersey Law Journal Features Article by McManus in Special Supplement on “Wealth Management”

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On July 28th, New Jersey Law Journal published a special supplement on “Wealth Management.” The featured section includes a co-authored guest article from McManus & Associates Founding Principal John O. McManus and Mark Cortazzo, senior partner at MACRO Consulting Group. The piece, titled “How Estate Planning Can Unintentionally Wreck a Retirement Plan,” outlines steps that can be taken to protect clients when complex investment vehicles like variable annuities are involved in the estate planning process.

Introducing the topic, McManus and Cortazzo emphasize the importance of being fully informed as a professional who can be held accountable for any missteps and blamed for poor recommendations: Continue reading

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John McManus and Dominic Pepper Co-Author Article for Bloomberg BNA

Reproduced with permission from Tax Management Weekly State Tax Report, 2014 Weekly State Tax Report
3, 7/4/14. Copyright 2014 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

July 14 Article 1July 14 Article 2July 14 Article 3July 14 Article 4July 14 Article 5

 

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John O. McManus Pictured and Quoted in the New York Times

New York Times graphic

 

New York Times “Wealth Matters” columnist Paul Sullivan recently interviewed John O. McManus, founding principal of NJ-based McManus & Associates and a top AV-rated attorney, about the implications of a recent court case in which he successfully helped a client named Kate contest the will of her late grandmother. John grasped the dynamics at play in Kate’s situation with her family, which was crucial to a successful outcome with the case.

With the column, “When a Will Divides an Estate, and Also Divides a Family,” John’s photo below appeared with the caption: “John O. McManus of McManus Legal [McManus & Associates] says that many cases contesting wills are not clear-cut. “Should the grandkids get their dad’s share? Absolutely,” he said. “Were the grandkids without fault? No, they didn’t visit Grandma enough.”

McManus - New York Times

From the piece:

What Kate’s case shows is both how easy and complicated it is to execute a deathbed disinheritance. John O. McManus, a lawyer in New York who represented Kate and her siblings, said that like many cases contesting wills, this one was not clear-cut. “Should the grandkids get their dad’s share? Absolutely,” he said. “Were the grandkids without fault? No, they didn’t visit Grandma enough.” Continue reading

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New York Family Publishes Article by McManus on Estate Planning for High-Income Household

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Estate Planning For High-Income Households

A local expert weighs in on the top 10 considerations

By John McManus, June 2014

John McManus high-resAmerican poet and novelist Don Williams, Jr. once said: “Despair is most often the offspring of ill-preparedness.” In the same vein, preparation to handle the problems that commonly challenge high-income families sets apart those who preserve wealth and values for posterity from the 70 percent whose inheritances and family businesses do not survive the second generation.

One of the most important (but sometimes overlooked) aspects of creating an estate plan involves detailing wishes and expectations for the care of children in an emergency or tragedy. Families should also give careful consideration to the sophisticated wealth transfer opportunities now available to create a stream of affluence to the next generation in a tax-efficient manner; but in doing so, parents and grandparents must be aware of the risks and complications that may arise from giving assets to children. Continue reading

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McManus Shares Mission-Critical Advice on the Do’s and Don’ts of Creating a Trust in CNBC Article

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On assignment for CNBC, Jennifer Woods recently penned an article to help readers think through the terms when creating trusts in order to ensure money “lands in the right hands and isn’t squandered.” For expert guidance on the topic, Woods turned to John O. McManus, founding principal of McManus & Associates and a top AV-rated estate planning lawyer.

Mission-critical advice from McManus on the importance of perpetuating a trust was spread far and wide via Woods’ article, “Heir tight: The dos and don’ts of creating rock-solid trusts.” From the story:

“We like the idea of a trust remaining in effect for the child’s lifetime,” said John McManus, founding principal of McManus & Associates, a trusts and estates law firm. This is particularly beneficial when large sums are involved.

Continue reading

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WSJ’s MarketWatch Features Advice from McManus on “How women can make estate planning easier”

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Andrea Coombes

Andrea Coombes

Andrea Coombes writes the “Ways and Means” column for MarketWatch, a media property of the Wall Street Journal that has nearly 9.5 million unique visitors per month. McManus & Associates Founding Principal and top AV-rated Attorney John McManus recently spoke with Coombes about special considerations for women when it comes to estate planning.

Coombes’ story, “How women can make estate planning easier,” was today published by the news outlet and includes a large section that reflects thoughts shared by McManus on the topic. From MarketWatch:

Women who remarry or those who come to a marriage with significant assets should think carefully about their estate plan before tying the knot.

“We find that women are hesitant to discuss their net worth going into a new relationship, but that puts them in grave danger,” said John O. McManus, founder of McManus & Associates in New York and New Providence, N.J.

“If they keep the assets on their own balance sheet, the good news is, if they divorce, the new spouse won’t have access to that money,” McManus said. While state laws vary, in some cases the assets one brings to a marriage “are not an asset in divorce.”

The bad news, assuming your wishes are otherwise, is that, if you die first, your husband will get one-third of those assets. “By operation of law, your spouse is entitled to a minimum of one third of your assets. Social policy in the U.S. says you cannot disinherit your spouse,” McManus said.

Even if you write a will in which nothing is left to the surviving spouse, “by law, he’s entitled to one third of the assets,” McManus said.

There are a couple of ways to forestall that issue, though none are ideal, he said.

One tactic is to make sure beneficiary designations on retirement plans and the like are set such that your children or other heirs inherit — but those designations need to be in place before you get married. If they are, such designations “will control and overrule the right of election,” McManus said.

But changing beneficiary designations after you get married may be difficult, because some financial-services firms won’t allow changes that entail disinheriting a spouse without the spouse’s consent.

Another solution is to set up a trust, naming a child or other relative as the recipient, and put assets into it before you get married. You can still borrow from the trust, McManus said, but the husband will not have access to that money if you die.

McManus said he’s seen situations where a spouse changed the beneficiary designation on a retirement account to name her husband, rather than a child, with a verbal agreement that the money would go to the child in the event of the husband’s death. But at that point, there’s no way to be sure that will happen when you’re gone.

“Be clear in your head what you want to leave to your children and to your spouse before you get married,” McManus said.

Coombes’ piece goes on to cover the estate planning basics that women should consider putting in place, no matter their ages or how much money they have. The list from the article:

  • A financial power of attorney, naming the person who will make money decisions for you if you can’t

  • A health-care power of attorney, naming the person who will make health-care decisions for you if you can’t

  • A living will specifying your end-of-life wishes

  • If you have minor children, a will that names a guardian for them

  • Make sure the beneficiary designations on retirement accounts and life-insurance policies are up-to-date.

  • Talk to your bank and representatives of your other financial accounts to make sure the titling of those assets suits your situation.

Coombes’ story includes more valuable information, so don’t miss reading it in full. Make your way over to MarketWatch to check it out.

And to take action on the to-do’s recommended by experts in the article, including our firm’s own founder, give us a call at 908-898-0100.

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