McManus Helps Uncover HSA Pitfalls for MarketWatch Column

Andrea Coombes, Ways & Means columnist for MarketWatch, recently took on the task of identifying “hidden pitfalls” of Health Savings Accounts, which are medical savings accounts with tax advantages. For her piece, she spoke with John O. McManus to learn what happens to HSAs when the accountholder passes away.

The fourth item on Coombes’ list of 10 pitfalls:

Your entire HSA account becomes taxable when you die, unless you’ve named your spouse as beneficiary, in which case your account becomes your spouse’s HSA. So, from an estate planning perspective, what’s the best way to handle these accounts, assuming you’re older and have a hefty sum stashed? “Our view is postpone withdrawals from accounts that are compounding tax-free,” John O. McManus, founder of McManus & Associates, a trusts and estates law firm in New York and New Providence, N.J. Once you’re over 65, you can withdraw money without the 20% penalty faced by those under 65. (If you spend on non-medical costs, you’ll owe income tax, which is the same as withdrawing from a traditional IRA, but health accounts don’t have required minimum distributions, so you have more control.) Letting the money grow is valuable, McManus says, given that people are living into their 90s and nursing-home costs can run “$100,000 just for living quarters and medical assistance.” If you bequeath the account to a non-spouse beneficiary, he or she will owe income tax on its fair market value.

To read Coombes’ full column, “10 hidden pitfalls of health savings accounts,” click here. For guidance on utilization of investment and savings vehicles as part of your estate plan, give McManus & Associates a call at 908-898-0100.

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Wall Street Journal Cites Tips on Family Meetings from John McManus

On May 11th, an article by Kelly Greene titled “When It’s Time to Huddle” appeared on page B8 in The Wall Street Journal. Greene’s story discusses an important issue that families across America are facing every day: complicated financial and legal planning for elderly relatives. In the piece, Greene relays key tips for tackling this challenge:

Be inclusive.

Don’t delay.

Hire a professional referee.

Set an agenda in advance.

Tap long-distance relatives.

Under “Don’t delay,” Greene captures advice from McManus & Associates Founding Principal John O. McManus that “families should hold meetings before any serious health problems develop.” From the article:

John McManus, an estate-planning lawyer in New Providence, N.J., says there is a “gaping hole” in family planning around preparing for parents’ aging. He considers instituting family meetings among his clients’ families, and in his own, one of his top professional and personal priorities, he says.

“Meetings are critical for getting ideas out on the table,” Mr. McManus says. “There is no one correct answer on how to deal with Mom or Dad’s health issue,” so it’s helpful to have time to think through the choices as a family.

For more tips, check out the full story. And for guidance on how to handle family meetings addressing the health of older loved ones, give McManus & Associates a call at (908) 898-0100.

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