Tag: estate planning

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

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.

Conference Call: Post-election Planning and the ‘Fiscal Cliff’

Now that the elections are over, Congress and the White House have the significant task of directing the country away from the impending “fiscal cliff.” Critical to these negotiations will be tax rates, exemption amounts and political ideologies.

During a conference call with clients, McManus & Associates Founding Principal John O. McManus identifies potential issues and ways to remain protected moving into 2013.

LISTEN HERE: “Post-election planning and the ‘Fiscal Cliff'”

Here’s what the discussion covers:

  1. What risks do the “Fiscal Cliff” negotiations present for estate and gift tax exemptions?
  2. Can compromise be achieved?
  3. What if no compromise is achieved by Dec 31, 2012?
  4. How does the composition of the House and Senate effect these discussions?
  5. What are some of the speculations for the compromise regarding gift tax/estate tax?
  6. How likely is it that a compromise, achieved later in the year, will be made retroactive to January 1, 2013?
  7. How does the emotional power of the argument to abolish the ‘death tax’ play into the debates?
  8. What new taxes will be levied? For example: 3.8% Medicare tax on capital gains, dividends and the top tax brackets.
  9. Estate tax on the ballot. How did it fair this election?
  10. Have you fully funded the trusts that we have set up for you and are all titles correctly named?

Please contact our office at (908) 898-0100 if we can help with any questions.

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

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

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

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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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.