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Top 10 Ways to Protect Children Under 18 and Over 18, Stateside and Abroad

Even for children who have newly become legal adults, parents need to be empowered to make decisions to help protect them in times of need. Laying out important considerations for families to discuss before and after children turn 18, McManus & Associates – top-rated, Tri-State-Area-based trusts and estates law firm – today released the newest edition of its educational focus series. The discussion, “Top 10 Ways to Protect Children Under 18 and Over 18, Stateside and Abroad,” identifies questions parents should evaluate, from who should be named as local representatives on a health care proxy for minors to whether a prenuptial agreement is appropriate if an adult child is soon getting married.

LISTEN HERE: “Top 10 Ways to Protect Children Under 18 and Over 18, Stateside and Abroad”

“While young adults today are far more astute and sophisticated on world matters than 100 years ago, they’re also far less independent than when kids were married at 16 and took over the family farm at 18,” explained John O. McManus, top AV-rated attorney and founding principal of McManus & Associates. “The fact is that the frontal lobe is not fully developed until the mid-20’s, and people who have newly entered adulthood still need to tap their parents’ experience-earned insight when evaluating important decisions.”

  1. What are the legal and medical risks for children upon reaching age 18, legal adulthood?
    1.  Once your children are legal adults, you are no longer able to automatically make medical decisions on their behalf, access their medical records, or take any other action for their benefit if they are unable to do so.
    2. Additionally, parents will not have automatic access to their child’s financial accounts if they are over the age of 18.
    3. Risk of inadequate, inappropriate or insufficient medical care is a primary concern for many parents with children leaving for school for the first time.
    4. Before your “adult children” leave for school, they must consider completing a Health Care Proxy, Durable Power of Attorney, and an Authorization for Release of Protected Health Information to provide parents with the authority to act with respect to their medical, legal, and financial needs if they are incapacitated or otherwise unable to handle their own affairs.
  1. What are the necessities when my child is studying overseas?
    1. All of the reasons above take on an extra urgency if your child is away from home in college or out of the country on a semester abroad.
    2. Learn about the healthcare system of the county where your child will be living. There are often differences between private and public hospitals, restrictions on international insurance accepted and, potentially, qualification standards for medical professionals.
    3. Colleges will not release a student’s medical records, even to parents, if the student is over the age of 18. This may be extremely detrimental to a child’s well-being in a physical or emotional medical emergency. Advance planning can facilitate communication between the foreign hospitals and parents.
  1. Upon reaching age 18, does my child need a will?
    1. We believe that broadly the answer is no. Most young adults do not possess assets sufficient to merit the use of a Last Will and Testament.
    2. However, if large gifts have been made to an adult child, if the adult child owns shares in a family business, or if he or she received money from a settlement, a Last Will and Testament may be a critical component in the family’s overall estate plan to avoid unintentional beneficiaries and estate tax implications.
    3. The Will should provide direction for a power of appointment to allow your child to appoint trust assets to descendants and/or a spouse.
  1. Should I appoint my adult child as my representative in my incapacity planning?
    1. Adult children may be the best choice to name as fiduciaries to make the parents’ medical and/or financial decisions.
    2. If they are away for school, however, consider appointing a local person as a representative in the event that the child is not able to serve.
    3. The adult child may be appointed in the documents to serve as a trustee at a future date (when a certain age is reached, such as 25).
    4. Often including adult children can be a trigger to start important conversations about wealth, inheritance and family mission.
  1. Should I make outright gifts to my adult children?  What are the risks of these gifts and custodial accounts?
    1. Outright gifts to adult children should not exceed a certain amount as outright gifts are exposed to attack and may deter your child from making his or her own way in the world.
    2. Presently, $14,000 from each parent can be transferred on an annual basis to each child and grandchildren. Additionally, up to $5.34MM can be transferred gift tax, estate tax, and GST tax free to children and grandchildren.
    3. A better way to make larger gifts to children is in lifetime trusts that will protect the assets against any unintended diversions or reversals (i.e. divorce, law suits, creditors, etc.) that a child may encounter, while still providing for the child’s needs and allow the child to maintain a certain quality of life.
    4. We often recommend that a child serve as co-trustee at age 30 and sole trustee at age 40.
  1. My child is getting married.  Should I review with them whether a prenuptial agreement is appropriate?
    1. We support having conversations about wealth with children far before this decision needs to be made. With a set “on-boarding” process for children’s significant others, you set the stage for a successful conversation around finances.
    2. Certain assets, which are intended to stay within the family, can be protected by trusts and pre-nuptial agreements.
    3. Life estates in real property can also be set up to provide for the in-law spouse while keeping the asset moving down the family line.
    4. Significant work has been put into creating trusts for your children so that there is little risk of diversion, but a child can empty the trusts. Children should be well-versed in the overall strategy to invest the assets in trust instead.
  1. What are the medical risks if you are unavailable for your minor children?
    1. In the event that parents or guardians are unavailable and minor children require medical care, a hospital or doctor’s office will reject the treatment that the child needs, unless there is a clear risk of death.
    2. In the past, care providers have been sued for wrongly treating children without the consent of the parents and now mandate formal written permission from a child’s parents if they are not present or cannot be contacted.
    3. A local representative should be appointed to assist in getting your child admitted to the hospital.
    4. In order to assure that minor children are treated properly and immediately, their Health Care Proxy and Authorization for Release of Protected Health Information will name representatives who will be able to (i) receive their critical medical information; and (ii) make medical decisions for them if the parents are unable to do so.
    5. A set of the documents should be kept at the house, in a place that is easily accessible such as inside the kitchen cabinet door.
    6. Electronic copies also suffice.
  1. What if both parents of a minor become incapacitated? 
    1. The Wills we prepare provide comprehensive directions for the guardians that outline expectations and wishes for the minor child’s upbringing, including visitation groups, outlines for holidays or important life events, etc.
    2. These instructions may include an advisory group to assist the guardians in making decisions and understanding the parents’ objectives and guidance regarding priorities for education, medical treatment, household support, and other important considerations.
    3. A family mission statement will assist with direction for your children and may be critical if a child has special needs.
      1. A supplemental needs trust provides for individuals with special needs while allowing them to continue to receive support from the government.
  1. What issues do we see for minor children in foreign jurisdictions? Or children with foreign citizenship?
    1. Keep children’s passports current – even expedited passports can take weeks to process. In the event of emergency travel, it is critical that all children’s passports are up-to-date.
    2. Without a legal guardian, a child will not be given a passport. A third party must be authorized by the court in the absence of a legal guardian to apply for the passport.
      1. This may be remedied by a signed and notarized document prepared by parents appointing this individual.
    3. If children of foreign nationality living in the US must move abroad to live with the guardian named in the Will, having a passport from the same country as the guardian can speed up the departure process since there will be no need to wait for a visa approval.
    4. Finally, most airlines have policies regarding accompaniment of a minor for air travel; check with your preferred carrier.
  1. Your child is under 18 and your selected guardians reside overseas. What are the risks to getting them “home”?
    1.  A Last Will and Testament should name temporary guardians in the United States. The temporary guardians assist in the process of transferring the children overseas to be united with the appointed guardians. A temporary guardian can also be critical if the child is an infant or requires other forms of immediate care.
    2. In order for the child to live abroad long-term, he or she will need to apply for a visa to the country of destination. Visa applications can require health screenings, background checks, and other time-consuming tasks that delay the child’s departure from the U.S. If the guardian named in the will cannot make it to the U.S. to take custody, a temporary local guardian can help navigate this process.
    3. Trap for the unwary: Children in the U.S. with a green card are only permitted to leave the country for a period of one year before needing to reapply for re-entry to America. After a two-year period, the green card will expire.
    4. New York will not appoint a non-US citizen guardian and will require a local co-guardian who can assist in moving the child abroad. A foreign guardian can serve alone in NJ, CT, or FL, for example; however, the courts will look at the best interest of a child and may request that a local co-guardian be named. New Jersey will send paperwork for guardianship to the Embassy or Consulate office in the country where the named guardian resides. The testamentary guardian will have to sign the papers at the Embassy, and sole guardianship may be granted.

“Talk to your children about why it’s important for them to sign documents that enable you to act on their behalf, if necessary,” McManus said. “Expect the best, of course – but you’ll be glad you planned for the worst if you’re ever confronted with it.”

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McManus Shares Mission-Critical Advice on the Do’s and Don’ts of Creating a Trust in CNBC Article

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On assignment for CNBC, Jennifer Woods recently penned an article to help readers think through the terms when creating trusts in order to ensure money “lands in the right hands and isn’t squandered.” For expert guidance on the topic, Woods turned to John O. McManus, founding principal of McManus & Associates and a top AV-rated estate planning lawyer.

Mission-critical advice from McManus on the importance of perpetuating a trust was spread far and wide via Woods’ article, “Heir tight: The dos and don’ts of creating rock-solid trusts.” From the story:

“We like the idea of a trust remaining in effect for the child’s lifetime,” said John McManus, founding principal of McManus & Associates, a trusts and estates law firm. This is particularly beneficial when large sums are involved.

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Insure.com calls on McManus for advice on life insurance trusts for child beneficiaries

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Navigating the terrain with life insurance trusts for child beneficiaries can be difficult, particularly when dealing with a special needs trusts for children that will likely never be on their own. Insure.com recently called upon McManus & Associates Founding Principal John O. McManus for guidance on trusts, “inherently complicated instruments” according to the story’s reporter Ed Leefeldt.

childThe article, straightforwardly titled “Life insurance trusts for child beneficiaries,” explains that life insurance companies often won’t pay the death benefit of a life insurance policy to a minor until he or she turns 18 unless a trustee or guardian has been named. Additionally, children may even face “estate taxes after a death, while the assets could be tied up in probate court” – trusts, however, ensure that life insurance money is “distributed according to your wishes, without delay.”

Trusts are also a useful tool for another reason. According to McManus:

A trust can also “protect children from themselves,” says John McManus, founder of an estate-planning law firm based in New York City. “If, at 18, a child gets it all, that could be a massively destructive injection of money,” he warns. Instead, the money can be earmarked for health, education or — with the help of a trustee — a lifetime trust.

The article suggests a revocable trust for those of average wealth, “which can be changed and/or revoked if necessary.” Of note: Sometimes you can simply write the name of the trustee on the beneficiary line of your life insurance policy, but always check with your life insurance company to make sure. For the wealthy, an irrevocable trust may be the best choice.

From the article:

This type of trust takes a bunch of assets, often including a life insurance policy, and “tosses them over the compound wall,” says attorney McManus. In effect, you create a separate corporation to manage them.

As explained by Leefeldt, an irrevocable trust needs a lawyer’s support; assets put in this trust can’t be taken out, regardless of how much one’s situation changes.

To learn how you can allow for changes in status when you create the original trust document (e.g., more kids, divorce, or a special needs child), check out the article in full. And to get help with the ins and outs of life insurance trusts for children and other loved ones, call 908-898-0100 to talk to the McManus & Associates team. Answers are a phone call away.

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McManus shares insight based on over two decades of experience for CreditCards.com article

 

Reporter Melody Warnick recently turned to McManus & Associates to get a better understanding of financial challenges faced by emancipated minors — few and far between, but common for child actors, young professional athletes and teen pop stars, for example. In her CreditCards.com story, “Emancipated minors may get freedom, but don’t count on credit,” Warnick explains that emancipation is a legal proceeding that grants adult status to a teen and frees her to make her own medical decisions, sign contracts and otherwise manage her life — and finances — independently.

A quote from John O. McManus, top-rated lawyer and founding principal of McManus & Associates, helps kick off the piece:

“There are instances when there’s a child actor or someone like an Olympic athlete, and the parents are managing their assets, and there’s a concern that they’re not acting in their best interest,” explains John McManus, an attorney and owner of McManus Legal, based in New York City. “The child also has to show that, despite their chronological age, ‘I am deemed to be independent and ready to make decisions on my own.'”

Based on over two decades of experience as a practicing attorney, John goes on to point out that:

“Emancipation is very, very unusual,” says McManus. “[The bar] has very little experience in the mechanics of it, because it’s just a very infrequent thing to see.” In some states, there aren’t even set procedures for allowing minors to petition for independence, let alone sufficient case history to establish guidelines for independence.

But there are things that minors, emancipated or not, can do to build credit and establish a solid financial footing for themselves, says Warnick:

1. Become an authorized user.

2. Sign a contract.

3. Get a debit card.

4. Talk to your financial aid adviser.

5. Get help.

Check out Warnick’s full story for an explanation of each item on this list. And to learn more, listen to a recent client conference call held by the firm on the “Top 10 Planning Issues for Recently Emancipated Children (over 18) and Minors.”

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McManus & Associates in New York Times article, “Growing Up With A Trust”

The New York Times today published an article with the headline “Growing Up With A Trust,” written by well-known “Wealth Matters” columnist Paul Sullivan. The story appeared online and in print, as well, on page F9 of the publication’s New York edition.

McManus & Associates worked hand-in-hand with Sullivan on this story, both in facilitating a conversation with one of our clients who shared insight on an anonymous basis and in providing expertise on preparing heirs for inheritance. From the article:

Steve, whose wealth was earned in financial services rather than inherited, is still working out a plan with his wife for telling their three sons about their inheritances. He asked that his name be withheld because he did not want his neighbors in the New York area to know about his money.

In his 40s and retired for more than a decade, he appears to be a model client for any trust and estate planner: he has already put more than $10 million in various trusts. “He’s a thoughtful, meaningful guy, and he has more time than our normal client,” said John O. McManus, his lawyer at McManus & Associates.

He is proud of the provisions written into the trusts for his children, which will keep them from having full access to the money until they are 35. Yet, though he has not done so, talking to his sons about his wealth is also important, even though all three are not yet 10.

To read on, visit http://www.nytimes.com/2013/03/26/your-money/trust-fund-children-need-an-education-about-money.html?pagewanted=all.

Top AV-rated Attorney John O. McManus was happy to weigh in on this important topic, because the firm is committed to helping its clients transfer not only assets, but also family values. As discussed in the piece, conversations with beneficiaries about wealth are part of an ongoing process, not just a one-time event. Through the creation of a Family Mission Statement, McManus & Associates can help you initiate these critical discussions and best prepare your heirs for a productive life filled with success that positively impacts society.

McManus & Associates is ready to talk you through this challenging, yet important process. Give our office a call at (908) 898-0100 to get started.

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The New York Times: “With Tax Changes Near, ‘You Can’t Wait to Plan’”

Mickey Meece, contributing writer for the The New York Times, recently interviewed McManus & Associates Founding Principal John O. McManus for an article published in the newspaper’s Retirement Section. The story, titled “With Tax Changes Near, ‘You Can’t Wait to Plan,’” showcases the below advice on managing retirement accounts from McManus:

John O. McManus, a trust and estate lawyer in Manhattan, suggested that some people should consider converting their individual retirement accounts to Roth I.R.A.’s to take advantage of the 2012 tax rate. A Roth I.R.A. is funded with after-tax money. Unlike other retirement accounts, Roths have no minimum distribution requirements after age 70 1/2, the accounts compound free of tax and distributions are tax-free. For those reasons, Mr. McManus said he was recommending Roth conversions to his clients.

To read the full write-up by the Times, click here.

Beyond what was included in Meece’s piece, McManus — a top-AV rated attorney — shared additional helpful estate planning tips related to the topic:

Tax rates will increase significantly in 2013 unless legislative action is taken. Roth I.R.A.’s can compound further without the requirement of mandatory distributions for those who find it “unnecessary” to take distributions. If someone lives to age 90, for example, the Roth IRA could experience significant additional growth, since it is not diminished by the mandatory distributions of a typical IRA. Furthermore, after his or her death, the children, who are then required to take distributions from the Roth IRA, will not pay income tax on those distributions. The result is 40 potential years of income-tax-free distributions to the children while tax rates may be higher than they are today. Finally, for those who have an estate that is subject to state estate tax and federal estate tax today, the act of converting to a Roth IRA today and paying the necessary income tax serves to reduce the future estate tax by reducing the amount of assets subject to tax, while ensuring greater income-tax-free compounding for his or her heirs down the road.

Advisors at McManus & Associates are available to discuss further.

 

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