Category: Media Clips

BenefitsPro Relays Estate Planning Guidance from McManus & Associates

March 14, 2013 - Media Clips

Top-rated estate planning attorney and founding principal of McManus & Associates John O. McManus last month chatted with Paula Aven Gladych, writer for BenefitsPro, about why even people who aren’t in the top 1 percent of earnings need to undertake estate planning. Individuals who earn between $250,000 and $1 million won’t have to worry about paying federal estate taxes, since the exemption is $5.25 million, but “they still have to worry about state exemptions, which are all over the map.” As pointed out in Gladych’s article, “Even middle-income earners should have an estate plan.”

Flickr/401 (K) 2013

From the piece, which is based on McManus’s interview with Gladych:

“People are not going to give a large amount of their assets away during their lifetime. If a client has $1.5 million during their lifetime, they may need every dollar of that to live from. If they become terminal, a quality financial advisor and attorney will say, ‘let’s move money off the balance sheet now.’ The fact is, by moving it you’ll avoid the imposition of state tax when you pass away. The problem in the past is people are not doing it because they only give away $750,000 to $1 million on the federal level,” McManus said. “The concern is that states will smarten up and impose a gift limitation equal to the death tax limitation.”

Why should middle-income earners consider putting money away in a trust? Read the rest of the story to find out.

More recently, Paula Aven Gladych interviewed McManus again for a piece, titled “Legacy, estate planning as important as retirement.” As captured by Gladych, “planning for the future isn’t just about retirement accounts or what you want to do with all of your free time. According to financial experts, people also need to plan for what comes after their retirement—end-of-life planning.”

McManus’s advice is captured in the story as follows:

Individuals need to make sure their documents are current. They need to review them every so often to make sure that what people think they will receive when they die is what they will actually receive, said John McManus, founding principal at McManus & Associates, an estates and trusts law firm in New York.

That means reviewing documents and walking through their provisions, deciding how they want to dispose of their assets and naming representatives who will make sure their assets are distributed as they intended.

There is a catch 22, however. Many people don’t realize that beneficiary designations on life insurance policies and retirement accounts trump whatever is written in a final will and testament.

Many parents place one of their children on their accounts as a joint account holder so they can help pay bills. What most people don’t realize is that when the parent passes away, no matter what is listed in the will, the person who is listed on the joint account will inherit that money. This can cause many problems among other beneficiaries who believe they are entitled to their share of that money, McManus said.

Each state has its own exemption when it comes to estate taxes. Some states, like New York, will allow individuals to pass down the first $1 million to heirs tax free. Anything above that $1 million will be taxed. McManus counsels his clients to gift that money while they are still alive to avoid hefty taxation later.

Check out more important estate planning tips in the story here.

Investment News: “A flightplan for snowbirds”

March 6, 2013 - Media Clips

Investment News has created a helpful, interesting slideshow that anyone attempting to escape cold northern winters (or really anyone who spends a good deal of time in a state that is no longer their primary residence) should check out to avoid issues of residency and, therefore, being taxed in more than one state. Investment News bases the nine tips on guidance from McManus & Associates founding principal John O. McManus. From the slideshow intro:

There’s nothing like a cold, northern winter or a chilly tax environment to inspire American retirees to head south. But if you plan to pack your bags for good, it may be easier to shed your overcoat than your status as resident of your former home state, warns John McManus, the founding principal of the New York area trust and estate planning firm McManus & Associates. He offered the following tips on how to enjoy hot weather without ending up in hot water with tax collectors in your previous domicile.

The feature shares important but sometimes overlooked suggestions like change your gym membership right after you move and use cash when visiting your previous state of residence, if possible. To learn about more steps you can take to shed the double layers and the double tax payments, click through the full slideshow “A flightplan for snowbirds” here.

Article for LifeHealthPro from McManus & Associates: “The Road Ahead for Estate Planning”

February 22, 2013 - Media Clips

Penned by John O. McManus, founding principal of McManus & Associates, the article “The Road Ahead for Estate Planning” is today featured by LifeHealthPro. LifeHealthPro is a go-to resource for advisors, insurance wholesalers, CPAs and estate planning attorneys.

In the piece, John discusses the several surprising outcomes regarding estate planning that emerged as part of the fiscal cliff deal and outlines the new tax rates and exemption amounts. He also recommends several “tactics to try.” From the article:

Here are a few of the trust and non-trust estate planning strategies that married and single persons should explore in 2013:

  1. Foundations: With increased taxes, gifts to charity have a greater tax-deductible value. Gifts to foundations allow full deduction in the year of the gift, whereas transfers out of foundation can be as small as 5 percent on an annual basis, allowing assets in the foundation to continue to grow.
  2. Charitable trust: These enable one to make gifts to charity and receive immediate deductions. One can continue to receive income from the charitable gift for a period of time. Gifts can also be made where the charity gets a distribution each year and the loved ones receive the remainder.
  3. Family mission planning: The family mission and preparing heirs for inheritances are critical to ensuring a successful transfer of wealth and family values, to helping minimize conflict and maximize harmony and to supporting charitable endeavors.
  4. Life insurance trusts: Funding a trust with a life insurance policy is a smart way to get a windfall of cash when someone passes away to pay off estate taxes. It’s also an avenue for getting a big asset off of one’s balance sheet, keeping a large amount of cash safe and protected. Make sure the trust is named as the beneficiary and policy owner (e.g., John Doe Irrevocable Trust). If a house is put into a trust and the house is insured, make sure to get the insurance policy changed to reflect the ownership by the trust. The trust should be the primary insured on the policy, and the individual can be the secondary.

And cautioning readers to be mindful of what’s ahead that could impact estate planning, he shares this observation:

Several valuable opportunities emerged as part of the fiscal cliff negotiations that pleasantly surprised the estate planning community. We are not completely out of the woods, however, with the debt ceiling debates just around the corner. When it comes to safeguarding wealth and family values, it’s important now to look ahead without losing sight of what’s in the rearview mirror.

Read the whole thing at http://www.lifehealthpro.com/2013/02/22/the-road-ahead-for-estate-planning. Also keep an eye out for John’s piece in Monday’s Life Insurance Insider e-newsletter. Next week will be a special estate planning edition.

Courtesy of LifeHealthPro

CPA Practice Advisor: “Estate planning after the fiscal cliff: Top 10 Steps”

January 31, 2013 - Media Clips

CPA Practice Advisor today published an article utilizing the guidance that McManus & Associates recently offered to clients via a conference call on next steps in light of the fiscal cliff deal. A quote from the firm’s founding Principal John O. McManus in the piece, titled “Estate planning after the fiscal cliff: Top 10 Steps”:

Many Americans will experience significant income tax increases as a result of the ‘fiscal cliff’ deal, but there is good news with respect to the estate tax. The newly established permanent estate tax gives wealth planners certainty that has been lacking for more than a decade – but what if Connecticut’s law encourages other states to also create a gift tax even lower than the federal exemption amount? The fact that they could do it retroactively is a real concern.

The story goes on to say:

The firm has offered the following tips:

Post-Fiscal Cliff Estate Planning: Top 10 Questions Answered in Light of the Deal

1.  The new tax rates and exemption amounts are set. What can you expect to pay for estates over $5.25MM?

a. Federal estate tax rate moves up from 35% to 40% with the exemption amount now at $5.25MM, which will be adjusted annually for inflation.
b. The Lifetime Gift Exemption amount (the total that can be given during one’s lifetime, separate from the much smaller Annual Exemption gifts) has been unified with the Estate Tax Exemption amount at $5.25MM.
c. For income tax purposes, individuals earning in excess of $400K and couples filing jointly earning in excess of $450K will be taxed at 39.6%, which does not include the new 3.8% tax on investment income, capital gains and dividends that was enacted to fund Obamacare.
d. Anyone earning less than $400K will continue at the ‘Bush era’ tax rates. However, the payroll tax for Social Security has been restored from 4% to 6% so paychecks will be smaller.
e. Two limits on tax exemptions and deductions will be reinstated: Personal Exemption Phase-out will be set at $250K, and the Itemized Deduction Limitation kicks in at $300K.

2. What are the estate-tax “traps” to be wary of?

a. The exemption amounts for state estate taxes are much lower than the federal exemption amount. While no federal estate tax will be paid on an estate up to $5.25MM, a large state estate tax liability could be due in certain states.
b. For anyone owning Real Property in a state that is outside of one’s primary residence, one’s heirs will have to endure the arduous and often expensive process of out of state probate, or ancillary probate in addition to probate in one’s state of primary residence. Employing a Revocable Living Trust can eliminate the need to undertake probate in multiple states.

3. Lifetime gifts in excess of $2MM in CT are subject to tax; is this a warning for similar gift limitations in other states?

a. When the federal lifetime gift exemption amount jumped to $5MM, the state of Connecticut passed legislation to tax any gifts made over $2MM.
b. With the precedent set and with states looking for additional income, it is possible that others states will follow. Additionally, such laws can be made retroactive.

4. With the new permanency in the estate tax exemption, which taxpayers should make gifts over $5.25MM and pay gift tax (a strategy widely used for many prior generations)?

a. With some certainty that estate tax will not evaporate and the $5.25MM exemption amount will remain unchanged, individuals will now employ taxable gifts again.
b. Taxpayers whose net worth continues to grow in excess of $5.25MM will look to transfer assets and pay the gift tax.
c. Gifts made during one’s lifetime will enjoy a more favorable tax treatment, will suffer less shrinkage due to taxes, will avoid state estate taxes and will enjoy future growth free of any state and gift tax.

5. For estates below $5.25MM, who should employ trusts in their wills?

a. Trusts provide a greater level of asset protection, so one can be assured that, in the event of reversals in life including divorce (the single largest creditor attack on wealthy families), trust assets will be protected and can continue to grow tax-free and provide for heirs.
b. Flexibility in trusts even allows access to trust assets via a power to appoint and to remove trustees. Trusts protect the value and future growth of any discounted assets and can employ generation skipping tax free.
c. Trusts also allow for the minimization of state estate taxes.

6. What is meant by “spousal portability” and “unification” of the exemption amounts? Does this eliminate the need for certain planning?

a. Portability allows the surviving spouse to utilize any remaining portion of their deceased spouse’s Federal Estate Tax exemption amount. To elect portability, the executor handling the estate of the spouse who died must file an estate tax return (Internal Revenue Service Form 706), even if no tax is due. This return is due nine months after death.
b. Unification: The federal exemption amount for estate tax and lifetime gifting has been unified. That means both exemption amounts will be set at $5.25MM this year and adjust annually for inflation.
c. For tax efficiency purposes, married couples now enjoy the ability to pass to loved ones $10.5MM free of estate tax.

7. The Generation Skipping Tax Exemption amount is also set at $5.25MM; who should take advantage of it?

a. Assets in trust not used by loved ones can skip to the next generation tax-free. Such a skip would normally constitute a generation-skipping tax event, which imposes a 40% tax.
b. The GST exemption employed in trust can avoid taxes for transferees for 100 years or more, including all the growth in the portfolio.
c. The most widespread use of the GST exemption is for wealthy individuals whose children already enjoy enough assets, will be earning enough assets, or will inherit enough assets to assure the greatest likelihood the trust assets will not be spent during the children’s lifetimes.

8. Looking forward to March 2013 and the “debt ceiling” debates, what detrimental effect could such negotiations have on state estate taxes?

a. Regarding revenue to individual states, the high federal estate tax exemption amount will ultimately reduce the states’ future estate tax revenue due to lifetime gifts.
b. Previously, there was a state “pick-up” estate tax that allowed states to collect estate tax from the federal government without additionally charging the estate of the decedent. This was accomplished by giving taxpayers a dollar-for-dollar credit for any state estate taxes paid. The credit expired, which caused most pick-up taxes to automatically expire.
c.  It is possible that states will construct new methods to make up for budget shortfalls, particularly if the debt ceiling debates carry on.

9. What are the trust and non-trust estate planning strategies that married and single persons should undertake in 2013?

a. Foundations: With increased taxes, gifts to charity have a greater tax-deductible value. Gifts to foundations allow full deduction in the year of the gift, whereas transfers out of foundation can be as small as 5% on an annual basis, allowing assets in the foundation to continue to grow.
b. Charitable trust: These enable one to make gifts to charity and receive immediate deductions. One can continue to receive income from the charitable gift for a period of time. Gifts can also be made where the charity gets a distribution each year and the loved ones receive the remainder.
c. Family mission planning: The family mission and preparing heirs for inheritances will be a critical to ensure that conflict is minimized and harmony maximized, to ensure motivation to grow the assets and to support charitable endeavors.

10. What critical gift tax consequences must be avoided for gifts made in 2012? When does the statute of limitations clock begin?

a. The final step to ensure the completion of any gift you have made to a trust is the timely filing of a gift tax return. Avoid professionals who do not have expertise in making significant gifts into trust.
b. Filing of a complete return starts the 3-year clock with the federal government. Once the statute of limitations has run, the IRS can no longer audit the return.
c. If a return is prepared but does not meet the specific adequate disclosure requirement, the statute of limitation does not begin to run.

To listen to the full recording of the conference call upon which the CPA Practice Advisor article is based click here.

The piece closes with another quote from McManus:

Several valuable opportunities emerged as part of the ‘fiscal cliff’ negotiations that pleasantly surprised the estate planning community, but we’re not completely out of the woods – the ‘debt ceiling’ debates, for example, are just around the corner. Keeping track of how the ever-evolving legal landscape impacts wealth preservation is a full-time job, but one that we’re here to help with.

Bloomberg BNA: Two New Stories Cite Firm’s Founding Principal

January 9, 2013 - Media Clips

 

 

McManus & Associates Founding Principal and top-AV rated Attorney John O. McManus recently spoke with Diane Freda, reporter for Bloomberg BNA’s Daily Tax Report®. The publication is a leading source of legal, regulatory, and business information for professionals covering issues in taxation, pensions, and accounting.

BNAFreda’s December 27th story “IRS Shuts Down Online EIN Applications, Complicating Year-End Gift Transactions” cites John’s thoughts on the IRS’s “planned outage” of online applications for employer identification numbers, from December 27th through January 2nd. It was the publication’s most-read article of the day.

Her second piece, “Fiscal Cliff Unified Estate, Gift Tax Exemptions Seen as Windfall by Advisers,” was published on January 2nd and includes John’s reaction to the passage of provisions in fiscal cliff legislation ensuring estate and gift tax exemptions remain at $5 million for the upcoming year and near future.

To learn more about fiscal cliff unified estate and gift tax exemptions, give our office a call at (908) 898-0100.

Reproduced with permission from Daily Tax Report, 248 DTR G-4 (Dec. 28, 2012). Copyright 2012 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

Reproduced with permission from Daily Tax Report, 02 DTR G-8 (Jan. 3, 2013). Copyright 2013 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

Bankrate.com: “Are these tax proposals fair?”

December 19, 2012 - Media Clips

Jennie Phipps, who has been reporting on retirement for six years, recently spoke with McManus & Associates Founding Principal John O. McManus about estate and retirement planning strategies and based an article for Bankrate.com on the conversation.

In her story, titled “Are these tax proposals fair?” Phipps highlights five estate and retirement planning strategies at which the Obama Administration has taken aim, according to McManus. As she notes in her piece:

Some of the people who are using these strategies as they approach retirement have lots of money to manage. But those using these approaches also include small-business owners and farmers eager to pass their enterprises on to their children without burdening them with a huge tax bill, McManus says.

Phipps summarizes what the government proposes to do to collect more taxes from money passed down via estates and tasks readers with deciding whether the proposals are fair. She calls out the following:

  1. Lower the estate tax exemption.
  2. Retool intentionally defective grantor trusts.
  3. Tax grantor retained annuity trusts, or GRAT.
  4. Limiting generation-skipping transfer tax exemptions to 90 years.
  5. Taxing grantor trusts when Dad still manages the money.

Phipps’ article expands on all five; read more here: http://www.bankrate.com/financing/retirement/are-these-tax-proposals-fair/

The story closes with thoughts from John:

McManus says he believes that taxing estates at 45 percent is unfair and counterproductive. “We are proposing to penalize hardworking people who aren’t making millions. Having to pay a punitive amount in taxes takes away the motivation to start up a business.”

Please give our office a call at (908) 898-0100 if we can help with questions.

New Jersey Newsroom: “A tax tip that can save you thousands”

December 4, 2012 - Media Clips

Warren Boroson

Warren Boroson – author of more than 20 books, including “J.K. Lasser’s How to Pick Stocks Like Warren Buffett,” and whose articles have appeared in publications like Reader’s Digest and New York Times Magazine – recently turned to McManus & Associates Founding Principal and top AV-rated Attorney John O. McManus to talk strategies for the looming Fiscal Cliff and rising taxes that 2013 will likely bring.

Boroson’s article “A tax tip that can save you thousands,” published by New Jersey Newsroom, is based on John’s foresight and guidance. Here’s an excerpt:

The gift tax exemption will likely be reduced next year, so something that well-to-do people should consider doing, McManus suggests, is setting up a trust to put assets into, to protect those assets from Uncle Sam. These trusts will give you “flexibility, control, and access.”

To learn more about what you can expect in terms of gift-tax rates and tax benefits “when the battle about the so-called Fiscal Cliff is over,” check out Boroson’s full column to read John’s expert insight: http://www.newjerseynewsroom.com/economy/a-tax-tip-that-can-save-you-thousands

FORTUNE: “The best way to give thanks at work”

November 26, 2012 - Media Clips

fortune logo Fortune Small Business Says ZoomProspector can help entrepreneurs hone in on untapped markets

Reporter Katherine Reynolds Lewis has written a valuable article for FORTUNE that sheds light on how employers and managers can best show appreciation for their employees – fittingly published at a time when Americans are focused on giving thanks. Lewis’ story, “The best way to give thanks at work,” is introduced with a couple lines that get to the root of where there’s disconnect and the point of the piece: “Bosses may think they’re showing gratitude to their staff, but more often than not, those thanks are not heard or believed. How to bridge the gratitude gap.”

Lewis notes that “for a thank-you to be perceived as meaningful, it should be specifically connected to the recipient, her preferences, and her accomplishments.”

To illustrate this advice, Lewis uses an example of McManus & Associates Founding Principal John O. McManus expressing his thanks in a special, individualized way for the firm’s beloved team member Elizabeth Fojtu:

…when John McManus was looking for a way to thank one of the wealth advisors at his estate and tax-planning firm for pushing through a recent deluge of work, he decided on a trip to Le Chateau Frontenac, a Quebec hotel that captures the Old World charm of Europe. The employee has children the same age as McManus’, who loved their own Canadian vacation, and she met her Europe-born husband in a similarly charming venue: Prague. “That connection had even more meaning to her,” McManus says.

To read more about what Lewis found exploring the topic of giving thanks at work, go to http://management.fortune.cnn.com/2012/11/21/the-best-way-to-give-thanks-at-work/.

NBC News: “Seniors face retirement ‘perfect storm’ in 2013”

November 19, 2012 - Media Clips

John O. McManus, founding principal of McManus & Associates, recently spoke with CNBC Reporter Mark Koba about whether 2013 is a bad year to retire, with the predicted fiscal cliff and, even if it’s resolved, the larger numbers of workers leaving their jobs for retirement. According to Koba, an estimated 7 million Americans will reach the age of 65 by the start of 2013.

John’s thoughts are found throughout Koba’s article:

As it stands now, the top tax rate on capital gains will jump to 23.8 percent from 15 percent and the top tax rate on dividends nearly triples to 43.4 percent from 15 percent. And any fiscal deal will likely include higher tax rates so seniors had better count on that when they plan for their retirement, said John O. McManus, CEO of McManus & Associates, a trust estates law firm.

“Many seniors may want to postpone retirement in 2013 because they just don’t know what their tax rates will be,” McManus said. “If the markets don’t perform well and tax rates go higher, seniors will have a lot less money to spend. There’s a lot of uncertainty about where this will all end.”

But McManus said even planning for tax increases won’t be easy.

“If someone retires in January but a deal isn’t reached until March, will tax rates be re-retroactive? That’s a big risk for someone thinking about retirement,” said McManus.

And after looking at the thoughts of various experts, Koba gets it right: “While 2013 presents unique problems, analysts say that in the end, planning for retirement never comes at an easy time, fiscal cliff or not.”

A quote from John closes out the piece:

“It’s not to say that 2014 will be a better year to retire,” said McManus. “There are always a lot of things people can’t control, like the markets and global issues. I’m just saying that if you think about retiring in 2013 you need to take care and take caution.”

Read the whole article here.

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