Real Daily Relays Insight from McManus on Self-Directed IRAs

 

Real Daily, which seeks to enrich, enlighten and empower readers to make informed choices that will positively impact their financial lives, recently published the article, “5 Reasons You Need a Self-Directed IRA.” The piece, which cites insight from McManus & Associates Founding Principal John O. McManus, begins with an overview:

·           Self-directed retirement accounts, known as a self-directed individual retirement arrangement (IRA), were created in 1999 by an act of Congress after intensive lobbying of small business owners and associations.

·           The beauty of a self-directed IRA is it allows you to invest up to $6,500 into a tax-deferred account where you control the investments. Many of those investments include alternative vehicles not available in a traditional IRA.

·           These alternative investments include real estate, private mortgages, private company stock, oil and gas limited partnerships, precious metals, horses, and intellectual property.

The first reason why one should consider opening a self-directed IRA is higher returns. Per the article, “The number one reason investors use self-directed IRA accounts is the ability to pursue much higher returns compared to stocks and bonds. If you make a 25% return on a real estate investment and are able to build on that profit cumulatively for 10, 30, or 30 years it can be life-changing.” The story goes on to quote McManus:

“If you understand investments, particularly in certain segments, you can take advantage of higher yields and maybe less volatility,” John O. McManus of the estate-planning firm McManus & Associates in New York and New Providence, New Jersey told NerdWallet.

McManus has invested in real estate and other assets through a self-directed IRA for about 15 years, he says.

A self-directed IRA also lets McManus invest in companies that aren’t publicly traded, which “a mutual fund will not allow you to do,” he says. But, he warns, “this is not a game for the unsophisticated.”

The following four reasons to consider a self-directed IRA include:

·       Better diversification

·       Investing in private equity

·       Putting assets to work

·       Investing in cryptocurrencies

Click here to read the full article, including more information about the five arguments in favor of a self-directed IRA, as well as the risks of self-directed IRAs.

To discuss your investment strategy as it relates to your wealth management plan, call McManus & Associates at 908-898-0100.

McManus & Associates Is Hiring! Join Our Team as an Administrative Professional

McManus & Associates is hiring an Administrative Professional to join our team! Please find more details about the position below and email your resume to Charles@mcmanuslegal.com in order to apply.

POSITION TITLE: Administrative Professional

LOCATION: New Providence, NJ

REPORTS TO: Department Heads and CEO

Objective:

We are seeking an exceptional individual to join our team as an administrative professional.

About McManus & Associates:

McManus & Associates is a boutique estate planning and wealth advisory law firm representing successful and engaging individuals and families in media, academics, finance and business with domestic and international assets. The firm was named one of the “10 great places to work” in New Jersey by New York Enterprise Report, as well as a finalist for the international “Boutique Firm of the Year” for two out of the last three years by the Society of Trust and Estate Practitioners. The McManus & Associates team is comprised of detail-oriented, accomplished and kind individuals, who are passionate about achieving client objectives. For more in-depth information on firm history and accolades, please visit http://mcmanuslegal.com/about-us/honors-and-recognitions/.

Why work for McManus & Associates?

  • Competitive pay
  • Invaluable experience to support upward mobility in your career
  • Supportive and welcoming team
  • Medical benefits

Essential Responsibilities:

The ideal candidate will present herself/himself in an elegant and professional manner as a face of the firm and support the department heads and the CEO.

  • Handle incoming calls
  • Greet clients and escort them to appropriate conference rooms
  • Process mail
  • Work with Department Heads to create bills in Clio and email them to clients
  • Process credit cards from clients who are either meeting at the firm or calling in with payment
  • Draft engagement and retainer letters for group and send to clients
  • Draft correspondence for Chief Executive of the Firm
  • Maintain firm’s client files (create them when client is signed and work with Department Heads when matter is closed to file appropriately)
  • Purchase office supplies
  • Learn Lexicata, Clio and Lawpay, the firm’s three primary tracking, billing and payment systems
  • Schedule initial client consulting calls, maintain the calendar, monitoring CEO emails, confirm meetings 1-2 days prior to scheduled time
  • Work 9:00 – 6:00 Monday through Friday

Qualifications and Background

Education:

  • Bachelor’s Degree

Skills:

  • Microsoft Office proficiency, with an emphasis on Word
  • Strong interpersonal skills
  • Self-starter
  • Ability to multi-task
  • Proficient written communication ability

Work Experience:

  • Administrative experience required
  • No legal experience necessary

 

Forbes Shares Invaluable Advice from McManus and Widow Clients

Founding Principal of McManus & Associates John O. McManus recently spoke with Ashlea Ebeling, who writes about how to build, manage and enjoy your family’s wealth for Forbes, to share his pre and post-mortem planning advice for spouses, based on his experience working with numerous high-net-worth widows over nearly three decades. McManus also connected Ebeling with two of his clients who shared how they navigated the challenges following the passing of their partners, from managing complexities of portfolios that fell on their shoulders, negotiating with lenders and insurance carriers, how long it took before they turned a corner from a grief standpoint, and more.

The article, “A Widow’s Advice to Her Younger Self,” starts with an invaluable piece of advice: don’t let your spouse do all of your family’s financial planning without your involvement; tell him or her, “This is stuff I need to know!” Those words of wisdom came from McManus & Associates client Bridget Wilson, whose husband passed away from cancer.

From the story:

Unfortunately, the Wilsons’ case is one their estate planner, John O. McManus, says happens all too frequently. He’s helping another financially unsophisticated spouse in her 40s sort out the estate of her late husband, a real estate investor, who committed suicide. “Each one was surprised and unprepared,” he says of the widows. “They simply were not ready.”

Here are the pre-mortem key takeaways that McManus, Wilson and McManus & Associates’ other client who participated in the story hope will be helpful to others:

Do a dry run. Wilson’s husband never signed their will, “so McManus had to petition the probate judge to admit it. ‘All of that would have evaporated if the will hadn’t been validated,’ McManus says.”

Talk to your spouse. Don’t sign things no questions asked. McManus & Associates’ client urges, “Don’t be embarrassed. Don’t be ashamed. Just ask for help.”

Plan for liquidity. “Review investment and retirement accounts for potential income streams,” writes Ebeling.

And after the death of a spouse? Here are important to-do’s from the story:

Revisit your estate plan. From the article, “McManus’ first piece of advice to Wilson was to write her own will as well as a financial power of attorney and healthcare proxy. And to sign everything.”

Seek outside experts. “A good estate administrator will know his or her limits and call on experts as needed,” says Ebeling. Citing McManus’ help to the widow who lost her husband to suicide, “On behalf of the other widow, McManus hired a real estate lawyer to stop the house foreclosure, and a real estate agent to rent it out while she downsized. He introduced her to a financial advisor who negotiated with the private school that was going to kick out her kids for being behind on tuition.”

Find your purpose. In short, ask yourself what will give your life new meaning, and go do it!

Read the full Forbes story here.

For help with pre and post-mortem estate planning, reach out to McManus & Associates at 908-898-0100. We look forward to supporting you.

Conference Call: 5 Estate Planning Action Items that Remain Relevant Regardless of Shifting Political Winds

The political ping-pong commonly seen in the U.S. leads to legislative changes that make it necessary to reevaluate one’s tax strategies every few years. However, there are also important estate planning techniques that are not directly affected by legislation and changes in tax law, but that can still make a big impact on wealth preservation. From regularly updating your will to consistently moving assets off your balance sheet, several estate planning items should be added to your to-do list.

McManus & Associates Founding Principal John O. McManus recently discussed with clients, “5 Estate Planning Action Items that Remain Relevant Regardless of Shifting Political Winds.” Listen to a recording of the call and find details below.

 

1. Schedule Routine (Estate Planning) Checkups: Regularly update your health care documents and wills

Consider whether the individuals named in one’s documents are still appropriate. Think about positions including power of attorney, health care agent, guardian for minor children, trustees of an irrevocable or testamentary trust, trust protectors and trustee appointers (if any). Ask questions, such as:

  • Has the relationship with any of the people named changed?
  • Has the life situation of any of those named changed?
  • Has the health of any of those named changed? If one’s parents were initially named as guardian for minor children, but the parents are now older and in poor health, for example, alternative guardians who can keep up with kids may need to be named instead.
  • Are all of the people who have been named still geographically appropriate? For example, if one’s trusted power of attorney moved across the country and cannot now serve in an emergency, a new power of attorney should be named.

Next, one should also consider whether the beneficiaries named are still proper. Ask questions, such as:

  • Are the amounts left to each beneficiary still appropriate?
  • Again, how is one’s relationship with each beneficiary? For instance, has there been a falling out with any of them?
  • Are there new beneficiaries (nieces, nephews, charities, etc) one now wishes to include? Normally, documents drafted by McManus & Associates cover new children and grandchildren automatically.
  • Are any of the beneficiaries at risk with inheriting assets? Are they the target of a divorce, legal action, or the victim of financial strife or addiction, for example?

Finally, think through whether the current trust provisions make best use of the law for asset protection purposes.

2. “Do it for the Kids”: Set up trusts for your children and grandchildren

While the lifetime exemption amount has changed several times in the last decade, the annual gifting exemption has remained fairly constant. Setting up a trust for your children and grandchildren allows one to tap into this reliable wealth transfer mechanism without the damage of gifting assets to them outright. With this strategy:

  • Assets will be in a protected vehicle, meaning they can be passed on to the next generation outside of the children’s estates, as well.
  • A trustee can manage and control the assets while the children are minors.
  • The spouse should be added as a beneficiary, and the grantor should retain the power to take loans from the trust.

3. Move Assets off Your Balance Sheet: Sell the family business, real estate, life insurance, investment accounts and more into a trust

  • A family business is typically a long-term investment, so sell it into a trust. This provides an income stream to older individuals who may wish to surrender the day-to-day operations of the business without losing access to the economic security of the asset. It also puts the asset in a protected vehicle that is exempt from estate tax.
  • Sell business interests when the value is modest so that growth takes place outside of one’s estate. Selling a business interest also allows for valuation discounts, with greater equity going into trust.
  • Real estate can be sold into trust for a similar purpose as family businesses.
  • Life insurance can be sold into a trust to avoid the three year look-back. If you gift life insurance into your irrevocable trust and pass away within three years, the IRS will claw that asset back into your estate. The sale prevents this.

4. Make the Switch: Swap low basis assets out of your trust

  • Assess the income tax benefits of holding assets inside one’s estate versus the estate tax benefits of pushing them outside of one’s estate.
  • With a critical eye, consider swapping estate assets for the trust’s assets, and vice-versa, to maximize the income tax basis step-up.
  • A step-up in basis is the readjustment of the value of an appreciated asset for tax purposes. With a step-up in basis, the value of the asset is determined to be the higher market value of the asset at the time of transfer, not the value at which the original party purchased the asset.
    • When an asset is gifted to an individual or trust, there is a carryover of the original basis – meaning there is no step-up. Although the asset is now outside the grantor’s estate for estate tax purposes, upon the sale of the asset, capital gains tax will be due.
    • When an asset is included in a descendant’s estate, the asset receives a step-up in basis to the date of death value at that time. The asset can be sold to avoid any capital gains tax.

5. Give Precedence to Giving Back: Use foundations and charitable trusts to make philanthropy a focus for your family and to achieve income tax benefits

  • Family unity can be created through a consistent emphasis on giving back.
  • Foundations and charitable trusts also both have income tax benefits. The tax rates may change, but income tax is unlikely to go away, so this will always be an important piece of a good planning strategy.
  • Donations should be reviewed annually to assess portfolio performance, confirm that the foundation is meeting minimum distributions for charity, and verify that the donative patterns are still desirable.

 

McManus Featured as Expert Speaker on “Estate Freeze Due Diligence”

An estate freeze is a power strategy for wealth management. Practitioners must be diligent in utilizing this estate planning tool, however, because even the most basic estate freeze can create a minefield of potentially negative estate, income tax, and family problems.

McManus & Associates Founding Principal John O. McManus was recently an expert speaker for the Lorman Education Services webinar, “Estate Freeze Due Diligence,” during which he outlined practical applications of estate freeze techniques and their benefits (which should be weighed in light of one’s expectations and business, financial, and personal goals). The presentation also provides an understanding of the common implementation challenges and pitfalls that can accompany an estate freeze strategy and, just as important, ways in which those dangers can be avoided and addressed.

See and listen to John’s presentation on the topic by clicking below. For more questions or more detailed guidance, call McManus & Associates at 908-898-0100.

John O. McManus – PowerPoint Presentation, “Estate Freeze Due Diligence” (PPT)

Conference Call: 10 Questions to Consider When Preparing for the Passing of a Loved One

Death represents a significant and vulnerable point in time for both the individual facing it and his or her loved ones. In the medical field, it is even associated with failure; only five out of 125 medical schools (4%) in the country offer a course on death and dying. This negative stigma means that what should be accepted as a natural part of life, often becomes an uncomfortable topic.

However, it is important to talk about death with loved ones. There are emotional benefits to reflecting on a life spent together, and expressing gratitude and admiration. It is also important to ask difficult questions so that this topic receives adequate attention and preparation. While everyone would prefer to focus on life, a significant amount of stress related to death can be reduced by proper planning.

Press play to hear McManus & Associates Founding Principal John O. McManus explain his 10 recommendations below for getting the best end-of-life care:

 

1. Know your options – What is the difference between hospice and palliative care?

2. Dot your i’s and cross your t’s – Are all the necessary legal documents in order?

3. Broach the subject – Have you had a discussion with your loved one to understand what his or her wishes are?

4. Nail down the timeline – When does your loved one want end-of-life care to begin?

5. Research reputation – Have you discovered all that you can about the potential care facilities that you are considering?

6. Find out who is behind the mask – How well do you know your loved one’s care providers?

7. Do your due diligence – Have you done your own research? Have you asked care providers to tell you what you can do to help? Have you explored all of the factors that could influence your decision?

8. Learn the ins and outs – Is in-patient or out-patient care best for your loved one and family?

9. Prepare Plan B – Do you have a backup plan?

10. Ask for help – Could your loved one and family benefit from counseling?

For guidance on ensuring that your estate plan reflects your wishes for life and death, contact McManus & Associates at 908-898-0100.

McManus Featured as One of New York’s Leading Lawyers in New York Mag

John O. McManus, Founding Principal of McManus & Associates, was featured as one of New York’s Leading Lawyers in a special section of award-winning New York Magazine. Here’s a picture of the plaque celebrating the special recognition. McManus & Associates congratulates you, John, for being chosen as a “Leader in the Law”!

Trump Tax Bill Passes – Act Now: Top 10 Year-End Tax Planning Strategies

With President Trump having signed the GOP tax bill today, new tax planning opportunities are now available – but you must take advantage of many of them within the next nine days, before 2018. John O. McManus, founder of top-rated estate planning law firm McManus & Associates, makes the following time-sensitive recommendations in light of tax reform and the reduction of income tax rates:

  1. Accelerate your income tax deductions. Certain itemized deductions, i.e. income tax and real estate tax deductions, will be capped at $10,000. Pay your January estimated taxes in December; make your January mortgage payment in December; deduct any unreimbursed medical expenses; make your 2018 charitable donations in 2017. Some commentators suggest prepaying property taxes that have been assessed, such as the 2/1/18 and 5/1/18 installments – but it depends on the state. Also, the American Institute of Certified Public Accountants has opined that CPAs should advise clients that payments in 2017 of state tax liabilities projected for 2018 are not deductible on their 2017 federal income tax returns. You should be mindful of the fact that these additional payments could cause you to be subject to the alternative minimum tax, which results in you losing the benefits of these state and local taxes.
  2. Prepay in 2017 any business entertainment expenses, such as sports tickets or green fees, and membership dues for clubs organized for business. The final tax reform bill disallows these expenses; it will continue to allow the deduction of 50% for food and beverages associated with a trade or business.
  3. Postpone/defer receipt of income until 2018 to take advantage of the lower tax rates.
  4. Review your potential capital expenditures. Under the final tax reform bill, until January 1, 2023, a business will be able to expense 100% of the cost of the non-real estate property as first-year additional depreciation (bonus depreciation). (There is the possibility that 100% expensing may be available for property placed into service after September 27, 2017). Starting in 2023, the allowance of 100% is phased out by 20% each year.
  5. While rates are higher in 2017, make gifts to charities and family foundations with appreciated assets. Because of the lower limitation of 20% of AGI for appreciated stock to a foundation, you should split your gift between this year and next.
  6. Consider gifting low-basis stock instead of selling to raise cash for gifting that could lead to gains.
  7. Fund a charitable remainder trust with concentrated positions in appreciated securities in order to diversify without adverse tax consequences associated with selling appreciated securities.
  8. Harvest your losses to offset capital gains.
  9. Establish and fund qualified plans. Consider making a gift of up to $5,500 to either a traditional or Roth IRA for your children or grandchildren who are not funding their own IRAs, but have enough earned income to report.
  10. Contribute up to $28,000 gift-tax free per married couple ($30,000 for gifts made in 2018) to a 529 Plan, which grows free of income tax. The final tax reform bill will allow withdrawals for private, elementary and secondary school expenses up to $10,000 per year.
  11. Make annual exclusion gifts to chosen loved ones of $28,000 per married couple ($30,000 for gifts made in 2018).
  12. Make gifts into trusts for children/grandchildren.
  13. Make unlimited gifts directly to educational institutions and medical facilities.
  14. Make distributions of income from trust accounts and estate accounts to lower the income tax liability. Estates and trusts are taxed at the highest income tax rate (and a lower threshold at which the 3.8% Medicare surtax applies). Therefore, it may make sense to distribute income to the beneficiaries to be taxed at the beneficiaries’ lower income tax rates.

“Trump’s new tax bill creates tax planning opportunities before year-end,” commented McManus. “Find time for last-minute tax planning as soon as you finish your last-minute holiday shopping.”

For trusted advice on tax and estate planning, call McManus & Associates at 908-898-0100. Learn more about the award-winning firm at www.mcmanuslegal.com.