Trusts & Estates (WealthManagement.com) Publishes Byline by John O. McManus

Ten Estate Planning Strategies While Waiting for Tax Reform

How to proceed until Congress takes action.

John McManus | May 12, 2017

The election of Donald J. Trump to the presidency and Republican control of both houses of Congress make estate tax reform extremely probable in the next two years. However, given the new administration’s other proclaimed priorities, including the repeal of Obamacare, minimization of illegal immigration, increases in defense spending and infrastructure improvements, there are likely several months before Congress turns its attention to a tax system overhaul.

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Conference Call: 10 “Must Do” Estate Planning Strategies While We Wait for Congress to Act

The election of Donald Trump to the presidency and Republican control of both houses of Congress make estate tax reform extremely likely in the next two years.  However, given the incoming administration’s other proclaimed priorities, including the repeal of Obamacare, minimization of illegal immigration, increases in defense spending and infrastructure improvements, there are already questions about the feasibility of adopting all of the proposed tax initiatives. Furthermore, there is much uncertainty about particular aspects of the Republican tax proposal (including a replacement tax on the wealthy), and there is already concern about the likely impermanence of any new legislation. These factors highlight the importance of flexibility in preparing an estate plan and proceeding with wealth transfers suited to the current political and economic circumstances.

In a recent conference call with clients, McManus & Associates Founding Principal John O. McManus highlighted the current appealing strategies and opportunities available as part of an estate plan. Click below to hear him discuss the following list:

LISTEN HERE for details: “10 ‘Must Do’ Estate Planning Strategies While We Wait for Congress to Act”

  1. Annual exclusion gifts
  2. Lifetime exemption gifts
  3. Short-term and mid-term Grantor Retained Annuity Trusts (GRATs)
  4. Estate Freeze Installment Sales
  5. Family Limited Partnerships
  6. Upstream Gifting
  7. Community Property Trusts
  8. Charitable Remainder Trusts (CRT)
  9. Drafting Flexibility in Core Planning Documents
  10. Philanthropic Planning
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3 Last-Minute Income Tax Strategies

Photo credit: Lendingmemo

Photo credit: Lendingmemo

Scrambling as we approach April 18th? Here are three last-minute tax strategies to harness for proper management of the deadline.

If you need additional time to file your personal income tax return, file an extension:

The deadline to file your tax return is April 18, 2016 (April 19, 2016, if you live in Maine or Massachusetts).

If you cannot file your return on time, apply by the due date of the return for an extension.  You can receive an automatic six-month extension for your personal income tax return if you file Form 4868 by the tax filing deadline.  (If you are mailing the extension, you should mail it certified with a return receipt, so that you have proof of the mailing date.) The extension gives you until October 17, 2016 to file your 2015 return.

This extension is for filing only and does not allow you more time, without penalty, to pay your tax liability for 2015.  Although the extension will be allowed without payment, you will be subject to interest charges and possible late payment penalties on 2015 taxes not paid by April 18th (or April 19th in Maine or Massachusetts).

If the amount paid with Form 4868, plus withholding and estimated tax payments for 2015, are less than 90% of the amount due, you will be subject to a late payment penalty (one-half of 1% of the unpaid tax per month).

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MarketWatch Publishes Article on Cutting Capital Gains Authored by McManus

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5 ways to protect your estate from capital gains taxes

Published: Dec 25, 2015 6:04 a.m. ET

Traditional estate planning is being turned on its head

By JOHN O. MCMANUS

The time-honored approach to estate planning is being turned on its head by significant tax law changes that have taken effect in recent years.

Long-term capital gains tax rates now range from 25% to 33% (when you add together the top federal, state and local rates and Obamacare’s Medicare surtax). So now that the federal estate tax exemption is $5.43 million ($10.86 million for a couple’s combined exemptions), many Americans may no longer be exposed to federal estate taxes, making taxes on income and capital gains more prominent.

In fact, some legal practitioners who spent the first half of their careers zealously transferring assets out of their clients’ estates to avoid estate taxes now expect to spend the second half pushing assets back into their clients’ estates because the estate planning paradigm has changed.

What are the best ways to strategize around capital gains taxes to keep them as low as possible?

Rundown of the tax rules for gifts

To answer that, it helps to first understand the rules about gifts and taxes.

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InvestmentNews Features McManus Column for The Tax-Conscious Adviser

Below is an advice column on capital gains tax strategies by John O. McManus that was published by InvestmentNews for its regular feature, “The Tax-Conscious Adviser.”

Investment News

 

 

tax concious adviser

Estate plans require a fresh look

Thinking around bequests shifts as capital gains tax and estate tax exemption rise

Nov 29, 2015 @ 12:01 am

By John O. McManus

Significant tax law changes mean it’s time to dust off your estate plan. Long-term capital gains tax rates now range from 25% to 33%, with the combination of the top federal, state and local rates and the Medicare surtax. This hike in capital gains tax rates, coupled with the greater federal estate tax exemption, calls for a fresh look at planning strategies.

With the current $5.43 million federal estate tax exemption ($5.45 million for 2016), many people may no longer be exposed to federal (and possibly state) estate taxes. Thus, maneuvering around capital gains tax becomes the primary concern.

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CAPITAL GAINS TAX: The Top 10 Current Issues and Planning Opportunities

The rise in capital gains tax rates and the higher federal estate tax exemption have shifted the estate planning paradigm. Across the nation, long-term capital gains tax rates now range from 25% to 33%, with the combination of the top federal, state and local rates, along with the Medicare surtax. This demands a fresh look at current planning strategies.

When assets are included in an estate, they are subject to estate tax, but the assets enjoy a step-up in basis for income-tax purposes. Gains tax can then be avoided. However, if there is no estate tax because the gross estate assets are below the estate tax exemption amount, then it may make sense to keep assets inside the estate.

Many estate planning attorneys have spent the first half of their careers getting assets out of their clients’ estates, but now they might spend the second half of their careers getting assets back into their clients’ estates (for those individual estates under $5.43MM or joint estates under about $11MM).

As part of McManus & Associates’ Educational Conference Call series, John O. McManus this month examined how to shift gears in light of new, unique opportunities. We invite you to listen to the recording to find detailed information on the Top 10 issues and planning opportunities related to capital gains tax.

LISTEN HERE: “Top 10 Current Issues and Planning Opportunities with Capital Gains Tax”

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“Wills, Trusts, and Estates Prof Blog” Points Readers to McManus & Associates

Gerry W. Beyer

Gerry W. Beyer

A treasure chest of information on estate planning, “Wills, Trusts, and Estates Prof Blog” is a member of the Law Professor Blogs Network sponsored by Wolters Kluwer and written by Texas Tech School of Law Professor Gerry Beyer. Via the go-to outlet, Beyer recently highlighted McManus & Associates’ latest educational conference call, “Top 10 Signposts to Guide Planning for Estates under $10MM.” The discussion sheds light on estate planning strategies that should be considered now following recent changes in federal and state law.

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Conference Call: “Top 10 Signposts to Guide Planning for Estates under $10MM”

The American Taxpayer Relief Act of 2012 (ATRA) delivered transfer tax certainty, large indexed transfer tax exemptions, and portability. Taking into account new norms, McManus & Associates, an estate planning law firm based in the Tri-State Area, today released a new installment in its free Educational Focus Series, “Top 10 Signposts to Guide Planning for Estates under $10MM.” During a conference call for clients, the firm’s Founding Principal and top AV-rated Attorney John O. McManus shed light on estate planning strategies that should be considered today following recent changes to federal and state laws.

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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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