Category: Conference Call

Conference Call: Top 10 Considerations for Domestic Asset Protection Dynasty Trusts

State laws vary rather widely regarding the jurisdiction of trusts and trust assets. Certain jurisdictions have laws that are generally more favorable in their treatment of trusts for purposes of asset protection, access to trust-owned assets and creditor protection. As part of McManus & Associates’ Educational Focus Series, Founding Principal John O. McManus shares expert guidance on the top 10 things to consider when deciding where to site your trust.

LISTEN HERE: “Top 10 Considerations for Domestic Asset Protection Dynasty Trusts”

Top 10 Considerations for Domestic Asset Protection Dynasty Trusts

 During the discussion, you’ll find answers to the 10 questions below:

  1. What is a self-settled trust? When can the grantor list himself or herself as a beneficiary?
  2. How do state income taxes affect the choice of situs for my trust?
  3. What variation is there in state legislation regarding creditors and Statute of Limitations?
  4. Are certain exemptions made for specific types of creditors?
  5.  What are the standards for proving fraudulent transfers?
  6.  What role do the courts play regarding actions involving a Trust?
  7. Does the state require an Affidavit of Solvency upon the transfer of assets?
  8. How does the rule against perpetuities affect choice of situs?
  9. Discussing observations of trustee fees in each of the most favorable states.
  10. What are some of the other miscellaneous trust enhancements in the most favorable states?

We would love to learn more about your asset protection needs. Send us an email at reception@mcmanuslegal.com or give us a call at 908.898.0100.

Conference Call: Top 10 Challenges to Estate Plans

McManus & Associates today hosted the June installment of its Educational Focus Series. Over the course of the firm’s 25 years in the field of Estate Planning, we’ve seen all manner of challenges to estate plans. From will contests to litigation, we are always aware of areas where even the slightest degree of risk might reside. Constantly working to protect against this, we are in a perpetual state of research and development to create the most comprehensive, state of the art plans that protect against even the most remote possible risks.

During this 30 minute recording, McManus & Associates Founding Principal John O. McManus reviews some of the areas of potential risk, discussing what we can learn from them. He also highlights effective strategies that the firm has created and employed to minimize risk and fortify your clients’ plans.

LISTEN HERE: “Top 10 Challenges to Estate Plans”

Top 10 Challenges to Estate Plans
  1. Will manipulated by third party and abuse of durable power of attorney. Undue influence by family members resulting in last minute changes to a will.
  2. Marshaling and valuing for tax purposes, international assets.
  3. Where has Generation Skipping Tax Exemption been utilized? You may be unaware of the significance of automatic allocation rates.
  4. Distributions to charities and notifying the attorney general/government agencies.
  5. Fiduciary’s responsibility to preserve and maintain the estate. (Stock fall in value, sale of home, house broken into, and unclaimed property.
  6. Significant gifts made during life that affect intended outcome of the estate plan.
  7. Failure to use a firm familiar with the sophistication of the planning documents to administer the estate. Failure to correctly interpret the documents.
  8. Personal property disputes after death of a loved one. Fighting in families over whether to sell or keep items to memorialize loved ones. Beneficiaries challenge distributions to surviving spouse from trust.
  9. Failure to title assets correctly. Joint accounts versus convenience accounts. Revocable Living Trusts not properly funded result in probate issues.
  10. Are there sufficient liquid assets available to continue to operate family business, preserve the family retreat and pay estate taxes?

We would be happy to answer your questions. Give us a call at 908.898.0100.

Conference Call: Maintaining and Operating Irrevocable Trusts

With the flurry of trusts created over the past two years that peaked as we approached the “fiscal cliff,” guidance on how to properly maintain and operate these wealth transfer vehicles is useful. Now that they are in motion, who is at the helm?

During this 30-minute call, McManus & Associates reviews strategies to ensure that your trust operates properly as it advances your estate planning and wealth transfer goals. John O. McManus also discusses the special provisions for life insurance trusts, payment of taxes on income earned by trust assets and the new planning ideas utilizing the trust as a leading instrument to accomplish the mission.

LISTEN HERE: “Conference Call – Maintaining and Operating Irrevocable Trusts”.

  1. Are all trust accounts, real property owned by trust and life insurance policies held in trust correctly titled?
  2. How does the tax basis of an asset and its projected future growth affect future planning? What future swaps of assets might you consider?
  3. How do we avoid common filing and reporting errors, especially payment of income taxes? If it’s a grantor trust, do we file an income tax return?
  4. Now that the trust is funded what post-funding strategies can be employed to impact the trust to better meet your goals?
  5. If you have not used the full exemption amount, ($5.25MM), should you consider making additional gifts now to further “freeze” the estate.
  6.  If your life insurance has been transferred to trust, are you properly maintaining the trust to address annual payments?
  7. When and why should you transfer a trust to an asset-protected state? Are there any actions pending against an individual who is a beneficiary of the trust or you, the grantor? What states are most favorable?
  8. When should you consider an institutional trustee? What are the pros and cons? When an individual is named as trustee, does he know his responsibilities?
  9. When your trust owns your primary residence, how should you cover expenses, insurance and titling? If you are the occupying tenant, have we formalized a lease agreement?
  10. How should you make distributions when the family business or other corporate entity (LLC, partnership, etc) is owned by a trust? Are two transactions necessary?

Conference Call: ‘These are a few of my favorite things’ – Top 10 Considerations when Planning for Tangible Personal Property

From jewelry to art, cigar collections to fine china, dividing tangible personal property equitably among loved ones after death can be a major challenge for an executor. In order to keep the court from stepping in to divide the pots and pans –a task no judge desires– direction on how to allocate specific items should be given (rarely explicitly mentioned in wills).

In a new conference call led by McManus & Associates Founding Principal and top AV-rated Attorney John O. McManus, learn about unique ways to plan for division of specific personal tangible property and special planning considerations for unique items such as music, art, wine, scotch and even gun collections.

LISTEN HERE: “‘These are a few of my favorite things’ – Top 10 Considerations when Planning for Tangible Personal Property”

After listening to the discussion, you’ll have answers to the questions below. Don’t hesitate to give McManus & Associates a call at (908) 898-0100 if we can be of further assistance.

1. Is it appropriate to use a personal property memo to capture personal items? Can enforcement of such a memo be guaranteed?
2. How do we catalog our personal property in a memo? Should items be specifically insured?
3. How to plan for art, jewelry and the use of a life estate for personal property, especially in a second marriage.
4. Are you a history buff with collection of Revolutionary and Civil War rifles? Who can you leave them to? Details on fiduciaries who need special licenses or permits.
5. How will pets, especially rare or exotic species be provided for?
6. How do you transfer and value intellectual property, Copyrights, projected sales, music and art?
7. Illegal transportation across state lines? Expensive transportation? Wine or gun collections, a grand piano? How to plan for covering expenses and proper transportation.
8. If you are named a fiduciary, what tasks should you consider taking now to ensure you are protected during probate?
9. Do you have bank accounts worldwide? Considerations to simply the probate process? Are you filing annual disclosures for FBAR?
10. What strategies can you use to ensure an equitable distribution of personal property when considering certain highly valuable assets?

Conference Call: Post-Fiscal Cliff Estate Planning – Top 10 Next Steps in Light of the Deal

In the early morning hours of January 1, the United States Senate passed legislation to avoid the ‘fiscal cliff.’ Nearly 20 hours later the House followed suit. Several surprising outcomes regarding estate planning emerged as part of this deal, which according to the Wall Street Journal, is “chock full of goodies” for nearly every interest group. The Estate Planning community was surprised to enjoy the benefit.

John O . McManus, top AV-rated estate planning attorney and founding principal of McManus & Associates, today held a conference call with clients about the new laws and ways to remain protected moving into 2013.

LISTEN HERE: “Post-Fiscal Cliff Estate Planning – Top 10 Next Steps in Light of the Deal”

Below please find the 10 questions that are addressed during the discussion:

1. The new tax rates and exemption amounts are set. What can you expect to pay for estates over $5.25MM?
2. What are the estate-tax “traps” to be wary of?
3. The Connecticut gifting limit of $2MM; is this a warning for future lifetime gifting limits in other states?
4. With the new permanency in the estate tax exemption, what taxpayers should make gifts over $5.25 MM and pay gift tax? (A strategy widely used for many prior generations)
5. For estates below $5.25 MM, who should employ trusts in their wills?
6. What is meant by “spousal portability” and “unification” of the exemption amounts? Does this eliminate the need for certain planning?
7. The Generation Skipping Tax Exemption Amount is also set at $5.25MM; who should take advantage of it?
8. Looking forward to March ’13 and the “debt ceiling” debates, what detrimental effect could such negotiations have on state estate taxes?
9. What are the trust and non-trust estate planning strategies that married and single persons should undertake in 2013?
10. What critical Gift Tax consequences must be avoided for gifts made in 2012? When does the statute of limitations clock begin?

McManus & Associates is here to help you make sure you’re covered. We welcome your call at 908-898-0100.

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.

Conference Call: President Obama’s Green Book — The Future of Estate Planning

As we have emphasized over the last two years, the Estate Tax Exemption Amount and the Lifetime Gift Exemption Amount currently at $5.0 million per person will end December 31st, 2012, and revert to $1.0 million.

President Obama has already indicated in his Green Book for the 2013 Budget that the Lifetime Gift Exemption will remain at $1.0 million and the tax rate will be 55% for transfers above that $1.0 million amount.

The opportunity, therefore, to transfer assets into a protected trust before year-end while retaining flexibility is unprecedented.  The additional benefit is that the future appreciation of the assets will be sheltered from both federal and state estate tax.

Read on or LISTEN HERE: “President Obama’s Green Book — The Future of Estate Planning”

When considering transfers of greater than $1.0MM in real estate, securities, partnership interests, or other assets, we strongly advise that a properly structured trust is the ideal recipient.

Given the potential value of the trust, it is specifically designed so that you and your spouse are able to enjoy a measure of flexibility to continue to access and control the transferred assets.  Among other things, this is accomplished by:

  • Retaining the power to remove and appoint Trustees or to receive loans from the trust;
  • Granting your spouse the right to receive distributions and serve as Trustee; and
  • Authorizing your spouse to determine how assets will be divided between your children.

Additionally, through the trust’s provisions, the assets receive an exceptional degree of protection against financial reversals and liability that you, your spouse, your children, and your other descendants may encounter during your lifetimes.

Again, after the expiration of the $5.0MM exemption at the end of 2012, only an act of Congress may increase the exemption from its $1.0MM level.  While it is unknown how Congress may respond after the election, the exemption is still likely to substantially decrease due to the current economic and political climate.

The nation is facing a “fiscal cliff” – the coinciding action of tax increases and spending cuts in order to remedy escalating budget deficits.  The result is that this special $5.0MM planning opportunity may never resurface during our lifetimes and be forever lost.

The prospective constraints on the present amount gifted will exponentially diminish the future amount that may be exempt from estate tax.  This concern is compounded by the fact that certain assets may currently be undervalued due to current market conditions and may reasonably be expected to experience accelerated growth in the coming years and decades in the protected trust.

To highlight the long-term estate tax advantage of making a significant lifetime transfer to a trust, consider an example in which a $3.0MM gift is made, both spouses pass away in year 2032, the gift appreciates at a very modest 4% per annum, and President Obama’s proposed estate tax plan is adopted.  The value of the assets will have doubled.

The consequences of failing to make such transfer now are at least $650,000.00 in state estate taxes and $2,600,000.00 in federal estate taxes, reducing the amount received by the children by more than 50%.  Naturally, this negative effect is diminished if more assets are gifted away, if each spouse lives longer, or if the estate appreciates in value at a greater rate.

The firm will close for the year on December 15; therefore, to be effective, all work must be commenced and completed within the month of November. We invite you to call or e-mail our office to review your specific circumstances.

Conference Call: Top 10 Planning Issues for Recently Emancipated Children (over 18) and Minors

The Dog Days of summer are past us and the recent return to school for so many reminds us of the simple task of protecting our young adults and our minor children. McManus & Associates is pleased to share the recording of our “Back to School” edition conference call, which addresses issues associated with the well-being and care of young adult and minor children.

LISTEN HERE: “Top 10 Planning Issues for Recently Emancipated Children (over 18) and Minors”

Below please find a list of topics that attorney John O. McManus, founding principal of the firm, covers in the discussion.

1. Legal and medical risks for children upon reaching age 18, legal adulthood. What happens if they are in a car accident or are hospitalized? How can we access medical and school records?

2. Overseas travel and study abroad. What are the necessities when your child is overseas?

3. Upon attaining age 18, does your child require a will?

4. Your child is 18. Should you appoint him or her as your representative in your incapacity planning?

5. Your child is 18 or 25. Should you make outright gifts to them? What are the risks of these gifts and custodial accounts?

6. Your 25 year old (or younger) child is getting married. Should you review with them whether a prenuptial agreement is necessary to protect the family assets?

7. Your child is under 18. What are the medical risks if you are unavailable?

8. Your child is under 18. What if both parents pass away or become incapacitated? What must a comprehensive plan to protect this child address in addition to appointing guardians?

9. Your child is under 18 and your selected guardians reside overseas. What are the risks to getting them “Home?”

10. Passports for children. What is the relevance of children of foreign nationality having a passport in the foreign jurisdiction? If your children are foreign born or going overseas, are passports current in the event of an emergency?

Please contact us — McManus & Associates, a trusts and estates planning law firm — at (908) 898-0100 if we can help with any questions.

Conference Call: Ready to Retire! Top 10 Ideas

John O. McManus, who founded McManus & Associates in 1991, has outlined the most important things that those in retirement, as well as those planning to retire, should carefully consider to protect themselves and their families. During a new conference call — part of a complimentary educational series provided by the firm — John explores the 10 issues below. Click the link to hear the 30-minute discussion.

LISTEN HERE: “Top 10 Considerations for Those in Retirement and Those Planning to Retire”

  1. Re-titling retirement accounts rolled out of a group plan and revisiting your financial plan with your advisor.
  2. Medicaid trusts and the eligibility period for elderly parents.
  3. The value of long-term care insurance and replacement of group term insurance.
  4. Effective gifting to descendants to retain access and/or control in trust.
  5. Moving out of state and the resulting domicile and residency issues.
  6. State estate taxes (a preview of the best states to move to for estate tax purposes and which have the best quality of life).
  7. Creating a family mission statement and all that it entails.
  8. Increased charitable giving (planned gifts, charitable lead trusts, charitable remainder trusts, foundations, and consideration of board memberships).
  9. Issues surrounding part-time consulting work and creating a business entity.
  10. Issues pertaining to real estate investments (ownership in an LLC or trust or sale to children in trust).

We’d love to help you learn more. Please give us a call at (908) 898-0100 or reach out via our Contact page.

Conference Call: Top 10 Topics on the $5MM Federal Gift Tax Exemption – Is It All Hype?

There are just a few months left to address what some practitioners are calling the end of the “golden age” in estate planning. During a conference call in August 2012, John O. McManus, trusts and estates planning attorney and founding principal of McManus & Associates, discussed the “Top 10 Topics on the $5MM Federal Gift Tax Exemption” below.

LISTEN HERE: “Top 10 Topics on the $5MM Federal Gift Tax Exemption – Is It All Hype?”

1. The propaganda – why is it called the “golden age”?

  • Gift tax exemption was always $1.0MM, meaning any gift in excess of that amount was subject to gift tax at a rate of up to 55%.
  • The exemption was increased to $5.0MM, dramatically increasing the ability to make tax-free gifts.

2. The deadlines – what actually happens on January 1, 2013?

  • Exemption retreats back to $1.0MM.
  • It will take an act of Congress to increase the exemption over $1.0MM.

3. Future tax rates – what is the new estate tax rate starting January 1, 2013?

  • There will be a 55% rate for estates in excess of $1.0MM.
  • This is an increase of 20% over the current 35% estate tax rate.

4. Future tax benefits – what about projected appreciation of the gift?

  • Once transferred, it is not just the gift that enjoys the exemption, it is also the growth that is outside the estate.
  • The entire amount is free from both federal and state estate tax.
  • Depreciated real estate and securities enable a gift of underappreciated assets.

5. State Estate Tax – what is the net state tax benefit if the $5.12MM Federal Exemption Amount remains unchanged?

  • NJ: 8-12% on average, with the top rate at 16% for an estate over $10MM.
  • NY: 3.5% to 12.45% for estates from $1.1MM to $15MM.
  • CT: over $2MM a 7.2% rate; up to 12% for estate over $10MM.

6. State gifting limitation – is Connecticut’s $2.0MM gift tax free limitation the beginning of a trend?

  • CT was the first state to reduce its estate tax exemption and is the only state that currently imposes a gift tax.
  • 7.2% rate on gifts over $2MM; up to 12% for estate over $10MM (same as estate tax).
  • Of the states that impose an estate tax, CT was one of the more liberal with respect to estate tax exemptions. There is a concern that states with more confiscatory tax regimes will consider following suit, particularly if the federal estate tax exemption does not retreat back to $1.0MM.

7. Gifts transferred into trust – is there any opportunity to access the gift or to change the beneficiaries?

  • Yes, the grantor can appoint the spouse as trustee and beneficiary, which we recommend.
  • The grantor may retain the option to borrow from the trust.
  • If drafted correctly and with precision, there can be an opportunity for the grantor to receive the assets back after the spouse beneficiary dies and if there has been dramatic reversal in his or her personal finances.
  • For years, we have had clients who wanted to move $1.0MM out of their estate to take advantage of the exemption, but they were concerned about access to the trust assets.  Now that the exemption is increased to $5.0MM, this concern is exacerbated. As a result, we have developed a structure that allows for significantly greater flexibility.
  • We also support procuring an insurance policy on the life of the spouse who is the trustee and beneficiary of the trust. If the spouse dies, there are then meaningful liquid assets available to the grantor to replace the spouse’s access to the trust as trustee and beneficiary.

8. Asset protection – can the gift truly be protected from creditors and plaintiff’s lawyers?

  • Yes, and the spouse can serve as the trustee.
  • We favor institutional trustees to accomplish this aim, and, at a minimum, we must preserve the right to transfer the situs of the trust to another state with stronger asset protection statutes.
  • The trust can protect the assets from attack for those in high-risk professions, such as physicians, or those in second marriages, where the spouse wants to ensure the assets pass to the children of the first marriage.

9. Planning limitations after the gift is made – are there any additional strategies or is it just “one and done”?

  • No, additional gift tax-free funding can take place provided that there is an unused amount of credit available. For example, if the gift tax exemption settles at $3.5MM in 2013, and a $2.0MM gift was made in 2012, there would still be a $1.5MM gifting opportunity.
  • The trust can also purchase certain components of the family wealth which exceed available credits using the assets of the trust as down payments. These more valuable assets may constitute the more aggressive portion of the overall portfolio, so all prospective growth is outside of the estate.

10. What does President Obama say about the exemption? What does Candidate Romney say about the exemption?

  • Mr. Obama wants to return to the 2009 levels. That would mean an estate tax exemption of $3.5MM and a gift-tax exemption of $1.0MM. The proposed top tax rate for both would be 45%.
  • Romney wants to eliminate the estate and gift tax all together. He is taking the Republican party line to broaden his appeal to conservatives, even though he comes from one of the most liberal states in the nation.
  • We have a mounting deficit, which will need, in part, to be bailed out with taxes.

BONUS

11. What assets you use to fund the trust and why now if you wish to gift only $1.0MM?

  • Many of those that we represent who are rushing to get some assets into the trust are using their residence or cash and then determining their approach for investing the money later. The residence can also be sold and the cash used for other investments or to purchase another piece of real estate.
  • Others are using cash to buy large life insurance policies to “supercharge” the trust, and guarantee a significant return or investment after they pass away.
  • Clients who want to give $1.0MM may say that there is no rush, but we always believe in the merit of (i) getting assets off the balance sheet; (ii) having those assets protected in a trust; and (iii) enjoying future growth that avoids federal and state estate tax.

McManus & Associates would welcome further discussion as you consider taking advantage of the “golden age” by December 31, 2012.