Tag: tax planning

Trusts & Estates Unveils Slideshow with McManus’ Ten Tax Planning To-Dos Before Year End

Trusts & Estates Magazine/WealthManagement.com published a slideshow authored by John O. McManus featuring 10 to-dos you should check off your list before the ball drops on New Year’s Eve. Check out the tips below — or view the full slideshow with photos.

 

 

 

Ten Tax Planning To-Dos Before Year End

John O. McManus | Dec 07, 2018

Discuss this checklist with your clients.

With less than a month left in 2018, time’s running out for your clients to finish their wealth management and tax planning to-dos. Many tax opportunities have an annual expiration date of Dec. 31, and this year presents unique possibilities. Here are 10 items your clients can check off their lists before the ball drops on New Year’s Eve.

  1. Freely give to help others live.

Clients should make annual exclusion gifts of up to $15,000 for individuals and $30,000 for married couples, per chosen loved one (per married couple).

Make gifts into trusts for children and grandchildren.

Contribute to an Internal Revenue Code Section 529 plan, which grows free of income tax.

Make unlimited gifts directly to educational institutions and medical facilities.

  1. Reap what you’ve sowed (and take your losses).

Clients should consider harvesting losses to offset capital gains realized in their securities portfolios.

  1. Your health is your wealth.

Advise clients to take advantage of this year’s lower threshold for Medical Expenses. For tax year 2018, the 2017 Tax Cut and Jobs Act reduced the floor (from 10 percent to 7.5 percent of adjusted gross income) that must be exceeded to take a deduction for Medical Expenses on one’s tax return. This is the last year to take advantage of this lower floor; so, if possible, your client should try to accelerate any medical transactions and purchases into the 2018 year.

  1. Use a tax rate in its infancy.

Review your client’s children’s portfolio income for application of the new Kiddie Tax. Prior to 2017, the children’s interest and dividends (unearned income) above $2,100 were taxed at your client’s top marginal tax rate. As a result of the Tax Act, this income will be taxed at the rates that are applicable to trusts. Trust rates are also at the top bracket, but the top rate starts sooner in the earnings curve.

When will your client’s child have to file a separate tax return?

  1. If their earned income, such as wages, exceeds $12,000; or
  2. If their unearned income (interest, dividends, capital gains) exceed $1,050; or

iii.          If the child has both earned and unearned income, the child must file if the total exceeds the larger of: (i) $1,050 or (ii) the earned income plus $350.

  1. Your client should think about giving.

Bunch your client’s charitable deductions into the same year. The deduction for cash donations to public charities has increased to 60 percent of the taxpayer’s adjusted gross income.

Charitable donations should be combined every other year to exceed the new higher standard deduction ($24,000 married; $12,000 single). Otherwise, your client’s charitable gifts won’t enjoy a benefit.

If over aged 70½, your client should make a qualified charitable donation of his required minimum distribution from his individual retirement account; the income will be excluded from the return and taxable income.

Make gifts to charities and family foundations with appreciated assets:

1. Consider gifting low-basis stock (instead of selling the stock to raise cash for gifting that could lead to gains).
2. Determine liquidity needs in the foundation to meet the requirement to pay 5 percent of the value of a foundation’s net investment assets.
3. Fund a charitable remainder trust with concentrated positions in appreciated securities to diversify without adverse tax consequences associated with selling appreciated securities.

  1. Rocket fuel for your client’s investment vehicles.

Establish and fund qualified plan contributions.

Maximize your client’s Section 401k contribution, which would be $18,500 generally and $24,500 for clients over aged 50.

Consider making a gift of up to $5,500 to either a traditional or Roth individual retirement account  for his children or grandchildren who aren’t funding their own IRAs but have enough earned income to report.

  1. Take a break to consider break-ups.

While we always support and encourage harmony and reconciliation, if there must be a decision to legally separate or complete a divorce, your client may want to do so before year end. Otherwise, moving forward, the payer of alimony will no longer get a deduction on their tax return, and the recipient will no longer have to include the alimony as taxable income.

  1. Don’t wait to compensate.

An owner of an S corporation must pay himself a reasonable compensation (what someone in a similar job would be paid). Therefore, make sure your client pays himself a salary before year end.

  1. Be bold and review client’s withholding.

The Tax Act lowered the tax rates and changed the tax bracket income ranges. Therefore, now’s the time for your client to do a “check-up” to see if the current tax withholding will be sufficient for next year’s income.

  1. Get in the groove to make a move.

Your client should make distributions of income from trust accounts and estate accounts to lower his income tax liability. Estates and trusts are taxed at the highest income tax rate (and a lower threshold at which the 3.8 percent Medicare surtax applies). Therefore, it may make sense for your client to distribute income to the beneficiaries to be taxed at the beneficiary’s lower income tax rate.

InvestmentNews Publishes Slideshow Based on McManus’s Year-End Tax Advice

6 tax strategies for year-end planning

New U.S. tax laws should inspire some Americans to pursue year-end tax strategies that will seek to maximize their wealth, according to John McManus, founding principal of McManus & Associates. He said these strategies make sense given the new tax framework, as well as estate planning recommendations. Click through the different strategies and listen to Mr. McManus discuss these strategies here.

Give it away sooner rather than later

Given that the increased estate tax exemption is temporary, high-net-worth clients worried about future estate taxes should make $15,000 (or $30,000 for a married couple) annual exclusion gifts to children and grandchildren into flexible irrevocable trusts before Dec. 31. Right after Jan. 1, give the gift again.

Offsetting gains due to growth

If a client sold appreciated investments or a business in 2018, that will spark capital gains taxes, so offset those by donating to a family-controlled charitable vehicle like a private foundation or charitable remainder trust before Dec. 31.

Think before you sell

Given the new limitation on the state and local tax (SALT) deduction for federal income taxes, clients should think before they sell appreciated investments or a business in the next few years because those sales will lead to unusually high capital gains taxes. But if they establish a non-grantor trust in Delaware or Nevada to store assets prior to a liquidity event, they can avoid state capital gains tax.

Investment diversification with insurance?

With the SALT deduction now constrained, think more about income tax exposure on investments. Consider whole life insurance, which continues to appreciate in value without resulting in income taxes due, and represents an efficient component of a diversified portfolio.

Tax benefits of insurance

High-net-worth families who will still have state and federal estate tax exposure should be thinking about how to utilize insurance. Permanent insurance coverage owned by an irrevocable life insurance trust should be a component of smart estate plans.

Creative solutions

Here’s a three-generation plan: A grandparent could loan significant funds to their child to acquire a life insurance policy for their grandchild. That loan can be structured to be dramatically discounted upon the grandparent’s death, thus cutting state and federal estate taxes. This arrangement allows the insurance policy to be free of taxes all the way down to the grandchild.

See the InvestmentNews slideshow with photos here.

Conference Call: 10 Tax Planning To-Dos to Check Off Your List before the End of 2018

With only one month left in 2018, time is running out to finish your wealth management to-dos. We’ve made your list, but it’s time to check it twice.

Today, McManus & Associates held a call with clients to provide guidance on the items below. Click to hear the half-hour discussion led by the firm’s Founding Principal John O. McManus:

 

1.  FREELY GIVE: Make annual exclusion gifts up to $15,000 for individuals and $30,000 for married couples, per chosen loved one.

2.  REAP (LOSSES TO OFFSET) WHAT YOU’VE SOWED: Harvest losses to offset capital gains in your securities portfolio.

3.  MIND YOUR HEALTH: Take advantage of this year’s lower threshold for Medical Expenses.

4.  USE A TAX RATE IN ITS INFANCY: Review your children’s portfolio income for application of the revised Kiddie Tax.

5. GIVE THOUGHT TO GIVING: Bunch your charitable deductions in the same year. The deduction for cash donations to public charities has increased to 60% of the taxpayer’s adjusted gross income.

6.   FUEL INVESTMENT VEHICLES: Establish and fund qualified plan contributions.

7.  TAKE A BREAK TO RECONSIDER BREAK-UPS: If planning to execute a divorce or separation agreement, you may want to do so before year-end. Otherwise, moving forward, the payer of alimony will no longer get a deduction on his or her tax return, and the recipient will no longer have to include the alimony as taxable income.

8.  DON’T WAIT TO COMPENSATE (YOURSELF):

An owner of an S Corp must pay themselves a reasonable compensation (what someone in a similar job would be paid). Therefore, make sure you pay yourself a salary before year- end.

9.  RESERVE TIME TO REVIEW YOUR WITHHOLDING:

The 2017 Tax Act lowered the tax rates and changed the tax bracket income ranges. Therefore, now is the time to do a “check-up” to see if your current tax withholding will be sufficient for next year’s income.

10.  MAKE A MOVE: Make distributions of income from trust accounts and estate accounts to lower their income tax liability.

Conference Call: 6 Strategies for Smart Year-End Planning under New Tax Laws

Before we know it, the calendar will turn to 2019. Today, McManus & Associates Founding Principal John O. McManus held a conference call with clients to impart insight on year-end tax strategies, in light of the new tax laws, to implement by December 31st. McManus also covered annual end-of-year essentials. Listen to a recording of the discussion by clicking below:

 

 

1.    TAKE ADVANTAGE OF A LIMITED-TIME OPPORTUNITY: Since the estate tax was not repealed at the end of last year and the increased estate tax exemption is temporary, what can high-net worth families do to minimize future estate tax?
2.    GET SET TO OFFSET: If you’ve already sold appreciated investments or a business in 2018 and will incur significant capital gains taxes, what can you do to enjoy a deduction and aid in offsetting the gain?
3.    PLAN TO SAVE: The drastic limitation on the State and Local Tax (SALT) Deduction for Federal income tax purposes means that those who anticipate selling appreciated investments or a business in the next few years will experience unusually high capital gains taxes—but what can you do so that State capital gains taxes will not be imposed?
4.    ADD TO YOUR INCOME TAX TOOLBOX: In spite of the marginal reduction of the Federal income tax rates, now that the Federal deduction on SALT has been significantly constrained, we will all have even more income tax exposure on investments. Can life insurance function as an income tax planning solution?
5.    ENSURE YOU’RE UTILIZING INSURANCE: High-net worth families will continue to have State and Federal estate tax exposure, so what must remain an essential component of any well-constructed estate plan?
6.    THINK OUTSIDE THE BOX: For those who have Estate Tax vulnerabilities but are elderly or in poor health, the acquisition of a life insurance policy may be uneconomical or impossible for those individuals, but how can life insurance reduce State and Federal Estate Tax while also creating wealth for future generations?

 

ADDITIONAL YEAR-END ESSENTIALS

 

THE ABCs OF ESTATE PLANNING PROTECTIONS: Regardless of tax law changes, it’s important to go back to the basics with estate planning on an annual basis. Proper year-end planning should always consider the following:
·     Incapacity concerns
·     The dangers of passing away without a will
·     Probate pitfalls
·     Insurance as creditor-protection planning
·     Foreign reporting requirements
·     U.S. estate tax exposure for non-resident aliens
·     Business succession issues

Trump Tax Bill Passes – Act Now: Top 10 Year-End Tax Planning Strategies

With President Trump having signed the GOP tax bill today, new tax planning opportunities are now available – but you must take advantage of many of them within the next nine days, before 2018. John O. McManus, founder of top-rated estate planning law firm McManus & Associates, makes the following time-sensitive recommendations in light of tax reform and the reduction of income tax rates:

  1. Accelerate your income tax deductions. Certain itemized deductions, i.e. income tax and real estate tax deductions, will be capped at $10,000. Pay your January estimated taxes in December; make your January mortgage payment in December; deduct any unreimbursed medical expenses; make your 2018 charitable donations in 2017. Some commentators suggest prepaying property taxes that have been assessed, such as the 2/1/18 and 5/1/18 installments – but it depends on the state. Also, the American Institute of Certified Public Accountants has opined that CPAs should advise clients that payments in 2017 of state tax liabilities projected for 2018 are not deductible on their 2017 federal income tax returns. You should be mindful of the fact that these additional payments could cause you to be subject to the alternative minimum tax, which results in you losing the benefits of these state and local taxes.
  2. Prepay in 2017 any business entertainment expenses, such as sports tickets or green fees, and membership dues for clubs organized for business. The final tax reform bill disallows these expenses; it will continue to allow the deduction of 50% for food and beverages associated with a trade or business.
  3. Postpone/defer receipt of income until 2018 to take advantage of the lower tax rates.
  4. Review your potential capital expenditures. Under the final tax reform bill, until January 1, 2023, a business will be able to expense 100% of the cost of the non-real estate property as first-year additional depreciation (bonus depreciation). (There is the possibility that 100% expensing may be available for property placed into service after September 27, 2017). Starting in 2023, the allowance of 100% is phased out by 20% each year.
  5. While rates are higher in 2017, make gifts to charities and family foundations with appreciated assets. Because of the lower limitation of 20% of AGI for appreciated stock to a foundation, you should split your gift between this year and next.
  6. Consider gifting low-basis stock instead of selling to raise cash for gifting that could lead to gains.
  7. Fund a charitable remainder trust with concentrated positions in appreciated securities in order to diversify without adverse tax consequences associated with selling appreciated securities.
  8. Harvest your losses to offset capital gains.
  9. Establish and fund qualified plans. Consider making a gift of up to $5,500 to either a traditional or Roth IRA for your children or grandchildren who are not funding their own IRAs, but have enough earned income to report.
  10. Contribute up to $28,000 gift-tax free per married couple ($30,000 for gifts made in 2018) to a 529 Plan, which grows free of income tax. The final tax reform bill will allow withdrawals for private, elementary and secondary school expenses up to $10,000 per year.
  11. Make annual exclusion gifts to chosen loved ones of $28,000 per married couple ($30,000 for gifts made in 2018).
  12. Make gifts into trusts for children/grandchildren.
  13. Make unlimited gifts directly to educational institutions and medical facilities.
  14. Make distributions of income from trust accounts and estate accounts to lower the income tax liability. Estates and trusts are taxed at the highest income tax rate (and a lower threshold at which the 3.8% Medicare surtax applies). Therefore, it may make sense to distribute income to the beneficiaries to be taxed at the beneficiaries’ lower income tax rates.

“Trump’s new tax bill creates tax planning opportunities before year-end,” commented McManus. “Find time for last-minute tax planning as soon as you finish your last-minute holiday shopping.”

For trusted advice on tax and estate planning, call McManus & Associates at 908-898-0100. Learn more about the award-winning firm at www.mcmanuslegal.com.

Conference Call: Year-End Boot Camp

There are a limited number of days left in 2017. McManus & Associates Founding Principal John O. McManus recently discussed imperatives before year-end for the firm’s clients, in light of significant current events, concerns, and considerations, and amidst a changing tax and economic environment. Listen to the call below, as well as review the list of topics that are covered. 

 

1.Tax Reform –  How will potential estate tax repeal impact you?

2. Estate Freezes – You have exhausted much of your lifetime gift exemption; how can a GRAT aid in shifting wealth in a tax-effective manner?

3. Low Interest Rates and the Market – How does the continued low-interest rate environment support the transfer of investments to the next generation?

4. Leveraging Existing Trusts – How can you deploy previously gifted assets to participate in other estate tax minimization strategies?

5. Family Limited Partnerships – What actions should you be taking in light of the new Partnership Audit rules?

6. Estate Tax – Can estate tax be eliminated if you have taken full advantage of all wealth transfer opportunities but still have a sizable net worth?

7. Asset Protection – Are you confident in your protections against exposure to personal and professional liability?

8. Life Insurance – How does premium financing of life insurance by a family member or bank shift wealth and minimize tax?

9. Planning with Basis – Can you take advantage of upstream gifting to an older family member to minimize capital gains tax?

10. Compliance – Are you certain that you have met the IRS requirements for reporting gifts that you have made in 2016 and prior to 2016?

Forbes Publishes Contributor Piece by John O. McManus, “Year-End Tax Planning Strategies Due To Trump’s Election”

John O. McManus, founder of McManus & Associates, penned the article below, which was published by Forbes and Next Avenue:

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Personal Finance

Year-End Tax Planning Strategies Due To Trump’s Election

By John O. McManus, Next Avenue Contributor 

12/19/2016

The election of Donald Trump, in addition to Republican control of the House and Senate, bodes well for significant tax reform during early 2017. For some people, this can present major opportunities for reducing taxes for 2016 by making some key year-end tax planning moves.

Media Round-Up: Trump & Year-End Tax Planning Tasks

Investment News
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McManus & Associates recently reviewed the “Top 10 Year-End Tax Planning Tasks” in light of President-Elect Trump’s pre-election tax platform with clients. Soon after, he had a lengthy conversation with Investment News reporter Greg Iacurci on the topic. Iacurci then put together an informative, engaging slideshow based on the discussion, “8 tax moves to make this year ahead of Trump’s presidency.” From the intro:

President-elect Donald Trump and the Republican-controlled Congress have said tax reform is a high priority next year. Mr. Trump’s agenda includes items such as repealing the estate tax, consolidating income tax rates and lowering the top income tax brackets.

Although there’s no certainty of any concrete reforms occurring next year, financial advisers are betting on legislation next year and telling clients to make certain moves by year-end.

John McManus, estate-planning attorney and founding principal of McManus & Associates, offers some actions to take this year based on Mr. Trump’s current proposals.

Conference Call: Top 10 Tax Planning Tasks to Complete before the End of 2016 in Light of President-Elect Trump’s Proposals

In light of Donald Trump’s election and his pre-election platform to reduce marginal income tax rates, there are several planning strategies that should be considered as part of your year-end planning. Today, McManus & Associates Founding Principal John O. McManus held a conference call with clients to discuss the 10 items listed below.

LISTEN HERE: “Top 10 Tax Planning Tasks to Complete before the End of 2016 in Light of President-Elect Trump’s Proposals”

McManus Quoted in Investment News on Estate Tax Changes with Trump Presidency

Investment NewsIf Republicans were to win a repeal of the so-called death tax, contentious Treasury regulations on business valuation discounts would also disappear, according to Investment News Reporter Greg Iacurci. In a new story, “Estate tax repeal no ‘slam dunk’ under Trump and Republican-held Congress,” Iacurci examines how president-elect Donald Trump will govern and what policies he may or may not be able to push through upon taking office. He writes:

Mr. Trump articulated several tax proposals as a candidate on the Republican ticket, focusing on a repeal of the estate tax, consolidation of income tax rates and lowering the top tax brackets, and standardization of tax rates across businesses.

But even if the death tax is repealed, McManus & Associates Founding Principal John O. McManus brings the estate tax victory into perspective. From the article:

Financial planners and tax payers should keep in mind that the laws around estate taxes come and go, said John O. McManus, founding principal of McManus & Associates.

“Even if the federal estate tax evaporates under Trump, that is never permanent,” he said, pointing out that in 2010 the estate tax exemption was reduced to zero, only to have it set at $1 million for the following year.

Head over to Investment News to read the full story. For trusted advice on tax and estate planning strategies in light of Trump’s intended policies, call McManus & Associates at 908-898-0100.