Bankrate Relays Investment Ideas from McManus in Feature Slideshow

bankrate logoBankrate, which has more than 2.75 million readers, recently turned to McManus & Associates Founding Principal John O. McManus for advice on investments and IRAs. His thoughts are included in the publication’s feature slideshow, “Traditional or Roth IRA: Find out which IRA is better-suited for high-return investments.” From the slideshow:

Pay upfront, watch Roth explode later

Do you benefit from having an extra-long time horizon? Then going full throttle in the Roth IRA is apropos, says John O. McManus, founding principal of McManus & Associates in New York City.

“If you can take a long-term view, opt for a Roth IRA and take an aggressive approach with asset allocation and investing,” he says.

“Roth IRAs buy you a lot more time to allow the market to recover, absent the mandatory distributions of traditional IRAs. Create a self-directed Roth IRA and pour significant capital in it to build horsepower. Then smartly pursue alternative investments to generate the biggest returns,” he says.

“Private equity and real estate are the 2 best areas where real leverage can be achieved with a Roth IRA. The idea is to pay your taxes up front, then really watch returns from your investments explode.”

To view the full slideshow, click here. And to discuss your investment strategy with McManus & Associates, give us a call at 908-898-0100.

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McManus Weighs in on “Ways the Rich Waste Their Money” for GOBankingRates

GoBankingRates logoToday GOBankingRates, which has nearly 350,000 readers, launched an interesting slideshow, “21 Ways the Rich Waste Their Money.” For #6 and #7 on the list, journalist Lia Sestric shared two examples of wasteful spending flagged by John O. McManus, founding principal of McManus & Associates. From the slideshow intro:

When you’re rich, you have more money than you know what to do with. But unfortunately, sometimes having too much money can lead to waste.

From the slideshow, here are two ways some rich people waste their money, compliments of McManus:

  1. Buying Ridiculously Expensive Cars for Kids

Estate planning attorney, John McManus of McManus & Associates, said there’s no reason to buy outrageously expensive, exotic vehicles for teenagers and young adults — especially those who have a record of making bad judgment calls. “A 21-year-old is still developing the frontal lobe of the brain where all the judgment and discerning ability lies,” he said.

Although certain luxury cars might become classics, some might not be worth the hefty price tag in the end thanks to depreciation. “The disproportionate majority of exotic cars more typically depreciate instantly when they roll off the lot,” said McManus. “Even if they don’t, the slightest accident can impact value permanently, sometimes to pennies on the dollar.”

  1. Trying to Launch Their Kids’ Sports Careers

All parents want the very best for their children, and rich people have the money to make it happen. And those who want their kids to launch a career in sports are willing to pay the big bucks to make their dreams a reality.

“Club team dues alone can be $3,000 to $5,000 a year, plus tournaments, private training and out-of-state travel, including flights across the country,” said McManus. But spending thousands of dollars on club teams and sports for a young child can be a total waste of money if the child doesn’t even want to be an athlete.

Here are expanded thoughts from McManus:

[6.] Wealthy individuals buying outrageously expensive exotic vehicles for still-developing young adults is one of the single greatest abuses often tied to the privilege of affluence—one that I hope to see infrequently in my practice. There is no sufficient reason to lavish a $250,000 Aston Martin on an 18-year-old or even a 22-year-old college graduate. The suitor for this 3,500 pound missile should not be a 21-year-old still developing the frontal lobe of the brain where all the judgement and discerning ability lies. Further, while certain exotics such as the DB11 may become an instant classic, the disproportionate majority of exotic cars more typically depreciate instantly when they roll off the lot; even if they don’t, the slightest accident can impact value permanently, sometimes to pennies on the dollar.

For the 21 year old who demonstrates advanced capacity to drive within the speed limit—a rare occurrence since the slightest touch of the gas rockets the vehicle to 65 MPH—this only ameliorates part of the risk: these exotics have very low clearance and their undercarriage can be torn apart pulling off the street heading up an inclined driveway or approaching a speed bump without aplomb and great caution or the inexact science of delicately approaching the curb in favor of scraping the nose underneath by getting too close. Further, law enforcement, not to mention new acquaintances, attracted to glitter and bling, develop the “mistaken” impression that one’s child is spoiled, flush with cash, and, of course, above the law not inoculated from affluenza. Red vehicles, often the color of the exotics, are pulled over more than any other color. These realities should paint the picture of a stop sign in parents’ minds. It’s not arbitrary that auto insurance companies charge male drivers under the age of 25 more for insurance; statistically speaking, they’re involved in more car accidents. Teens and 20-Somethings think it’s cool to drive fast; the rich should not strap their kids to a 3,000-pound rocket and expect to protect their investment and, even more so, their child.

[7.] While some rich folks feel like they have plenty to burn, spending gobs of money on a child’s club or academy sports career, frequently starting in early elementary and continuing into early adulthood, is an extravagance, more times than not. Club team dues alone can be $3,000 to $5,000 a year, plus tournaments, private training and out-of-state travel including flights across the country. Clubs justify that it is necessary for greater visibility of your child for their future careers, but more frequently the top motive is to get greater visibility for the club, to increase membership, and garner more fees. It’s a rare event that challenging and diverse competition can’t be had within just a few hours of travel. From traveling teams to high-dollar private coaches, clinics and tournaments, many wealthy families wrap up their dollars and time away from family and siblings in athletic development for years, only to be met with a career-ending injury, a burned-out teen, or the reality that playing professional or getting recruited just isn’t in the cards. One brilliant and thoughtful coach said, “If you want to see your child a success in life, get them a tutor for their studies and worry less about this team sport” – that is rarely professed.

Certainly, playing sports offers an invaluable learning experience for young people and can contribute to a well-rounded adolescence, but parents should do a gut check every year to ensure they’re not throwing dollars or family time (with the whole family) down the drain to live vicariously through their children. Vacations are missed, resentment is bred and thousands of dollars may be irretrievable.

To see Sestric’s full slideshow for GOBankingRates, click here.

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MarketWatch Publishes Article on Cutting Capital Gains Authored by McManus

Sidebar_Logo_Marketwatch

 

5 ways to protect your estate from capital gains taxes

Published: Dec 25, 2015 6:04 a.m. ET

Traditional estate planning is being turned on its head

By JOHN O. MCMANUS

The time-honored approach to estate planning is being turned on its head by significant tax law changes that have taken effect in recent years.

Long-term capital gains tax rates now range from 25% to 33% (when you add together the top federal, state and local rates and Obamacare’s Medicare surtax). So now that the federal estate tax exemption is $5.43 million ($10.86 million for a couple’s combined exemptions), many Americans may no longer be exposed to federal estate taxes, making taxes on income and capital gains more prominent.

In fact, some legal practitioners who spent the first half of their careers zealously transferring assets out of their clients’ estates to avoid estate taxes now expect to spend the second half pushing assets back into their clients’ estates because the estate planning paradigm has changed.

What are the best ways to strategize around capital gains taxes to keep them as low as possible?

Rundown of the tax rules for gifts

To answer that, it helps to first understand the rules about gifts and taxes.

If you give assets to family members or put them into a trust to minimize estate taxes and the assets have appreciated significantly, when they’re sold, the gain (the amount that is taxed) is the difference between your original purchase price and the sale price at the current market value.

That purchase price is known as your “cost basis” (adjusted for any stock splits and dividends). With residential real estate, basis can increase depending on capital improvements to the property; for commercial real estate, basis can be adjusted due to depreciation. Examples of assets with a low basis: Exxon stock your grandfather gave you years ago when he was alive or the Brooklyn brownstone you bought in the 1970s that has appreciated in value by several million dollars.

Without strategic planning, $33,000 in capital gains taxes may be due when an asset is sold with a $100,000 gain, leaving the net proceeds at just $67,000.

When the owner of an asset passes away, the asset’s basis can shift upward, which shrinks the amount of gain that will eventually be taxed upon its sale. The basis then gets reset to the fair market value at the date of death. This is called a “step-up” in basis, and it is essential to many income and gains tax planning strategies. When assets are included in an estate, the Internal Revenue Service (IRS) gives you a capital-gains tax break because of the step-up in basis upon death.

5 capital-gains cutting strategies

Here are five ways you might be able to reduce your capital gains taxes through timely estate planning strategies:

First, consider undoing a trust. Assets that were gifted into trust are not part of an estate, but putting them back into the estate could avoid capital gains taxes.

For example, once a home has been given by a parent to a child and put into trust, the parent can’t live in the home without a lease and scheduled rent payments. But if you decide to live in the home without paying rent, terminate the lease, and create an agreement saying your intention is to undermine the previous trust transfer, the home gets clawed back into the estate.

Second, consider ”upstream gifting.” This is a strategy that involves transferring an asset up the generational chain to an older family member (like your parent) or a trust for the benefit of the older family member. This allows the asset to achieve a step-up in basis at the time of the parent’s death (inherited assets receive a step-up upon death but gifts have no step-up). Upon the parent’s passing, he or she would leave the asset back to the child who made the gift or to his or her descendants. The asset could then be sold, with the new high basis at current market value, free of capital gains tax, on the one condition that the parent survived the transfer from the child by at least one year.

Third, if you and your spouse have highly-appreciated assets, you could consider using a special type of trust. It’s a Joint-Exempt Step-Up Trust (JEST) or an Estate Trust or, if you live in Alaska or Tennessee, a Community Property Trust. Each lets the surviving spouse sell an appreciated asset without the imposition of any capital gains tax after the first spouse’s death. In effect, they provide the benefit of a step-up in basis to current market value upon the passing of the first spouse, so the surviving spouse can sell the appreciated asset without owing any capital gains tax.

These are valuable strategies because it is quite common for assets to be jointly owned between spouses, and the typical step-up in basis upon the death of the first spouse would apply to only 50% of the asset, rather than its full market value at the time.

Just make certain there is a separate side agreement saying this property is treated as community property.

Fourth, take advantage of the home sale tax exclusion. It lets homeowners exclude up to $250,000 of capital gain ($500,000 for a married couple) when they sell if they’ve owned and lived in the home for at least two out of the past five years before the sale.

Fifth, if you have a real-estate investment or artwork you bought as an investment, use a 1031 Exchange. This is a strategy that lets you delay capital gains taxation by rolling over the sale proceeds from the original asset into a new, similar property or piece of art — known as a “like-kind” investment. The new investment takes the original basis, which is carried over based on the original basis of the asset.

When it comes to your estate plan, it may be time to say “out with old and in with the new.”

John O. McManus is founding principal of McManus & Associates, a trusts and estates law firm based in New Providence, N.J.

This article is reprinted by permission from NextAvenue.org, © 2015 Twin Cities Public Television, Inc. All rights reserved.

http://www.marketwatch.com/story/5-ways-to-protect-your-estate-from-capital-gains-taxes-2015-12-25

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Forbes Confers with McManus on Intra-Family Loans

Forbes

 

Are intra-family loans now a steal? According to a recent story from Ashlea Ebeling of Forbes, the answer is a resounding “yes!” John O. McManus recently spoke with Ebeling on the topic, of which you should take note. From the article:

The terrifically low rate you can use for a short-term intra-family loan is just 0.56% for loans up to three years. Go out up to 9 years and the rate is 1.68%. For loans of 10-years-plus, it’s just 2.61%.

As Ebeling points out, intra-family loans are a good option for parents and grandparents who want to help buttress future generations with buying a house or opening a professional practice, for example. And what if you were to loan $1 million to a family member who then uses it for a private equity investment that doubles to $2 million? From the story:

“I’ve just made $1 million on her balance sheet instead of mine,” explains John McManus, an estate lawyer in New Providence, N.J. who just helped a developer father loan his son the money to invest in distressed commercial real estate in Newark.

Ebeling explains that there’s a new sense of urgency with interest-rate sensitive techniques such as intra-family loans, as the Fed will soon increase rates.

For those who wish to capitalize on the opportunity, McManus shares an important point: If you make a loan to your kids, you need clear terms and documents to back it up. An excerpt from Ebeling’s article:

“People aren’t fastidious about paying the loans back. If you’re not paying it back, then the IRS says you’ve made a gift,” McManus says. He recommends terms that require the kids to pay interest on an annual basis and tells clients to put reminders on their calendars to remind their kids to pay. In a pinch, parents can give kids annual exclusion gifts (for 2016, you can give $14,000 to as many individuals as you’d like without triggering gift taxes) to help them pay the interest. Another technique is loaning them a little extra so they’ll have the money in reserve to pay the interest. Note: Any interest the kids pay is taxable income to you, but if you’ve lent a child less than $10,000 in total, you don’t have to charge interest.

For more tips on intra-family loans, head on over to Forbes and read Ebeling’s full article “Tax-Free Transfer: Intra-Family Loans Are A Steal Now.” For help with setting up an intra-family loan and to take advantage of other estate planning techniques, contact McManus & Associates at 908-898-0100.

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InvestmentNews Features McManus Column for The Tax-Conscious Adviser

Below is an advice column on capital gains tax strategies by John O. McManus that was published by InvestmentNews for its regular feature, “The Tax-Conscious Adviser.”

Investment News

 

 

tax concious adviser

Estate plans require a fresh look

Thinking around bequests shifts as capital gains tax and estate tax exemption rise

Nov 29, 2015 @ 12:01 am

By John O. McManus

Significant tax law changes mean it’s time to dust off your estate plan. Long-term capital gains tax rates now range from 25% to 33%, with the combination of the top federal, state and local rates and the Medicare surtax. This hike in capital gains tax rates, coupled with the greater federal estate tax exemption, calls for a fresh look at planning strategies.

With the current $5.43 million federal estate tax exemption ($5.45 million for 2016), many people may no longer be exposed to federal (and possibly state) estate taxes. Thus, maneuvering around capital gains tax becomes the primary concern.

While basis is typically the purchase price less adjustments, basis can change or jump upward significantly upon inheritance, which is called a “step-up in basis.” With a step-up in basis, the value of the asset is determined to be the market value of the asset at the time of the step-up.

Historically, practitioners moved assets out of the individual’s estate while that individual was alive to avoid estate tax. However, when assets are gifted during a lifetime, the step-up in basis is not deployed. When assets are included in an estate, they may be subject to estate tax (in today’s environment, not always), but certainly the assets in the estate enjoy a step-up in basis and significant gains tax can be avoided.

UNDERMINE PRIOR GIFTS

How does one employ a step-up in basis when assets have already been irrevocably transferred during lifetime, theoretically surrendering the opportunity to obtain a step-up in basis? One strategy may be to intentionally undermine a prior gifting plan so that assets can be included in the estate to achieve the step-up in basis upon death, particularly if those assets would not otherwise be subject to estate tax.

Next, transferring an asset “up-stream” to a trust for the benefit of the donor’s parents allows an asset to get a step-up in basis upon the parents’ death and then the asset passes back to the donor or his or her descendants in trust. The asset could then be liquidated free of capital gains tax.

Another potentially avoidable problem is tied to older Americans each owning a half interest in their primary residence. After one spouse passes away, the surviving spouse may wish to sell the real estate, but only half of the property received the step-up obtained from the deceased spouse. Trying to move the entire residence to the infirmed spouse’s name prior to death is clever, but the IRS has significant restrictions. What you can do is employ a community property trust with a home (or situs) in Alaska or Tennessee, a joint-exempt step-up trust (JEST), or estate trust while both spouses are not facing imminent death. These moves can provide the benefit of a step-up in basis on the entire residence upon the passing of the first spouse, so the surviving spouse can sell the appreciated asset without the imposition of any capital gains tax.

The tax code permits owners of homes to exclude up to $250,000 of capital gain if they have owned and lived in their home for at least two years out of the five years before a sale. For a married couple, the amount is $500,000. With this strategy, one may be able to exclude some or all of the gain that is taxed on the sale of one’s principal residence. If a surviving spouse sells the home in the year their spouse passes away, they can still file jointly and use both exemptions.

1031 EXCHANGE

When working with investment property including residential rentals, a 1031 exchange enables one to postpone the capital gains taxation by rolling over the sale proceeds into a new investment. A separate corporation needs to be set up to receive the sale proceeds and make the new purchase (all within a short period of time of each other), but it is a wonderfully effective strategy.

Finally, when gifts of appreciated long-term assets are made to charity, no capital gains taxes are owed, because they are donated to charity, not sold in the donor’s name. If you’re holding securities with a loss, it’s better to sell them first, then take the capital loss for tax purposes, and thereafter donate the cash. A charitable remainder trust allows you to make the gift, retain an annuity stream back to the donor in a tax-efficient manner and later contribute it to a charitable entity run by the family making donations to favorite charities.

John O. McManus is an estate planning attorney and the founding principal of McManus & Associates.

http://www.investmentnews.com/article/20151129/FREE/311299996/estate-plans-require-a-fresh-look

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John O. McManus Featured Expert for Next Avenue (PBS)

The following article written by John O. McManus first appeared on Next Avenue (PBS).

Next Avenue logo

 

 

5 Ways to Keep Capital Gains Taxes Down

How traditional estate planning is being turned on its head

By John O. McManus

November 23, 2015

FEATURED EXPERT

The time-honored approach to estate planning is being turned on its head by significant tax law changes that have taken effect in recent years.

Long-term capital gains tax rates now range from 25 percent to 33 percent (when you add together the top federal, state and local rates and Obamacare’s Medicare surtax). So now that the federal estate tax exemption is $5.43 million ($10.86 million for a couple’s combined exemptions), many Americans may no longer be exposed to federal estate taxes, making taxes on income and capital gains more prominent.

In fact, some legal practitioners who spent the first half of their careers zealously transferring assets out of their clients’ estates to avoid estate taxes now expect to spend the second half pushing assets back into their clients’ estates because the estate planning paradigm has changed.

What are the best ways to strategize around capital gains taxes to keep them as low as possible?

Now that the federal estate tax exemption is $5.43 million, taxes on income and capital gains have become more prominent.

Rundown of the Tax Rules for Gifts

To answer that, it helps to first understand the rules about gifts and taxes.

If you give assets to family members or put them into a trust to minimize estate taxes and the assets have appreciated significantly, when they’re sold, the gain (the amount that is taxed) is the difference between your original purchase price and the sale price at the current market value.

That purchase price is known as your “cost basis” (adjusted for any stock splits and dividends). With residential real estate, basis can increase depending on capital improvements to the property; for commercial real estate, basis can be adjusted due to depreciation. Examples of assets with a low basis: Exxon stock your grandfather gave you years ago when he was alive or the Brooklyn brownstone you bought in the 1970s that has appreciated in value by several million dollars.

Without strategic planning, $33,000 in capital gains taxes may be due when an asset is sold with a $100,000 gain, leaving the net proceeds at just $67,000.

When the owner of an asset passes away, the asset’s basis can shift upward, which shrinks the amount of gain that will eventually be taxed upon its sale. The basis then gets reset to the fair market value at the date of death. This is called a “step-up” in basis, and it is essential to many income and gains tax planning strategies. When assets are included in an estate, the Internal Revenue Service (IRS) gives you a capital gains tax break because of the step-up in basis upon death.

5 Capital-Gains Cutting Strategies

Here are five ways you might be able to reduce your capital gains taxes through timely estate planning strategies:

First, consider undoing a trust. Assets that were gifted into trust are not part of an estate, but putting them back into the estate could avoid capital gains taxes.

For example, once a home has been given by a parent to a child and put into trust, the parent can’t live in the home without a lease and scheduled rent payments. But if you decide to live in the home without paying rent, terminate the lease, and create an agreement saying your intention is to undermine the previous trust transfer, the home gets clawed back into the estate.

Second, consider “upstream gifting.” This is a strategy that involves transferring an asset up the generational chain to an older family member (like your parent) or a trust for the benefit of the older family member. This allows the asset to achieve a step-up in basis at the time of the parent’s death (inherited assets receive a step-up upon death but gifts have no step-up). Upon the parent’s passing, he or she would leave the asset back to the child who made the gift or to his or her descendants. The asset could then be sold, with the new high basis at current market value, free of capital gains tax, on the one condition that the parent survived the transfer from the child by at least one year.

Third, if you and your spouse have highly-appreciated assets, you could consider using a special type of trust. It’s a Joint-Exempt Step-Up Trust (JEST) or an Estate Trust or, if you live in Alaska or Tennessee, a Community Property Trust. Each lets the surviving spouse sell an appreciated asset without the imposition of any capital gains tax after the first spouse’s death. In effect, they provide the benefit of a step-up in basis to current market value upon the passing of the first spouse, so the surviving spouse can sell the appreciated asset without owing any capital gains tax.

These are valuable strategies because it is quite common for assets to be jointly owned between spouses, and the typical step-up in basis upon the death of the first spouse would apply to only 50 percent of the asset, rather than its full market value at the time.

Just make certain there is a separate side agreement saying this property is treated as community property.

Fourth, take advantage of the home sale tax exclusion. It lets homeowners exclude up to $250,000 of capital gain ($500,000 for a married couple) when they sell if they’ve owned and lived in the home for at least two out of the past five years before the sale.

Fifth, if you have a real estate investment or artwork you bought as an investment, use a 1031 Exchange. This is a strategy that that lets you delay capital gains taxation by rolling over the sale proceeds from the original asset into a new, similar property or piece of art — known as a “like-kind” investment. The new investment takes the original basis, which is carried over based on the original basis of the asset.

When it comes to your estate plan, it may be time to say “out with old and in with the new.”

http://www.nextavenue.org/5-ways-to-keep-capital-gains-taxes-down/

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McManus Speaks to Year-End Tax Planning Strategies for Investment News

Investment News

 

Reporter Greg Iacurci tackled year-end tax planning strategies in a recent piece for Investment News. To help identify where the focus of advisers should be, Iacurci spoke with John O. McManus, estate planning attorney and founder of McManus & Associates.

The Investment News story, “Year-end tax planning strategies advisers should be considering,” encourages exploration of end-of-year tax considerations now, with just two months left in 2015. As Iacurci points out, “tax rules are largely unchanged,” so “tactics employed last year will more than likely still be relevant.”

Two important considerations? Tax-loss harvesting and moving assets into trust to avoid gains tax. From the article:

Financial markets haven’t been particularly strong this year, which provides an opportunity for advisers to do tax-loss harvesting, according to John McManus, founder of McManus & Associates.

Tax-loss harvesting involves selling assets that have incurred losses in taxable accounts to offset taxes due to gains elsewhere in the portfolio. It’s a strategy advisers especially turned to following recent bouts of market volatility.

“Given the markets have been flat, for sure you should be picking through your portfolio to find the pieces that have losses and harvest those,” Mr. McManus said.

Through Oct. 29, the S&P 500 index was up 1.5% for the year.

Market performance this year also creates a tax opportunity from an estate-planning standpoint, Mr. McManus added.

For example, there’s a federal tax exemption for assets up to $5.43 million, and anywhere from $675,000 to $5 million at the state level, when transferred upon death. For assets beyond these thresholds, tax rates are 40% and roughly 10%, respectively, Mr. McManus said.

However, clients can essentially accelerate the exemption by establishing a trust during their lifetime, forfeiting the exemption they would have gotten at death.

“This year, since the markets are flat, we’re poised to probably see some [market] growth going forward, so give the assets [to the trust] before the growth takes place,” Mr. McManus said. That way, there wouldn’t be any estate taxes on gains in the trust.

For more important strategies that should be examined to help minimize your tax burden going into the last two months of the year, read the full Investment News story here.

To take advantage of asset preservation opportunities before they expire with the New Year, contact McManus & Associates at 908-898-0100.

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McManus Raises Concern about Reverse Mortgages in Investment News Article

investmentnewslogoGreg Iacurci, reporter for Investment News, recently explored reverse mortgages, a type of home equity loan for borrowers age 62 and older that allow homeowners to access part of their home equity in cash. For his story, “Advisers like reverse mortgages, but only in unique circumstances,” Iacurci interviewed John O. McManus, founding principal of McManus & Associates, who shared some words of caution.

While reverse mortgages may be an ok option for clients who plan to stay in their home indefinitely and who could use some supplemental income, McManus warned against draining one of your most valuable assets to pass down to children or other loved ones. From the article:

Further, for those looking to leave an inheritance for children, borrowers should expect not to be able to bequeath the home, John McManus, founding principal of McManus & Associates, said.

“It’s particularly destructive if you need to transfer assets down to your children, and they need the money,” Mr. McManus said, giving the examples of an indigent or special needs child, or a child living at home.

What is a reverse mortgage? Iacurci explains:

Reverse mortgages are a type of home equity loan for borrowers age 62 and older that allow homeowners to access part of their home equity in cash. The loan amount depends on home value (capped at $625,500), interest rate and age of the borrower. Unlike with traditional loans, there’s no monthly payment — rather, the principal and accrued interest come due when a borrower dies or moves.

Money can be accessed through a line of credit, monthly installments, a combination of those options, or a lump sum. Fixed interest rates are only available via a lump sum.

Advisers say that reverse mortgages can be a useful financial planning strategy, but one that should only be used in very specific circumstances. According to Iacurci, “Consensus thinking on reverse mortgages is that it’s a strategy mainly for clients who know they’ll stay in their home for the remainder of their lives.”

To read more about the pros and cons of reverse mortgages, read Iacurci’s article here.

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McManus Interviewed by The Washington Post on Money Milestones

washington post logo

Washington Post Reporter Jonnelle Marte recently interviewed McManus & Associates Founding Principal John O. McManus on financial goals that people should aim to achieve in their 40s. Jonnelle’s piece, “5 Money Milestones to Hit While You’re in Your 40s,” was published last week and re-published by Tulsa World on Sunday.

McManus’ insight informs two milestones from the article: one related to wills & estate planning and the other life insurance. From the story, here’s Milestone #4:

4. Update your will and estate plan: A few things may have changed since you last reviewed your will. You might have had another child, gotten divorced or been newly married. These changes would make it time to update your will to make sure your home, savings and other assets will go to the appropriate people after you die, Turner says. “If your ex-spouse is the beneficiary for your retirement plan you want to change that,” Turner says, adding that people should double check the beneficiaries for your 401(k) and life insurance policies.

The rules for how a person’s estate will be broken up after death vary from state to state, says Peter Creedon, a financial adviser in Mount Sinai, N.Y. For instance, some states may pass assets on to a domestic partner while other states will not, Creedon says, making the will the best method for explaining who should inherit assets. Talk to a lawyer or financial adviser about getting the documents in order. People with simple situations may get by using online services such as LegalZoom, which will create a will for prices starting at $69.

Parents should name guardians and put together a plan for what should happen to their children if they died, says John O. McManus, a trusts and estates lawyer in New York City. Those instructions can include guidelines for medical treatment and preferences on what type of school they would like their child to attend, he says. Parents who have amassed a sizeable amount of savings — think millions — may want to create a trust that would help them pass the money on to their children in a tax efficient way, he says.

And here’s Milestone #5:

5. Review your life insurance: At this age, buying life insurance can be about more than just protecting your children and your spouse. Business owners — especially those who have had some success — may want to buy a life insurance policy to help protect their businesses, McManus says. A spouse or a child inheriting a business worth more than $5 million may need to pay taxes on that transfer and the bill may be due in less than a year, he says. If they don’t have the cash on hand to cover the tax bill, they may be forced to liquidate the company to cover the tax bill, he says.

A life insurance policy could provide the funds to cover that tax bill and allow the family to keep the business intact, McManus says. Single people with small businesses may not have to worry about this, he adds, since smaller estates may not be subject to federal taxes.

If you don’t own a business, a life insurance policy is still good for protecting your family and your assets. If one spouse dies, the coverage could help the other spouse financially when it comes to paying the mortgage and supporting the children. And it isn’t just the working spouse who needs to be covered, advisers say. A life insurance policy can help pay for child care and other costs if a stay-at-home parent dies.

Head on over to The Washington Post to read Marte’s full article. For help with updating your will, reviewing your life insurance policy and other money milestones throughout your life, reach out to McManus & Associates at 908-898-0100.

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McManus Weighs In on Critical Healthcare Issue during NPR Episode

The Leonard Lopate Show covers issues of interest to New Yorkers, from contemporary art to current events. It’s in the NPR family and is produced by WNYC.

Yesterday, the radio show explored the extremely important topic “How to Access the Best Healthcare” with guest Leslie Michelson, author of The Patient’s Playbook: How to Save Your Life and the Lives of Those You Love. The episode, which focused on how to be a smarter health care consumer, was introduced with the fact that 400,000 Americans die every year from preventable medical errors. And many others “receive less than optimal care, even though it’s readily available to them and their insurance will cover it.” With priceless advice on how to avoid being a victim of this crisis, Michelson discussed how to choose the right doctor, coordinate the best care, and make good medical decisions.

John O. McManus, who has decades of experience ensuring that families are prepared and protected when faced with dire medical situations, called in during the show to add a key observation: It’s critical to name people who will step in and act on your behalf, if you are ever incapacitated. Without choosing representatives to serve as our advocates, we’re left at the mercy of the medical community.

In response to John’s point, Leslie said, “I couldn’t agree with you more…the best [health]care in the world doesn’t go to the wealthiest people; it goes to the people who are the savviest healthcare consumers.”

Listen to the full episode for more detailed advice from Leslie Michelson.

Call McManus & Associates at 908-898-0100 to discuss legally appointing healthcare representatives for you and your family members. Only advance planning will enable these advocates to help when it’s needed most.

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