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.

Posted in Media Clips Tagged , , , ,

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.

Posted in Media Clips, News Tagged , , , , , ,

CAPITAL GAINS TAX: The Top 10 Current Issues and Planning Opportunities

The rise in capital gains tax rates and the higher federal estate tax exemption have shifted the estate planning paradigm. Across the nation, long-term capital gains tax rates now range from 25% to 33%, with the combination of the top federal, state and local rates, along with the Medicare surtax. This demands a fresh look at current planning strategies.

When assets are included in an estate, they are subject to estate tax, but the assets enjoy a step-up in basis for income-tax purposes. Gains tax can then be avoided. However, if there is no estate tax because the gross estate assets are below the estate tax exemption amount, then it may make sense to keep assets inside the estate.

Many estate planning attorneys have spent the first half of their careers getting assets out of their clients’ estates, but now they might spend the second half of their careers getting assets back into their clients’ estates (for those individual estates under $5.43MM or joint estates under about $11MM).

As part of McManus & Associates’ Educational Conference Call series, John O. McManus this month examined how to shift gears in light of new, unique opportunities. We invite you to listen to the recording to find detailed information on the Top 10 issues and planning opportunities related to capital gains tax.

LISTEN HERE: “Top 10 Current Issues and Planning Opportunities with Capital Gains Tax”

  1. The Basics of Basis. Cost basis is the original acquisition value of an asset for tax purposes (usually the purchase price or the inherited price), adjusted for stock splits, dividends and return of capital distributions. This original value is used to determine the capital gain – and becomes the difference between the asset’s cost basis and the current market value.
    1. Assets with a high basis include cash (which actually has no basis) and recently purchased assets that have not yet appreciated.
    2. Assets with a low basis include Exxon stock your grandfather gave to you and a Brooklyn brownstone purchased in the ‘60’s that have significantly appreciated.
  2. Striking while the Step-Up’s Hot. 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.
    1. When an asset is gifted to an individual or to a trust, there is a carryover of the original basis – meaning there is no step-up in basis. Although the asset is now outside the grantor’s estate for estate tax purposes, upon the sale of the asset, there will be capital gains tax to be paid.
    2. When an asset is included in a decedent’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.
  3. Transfer Up to Get Capital Gains Down. Transferring an asset “upstream” to your parents or a trust for the benefit of your parents will enable the asset to get a step–up in basis upon the parents’ death.
    1. At that time, the parents would leave the asset back to the client or the client’s descendants in trust, and the asset could then be liquidated free of capital gains tax.
    2. Don’t forget that you use part of your lifetime exemption based on the value of the upstream gift.
  4. Remember the Second Half of Estate Planning Attorneys’ Careers? Assets previously gifted by clients directly to family members or in trust for estate tax minimization purposes may have appreciated significantly, causing unintended capital gains tax consequences for their loved ones.
    1. With the current $5.43MM federal estate tax exemption, clients may no longer have exposure to estate taxes. Thus, they may consider intentionally undermining the prior gifting plan to cause the asset to be included in their estate, achieving the step-up in basis on death.
    2. If we prepared your trust, we provided an asset substitution provision, which allows you to swap low basis assets out of the trust back into the estate. This would allow a step-up in basis upon death.
  5. Speeding up the Process when You Want to Sell Now. For older clients who wish to sell highly appreciated assets in the near-term, several trust strategies can provide the benefit of a step-up in basis upon the passing of the first spouse.
    1. For jointly held assets, if the surviving spouse were to sell after the first spouse’s passing, the survivor would still owe capital gains tax on his or her remaining 50% interest in the asset.
    2. Community Property Trusts with a situs in Alaska or Tennessee, Joint-Exempt Step-Up Trusts (JEST), and Estate Trusts are all planning vehicles that are structured to allow for the surviving spouse to sell an appreciated asset without the imposition of any capital gains tax after the first spouse’s death. Make certain that there is a separate side agreement that the property is treated as community property
  6. Tinkering with the Taxation of Capital Gains in a Trust. For non-grantor trusts, long-term capital gains are not included in distributable net income (DNI) and are taxed at the top marginal rate.
    1. The trust itself may allow for the trustee to have discretionary powers to distribute principal, as well as the power to shift capital gains to income for inclusion in DNI.
    2. An alternate for the power to adjust is the use of the state unitrust statute. A unitrust generally allows a fiduciary to calculate the trust’s income as a percentage of the trust’s assets, as of either the beginning of the year or averaged over some period (NY provides for unitrusts while NJ does not).
    3. However, NJ does allow for a safe harbor power to adjust; a trustee is permitted to adjust the distribution to the income beneficiary (from 3%-5% of the FMV of the trust’s assets in any accounting period). This adjustment must be deemed to be responsible and fair to all of the trust’s beneficiaries.
    4. If possible, utilize a grantor trust and have all income, deductions, and credits, including capital gains, taxed to the grantor at a presumably lower individual income tax rate.
    5. Consider switching the situs of the trust to a state that does not have state gains tax.
  7. Spending Time to Save Money. You may be able to exclude some or all of the gain that is taxed on the sale of your principal residence. The  tax code permits owners of homes to exclude up to $250,000 of capital gain ($500,000 for a married couple) if they have owned and lived in their home for at least two years out of the five years before a sale.
    1. Find better assets to gift than your personal residence.
    2. If you receive a house as a gift and then reside in it as your primary residence for two years, you may be able to reduce or eliminate the capital gains tax on the carryover basis.
  8. The IRS’s Gift for Giving Back. When gifts of appreciated long-term assets are made to charity, no capital gains taxes are owed, because the securities are donated, not sold.
    1. The deduction is limited to 30% of your adjusted gross income (AGI) instead of the usual 50% limit for donations of cash and short-term property made to public charities—though you can still carry forward unused deductions for five years.
    2. If you choose to deduct your cost basis only, you can raise the limit to 50% of your AGI. But if you’re holding securities with a loss, it’s better to sell first, take the capital loss for tax purposes, and then donate the cash.
    3. A Charitable Remainder Trust and a Private Operating Foundation may provide similar relief from capital gains tax.
  9. The 411 on a 1031 Exchange. A 1031 Exchange is a way to delay capital gains taxation by rolling the sale proceeds of the original asset into a new investment in a like-kind asset.
    1. This is traditionally used as a strategy for real estate, but it also works for artwork.
    2. The new investment takes the original basis, which is carried over based on the original basis of the asset.
    3. If the owner dies with the asset in his estate, there is a step-up in basis with little to no capital gain upon sale soon thereafter.
  10. Consider the Tax-Free Possibilities. Two special savings accounts are given a pass by the IRS in terms of taxation.
    1. Contributions to a Roth IRA are after-tax and, as such, all future growth and distributions are tax-free.
    2. Contributions to a 529 College Savings Account also grow tax-free and withdrawals for educational expenses are tax-free.



Posted in Conference Call Tagged , , , , , ,

McManus Guidance on How Parents Can Help Protect Young-Adult Children Featured in College Series

Colleen Moriarty, a seasoned health and lifestyle writer and a staff writer for, recently tapped McManus & Associates for advice on important legal documents that should be put in place for children who are already 18 or will soon be of legal age before they head off to school. Her article, “Help Your Child Stay Safe at College”, is part of a series called Off to College 2015: The First Six Weeks.

Moriarty’s article opens by shedding light on the importance of planning ahead to protect college-bound children, because, as McManus points out:

“If an accident, emergency, mental health crisis or trouble with substance abuse should arise after your son or daughter’s 18th birthday, you have little or no legal right to step in without legal documents that explicitly give you that authority.”

Before adult children become big men and women on campus, which legal documents should they strongly consider completing to provide parents with the authority to act with respect to their medical, legal and financial needs if they get sick or hurt, or are otherwise unable to handle their own affairs? A helpful graphic from the story:

graphic for college series blogAccording to McManus, “without these executed documents, colleges, clinics and hospitals will not release a student’s medical records — even to parents — if the student is over the age of 18…Without a back-up decision maker in place [meaning a parent or other designated adult], there is a risk of inadequate, inappropriate or insufficient medical care if your child is incapacitated.”

Of note, these legal documents cannot be signed until the age of 18, and they can be revoked at any time.

So how should a parent discuss the need for such legal documents with their newly adult child? McManus shared personal experience to convey his thoughts:

“Being the child of an attorney, my daughter pored through these documents to find out exactly what powers she was giving. She signed because she realized that they could keep her safe if she got into an accident or had a medical emergency while at college. The piece that I emphasized with her was that her mother and I would only step in if she was in danger – and that’s danger with a capital ‘D’.”

To see the list of DOs and DON’Ts for parents when it comes to working with a child to get these documents in place, find the full article here.

To ensure that the correct documents (forms vary by state) are properly executed to adequately protect your adult child, call McManus & Associates at 908-898-0100 or send an email to

Posted in Media Clips Tagged , , , , , , , , , ,

The Art of Gifting: Top 10 Issues with Owning and Gifting Artwork

Owning artwork is not only a cultural indulgence, but the sophisticated (and the lucky) possess artwork as an investment that can provide a handsome return. Auction houses, most recently Christie’s, have seen record-setting bids as fine art wrestles to take its position as an asset class equal to equities, commodities, and other hard assets. In light of the increase in capital gains tax combined with the collector’s desire to reduce the imposition of income tax and estate tax, the field is ripe for sophisticated planning.

As part of it Educational Conference Call series, John O. McManus this month discussed strategies to addresses the hard and soft issues surrounding the ownership and transfer of art. We invite you to listen to the recording to find detailed information on the Top 10 issues with owning and gifting artwork that follows, whether you’re an artist, dealer, investor or collector.

LISTEN HERE: “Top 10 Issues with Owning and Gifting Artwork”

Continue reading

Posted in Conference Call Tagged , , , , , , , , ,

The Money Coach® Taps McManus for “3 financial lessons that could protect your heirs”

Get Rich Slowly



Lynnette Khalfani-Cox is known as The Money Coach®; she’s a personal finance expert, television and radio personality, and the author of 12 books, including a New York Times bestseller. She recently reached out to John McManus for guidance on how to avoid a quandary like the one her family faced when three loved ones passed away in short order.

Writing for Get Rich Slowly, a personal finance publication with over 750,000 regular readers, The Money Coach® shares her heartbreaking story, which includes a nightmare custody proceeding after her sister passed away.

Continue reading

Posted in Media Clips Tagged , , , , , , ,

Top 10 “Non-Run-of-the-Mill” Ideas as You Prepare to See Your Child Off to College

“YIKES! My child is leaving for college in two months.”

The summer before a child enters his or her freshman year of college is filled with excitement and consternation, happiness and remorse, confidence and concern. McGraw Hill Education notes that 25 percent of college students drop out of their first year due to not being academically, emotionally, or financially prepared for college life and adulthood. Now is your chance to help your child in his or her final preparation.

Because Family Mission Planning is a cornerstone of McManus & Associates’ approach to estate planning, the firm has compiled a list of ideas and research that can help families stay on track with their individual mission statements as college-bound children leave the nest. Here are 10 pieces of advice that you may not have gathered from your high school guidance office, selected universities or friends with adult children, but that we think might hold an equal amount of wisdom:

LISTEN HERE: “Top 10 ‘Non-Run-of-the-Mill’ Ideas as You Prepare to See Your Child Off to College”

Continue reading

Posted in Conference Call, Press Releases Tagged , , , , , ,

McManus & Associates Client Featured in New York Times Column on Family Business Succession

Paul Sullivan writes the “Wealth Matters” column for the New York Times, which shares insights on the mindset and strategies of the affluent. Recently, McManus & Associates Founding Principal John O. McManus chatted with Sullivan about the decisions that adult children who are expected to take over a family business face and connected Paul with his client Sharon Madison, a remarkable woman who successfully navigated the challenge of family business succession.

Sullivan’s article leads with Madison’s dedication that kept United Building Maintenance, the business that her father started, on its successful path after he became ill.

Continue reading

Posted in Media Clips Tagged , , , , , ,

McManus Cited in “College Financing Q&A” from the Wall Street Journal

wsj logo

In February, Andrea Coombes wrote an article, titled “The Tax-Smart Way to Draw ‘529’ Funds”, about education tax benefits for the Wall Street Journal’s Investing in Funds report. The piece generated a number of follow-up questions from readers. Here’s one that came across Coombes’ desk:

“Before he died, my father contributed to a 529 on behalf of my daughter [his granddaughter]. Need anything be done now to ensure that my daughter is able to use these funds for tuition?”

To help answer this question, Coombes turned to John O. McManus, top-rated tax and estate planning lawyer who founded McManus & Associates. The firm offers income tax planning among its services.

Continue reading

Posted in Media Clips Tagged , , , ,

Trusts & Estates, Publishes Guest Article from McManus on Coordination of Income Tax and Estate Planning

trusts and estates logo


Combine Income Tax Preparation and Estate Planning

Coordination is key

Apr 1, 2015 John McManus Trusts & Estates

When tackling a jigsaw puzzle, you’ve likely taken the “divide and conquer” approach, separating the larger puzzle into more manageable sections. Eventually, you bring the different areas of focus together to put the finishing touches on the full image.

Wealth management is the same. Estate planning emphasizes an array of complex matters spanning death taxes, asset protection, incapacity, guardianship and family missions. Compartmentalizing can be helpful, but advisors must remember to bring the pieces of the puzzle back together in the end. It’s critical that strategies to maximize the value of your clients’ estates are coordinated with their retirement, financial and income tax planning.

Continue reading

Posted in Media Clips Tagged , , , , , , , ,