Forbes: “Delayed Nuptials Cost Couple $214,000 In State Death Tax”

This month, Forbes Editor Ashlea Ebeling turned to John O. McManus for insight on the court case of Peter Muscle and Linda Jackson. Ebeling’s article begins:

Here’s a heartbreak story that might make you decide to get married, move to Florida or hire a trusts & estates lawyer—or all three. A woman who dated her beau for 44 years and was on the verge of finally marrying him lost a case recently in New Jersey tax court that cost her beau’s estate $214,000 in state taxes. That’s money that would have otherwise gone to her and the man’s niece and nephew.

The piece goes on to cite the thoughts of McManus:

Making lifetime gifts to reduce the impact of state estate taxes still can work. “This case should not stop people from making lifetime gifts,” says John McManus, an estate lawyer in New Providence, N.J., adding the general warning: “Just take care to be mindful of issues with states.” Many wealthy folks are taking advantage of a bumped-up $5 million lifetime federal gift tax exemption, to transfer assets to loved ones (it’s in place through year-end 2012; it reverts to $1 million on Jan. 1, 2013). But it’s key that you consult a trusts & estates lawyer in your state (Jackson and Muscle had consulted with a Medicaid planning lawyer).

Find out about options with “gifting” by reading the full story.

The Street: “Heir of the Dog: Provide for Pets in Perpetuity”

John O. McManus recently spoke with reporter for TheStreet.com Joe Mont about common financial and legal moves to ensure beloved pets are taken care of once an owner passes away.

From the article:

It isn’t just the rich and famous who make financial and legal moves to make sure Rover, Fluffy and Snowball are cared for after they pass on.

John O. McManus, founding principal of McManus & Associates, a trusts and estates law firm in New York and New Jersey, says he often sees large sums reserved for grooming, health care and food choices “to ensure that the structure of high-quality care is in place for the pet.”

The first step for someone making such plans, even before money issues are discussed, is to establish a point person for carrying out post-death pet care requests.

“They need to choose someone who is going to serve in that position, someone they know is a pet lover and will treat their pet as though it were their own,” he says of his clients. “It is not dramatically dissimilar to when someone goes away on vacation for a week. With whom did they leave the pet?”

For more of John’s advice on planning for your pet’s well-being, check out the full story here.

Investment News: “Don’t Die in New Jersey”

Investment News Reporter Liz Skinner has published an article comparing state estate taxes. Skinner’s recent  interview with McManus & Associates Founding Principal John O. McManus revealed that New Jersey has one of the highest estate tax rates in the country, leading to the title of the piece, “Don’t Die in New Jersey.” From the story:

“New Jersey typically rises to among the highest levels of the least favorable places to pass away,” said John McManus, a tax attorney and founder of McManus & Associates. “And New York is not great.”

New Jersey begins taxing estates at $675,000 and has a maximum rate of 16%, in addition to a maximum 16% inheritance tax on beneficiaries who are not spouses or parents, or children or other lineal descendants. New York has a $1 million exemption for its estate tax, which also tops out at 16%.

To read how New Jersey stacks up against other states, check out the full article.

Investment News: “Key death tax exclusion hinges on speedy filing”

John O. McManus was recently interviewed by Investment News Reporter Liz Skinner for a story about the need for surviving spouses to swiftly file estate tax returns to guarantee ‘portability’ of unused exclusions. John is quoted throughout the piece.

From the article:

…the estate of someone who died Jan. 1, 2011, should have filed the estate tax return Form 706 by Oct. 3. Another form can be filed for an automatic six-month extension, the IRS said in its notice late last month.

Clients need to be informed of this hitch. The reason? Many don’t file an estate tax return if they don’t owe any taxes (thanks to the exemption on the estate tax), said John McManus, a tax attorney and founder of McManus & Associates. The value of the surviving spouse’s estate could surge before their death, however, and then it would be too late to claim the unused portion of the first spouse’s exemption.

“We just think it is prudent to file the return and seek portability for the surviving spouse,” Mr. McManus said.

Read the full write-up for more important advice on this issue.

The Bernardsville News: Letter to The Editor

To the Editor:

One of the upsides of the strife from Hurricane Irene is watching people band together and extend a hand to those in need. Ten years after 9/11, we still clearly remember hardened New Yorkers pitching in to help their brothers and sisters in a time of extreme need.

However remarkable this effort, in the face of tragedy, we often question why we do not always act for the benefit of our community. For many of us, the answer is straightforward: we are committed to serving our families and loved ones first. Events such as 9/11 and recent natural disasters remind us how fortunate we are and inspire us to serve others in their time of need.

Following Hurricane Irene, sharing refrigerators, showers, and washing machines became the norm for those possessing electric power and running water. One of my dear friends, on a moment’s notice, hauled a generator to my house to assist and, when power was received, we passed along his kindness to our friends by making available power, water, and accommodations for the next seven days.

While the outpouring of assistance is commendable in a time of crisis, there are those who make it their life’s mission, in more ordinary times, to help others in their day-to-day struggles. One institution that stands out as a hallmark for serving others, at all times is the Somerset Hills YMCA.

Throughout the power loss the Y was a welcomed retreat for those without power or water. Yes, to take it a step further, on Labor Day, when the Y is typically closed, employees and volunteers joined together so that anyone in the community would still have the privilege of a warm shower, and electric power. Some may view this as exceptional, but those more intimately affiliated with the Y know that these behaviors are typical even in normal periods. Yes, the Y is a venue to socialize and to be physically active, but that is merely an ancillary benefit of its highest mission.

The Y is first and foremost a charitable institution serving the community irrespective of its need.  The elderly, the poor and the financially strapped young families who need assistance receive services from the Y.  The YMCA gives nearly to $1 million in free services each year, to those in need in the Somerset Hills community.

This element of charity, which attracts so many of us to our churches, temples, and to the Y, is also the reason why my wife and I have committed ourselves to aiding the works of the Y. The Y is the one institution in our community that transcends all cultural and religious boundaries, and its Board of Directors is comprised of individuals from all walks of life. Everyone feels at home at the “Y.”

The Y reminds us that there is goodness in focusing on the needs of the community, certainly in times of extreme strife, but also in times when people’s needs are a private matter particularly in this ostensibly unceasing economic crisis. While each of us are busy with our daily routines and obligations, there are always people “just around the corner” in need… they can find a welcoming home at the Y.

John O. McManus

(Mr. McManus is a Board Member of the Somerset Hills YMCA)

The Street: “Debt Crisis Could Change Estate Tax”


John McManus was interviewed by Joe Mont of The Street for his article, “Debt Crisis Could Change Estate Tax.” John had this to say:

Thus far, changes to the budget compromise reached earlier this year between President Barack Obama and Republicans on the Bush tax cuts for the wealthiest and estate taxes have been spared any effort to boost national revenues.

But legacy plans may still need to be revised sooner rather than later, says John O. McManus, founding principal of New York- and New Jersey-based McManus & Associates and a tax planning expert.

Currently, a patriarch or matriarch can give children, while they are still alive, up to $5 million without triggering the gift tax. Doing so allows that money to be spared a 55% tax hit via a so-called “death tax.” The $5 million limit could also be used upon death to shelter a portion of assets. Before the budget compromise, that limit was $1 million.

McManus says the real advantage is in being able to give away that money while you are still alive, but the ability to do so is in danger.

“The way that the Democrats negotiated the deal, and the way it was set up, is that it was only an extension for 24 months,” he says. “This whole thing evaporates Dec. 31, 2012.”

Given the tremendous wealth that will shift from aging baby boomers during he next 20 years, Democrats have taken “some solace” in the fact the compromise is short-term, McManus adds.

“They don’t want people giving away $5 million because 10 years from now that $5 million would have been $10 million back in the client’s estate and they would have gotten a 50% percent tax on that,” he says. “Because of the mounting debt crisis, there is a risk here that the first thing in jeopardy here is the amount of money that you can gift away … There clearly is looming a freight train coming down the track. We can see the smoke billowing and the light flickering. It is far enough down the track, but it may be picking up speed.”

In the meantime, so long as the gift tax exemption is on the table, McManus sees it as a “massive opportunity.”

But there’s a catch, he says. Read the rest here.

Wall Street Journal: “Milking a Business for Retirement”


Kelly Greene quotes John McManus in her Wall Street Journal Article, “Milking a Business for Retirement”:

Professional advisers are pushing two new maneuvers designed to help small-business owners save for retirement or pass down their companies to heirs. While the strategies can make sense for some people, they also carry risks.

[ … ]

John McManus, an estate-planning attorney in New Providence, N.J., says that thanks to the higher exemption, he has worked with clients to set up this strategy “multiple times more frequently this year” than in the past. The maneuver can make sense for owners of stable businesses who would like to pass them along to their children eventually, but who can’t afford to quit receiving an income from that business, he says.

[ … ]

Here’s where retirement income comes in: You then set up a payment plan for 15 years of about $70,000 a year, plus interest. That means each trust would be getting about $125,000 in income a year and making a payment of roughly $70,000 back to the parents, Mr. McManus says.

You would have to pay a lawyer to set up the trusts, of course, and the income they generate would be taxable—and you would be responsible for paying those bills. If the business has a bad year, you can restructure the debt or forgive that year’s payment, though you may incur additional income tax, Mr. McManus says.

Read the rest here.

McManus & Associates Chosen as one of New York Enterprise Report’s “10 Great Places to Work”

McManus & Associates - A Great Places to WorkWe’re proud to announce that New York Enterprise Report has chosen McManus & Associates as one of the 10 Great Places to Work, citing our modern client philosophies and the opportunities and benefits offered to our employees.

“Forget the stuffy offices full of dark mahogany furniture found in traditionally conservative firms of estate and trust attorneys. McManus & Associates has created a modern law firm, both in interior design and client management philosophies. The firm encourages employees’ personal ownership of the work product within the framework of a team approach. Each employee becomes an integral part of the entire process.”

See the full feature here.

Investment News: “Clients seek more advice about philanthropy”


Liz Skinner quotes John McManus in her Investment News article, “Clients seek more advice about philanthropy”:

Financial advisers play an increasingly important role in helping wealthy clients get the most bang for their philanthropic bucks. Increased scrutiny on philanthropic organizations is prompting individuals and families who give to non-profit groups to investigate whether their money is producing results.

Donors should examine organizations’ financials to see how much of their money is actually going toward the work of the charity, as opposed to administrative costs, said estate attorney John McManus, founding principal of McManus & Associates.

“Donors are looking for real, true examples of how their money is going to be applied,” he said.

Read the rest here (requires registration/subscription to view).

Wall Street Journal: John McManus on State Tax Audits


Wall Street Journal’s SmartMoney article, “Why State Tax Audits Are Increasing” features John McManus:

When most people picture a painful tax audit, it’s the Internal Revenue Service they see behind it. But a state tax man is just as likely to knock on the door these days.

[ … ]

While audits seem to be proliferating, “they aren’t necessarily prevailing,” according to John O. McManus, an estate lawyer based in New Jersey. Taxpayers may be able to prove their returns were accurate and their strategies valid.

New Jersey is looking closely at certain kinds of small business, including pizzerias, doctors’ and lawyers’ practices. Along with others, it also looks at people who move to states with lower tax rates such as, say, Pennsylvania. California pays close attention to New York- and New Jersey-based companies with business on the West Coast, according to McManus.

Read the rest here.