Category: Guidance

WEBINAR: Proposed Tax Law Changes for 2022

Autumn 2021 Webinar

For its budget proposal for 2022, the U.S. House Ways and Means Committee proposed amendments to the Internal Revenue Code.

Over the past year, McManus & Associates has shared the dangers of this coming tax legislation impacting families’ efforts to transfer their wealth.

The tax legislation reflects many of the concerns that we have shared over the past year in anticipation of the current Administration’s efforts to enact significant obstacles for affluent families to transfer their wealth effectively.

In addition to the expected reduction of the tax exemption for lifetime gifts and estates, the potential House budget also seeks to:

 ·       Drastically diminish the powerful benefits of irrevocable grantor trusts – which are widely used to transfer wealth.

 ·       Hamstring the effectiveness of Grantor Retained Annuity Trusts (GRATs) – one of the most powerful strategies to effectively transfer the growth of one’s estate while maintaining the original wealth.

 ·       Eliminate valuation discounts on the transfer of private businesses, including family partnerships and limited liability companies – frequently used to compress gift and estate values to minimize taxation.

Watch the video to review the urgencies presented by these possible tax law changes and to hear McManus & Associates’ perspective on planning during a period of continuing uncertainty. For recommendations tailored to your circumstances, contact the firm at 908.898.0100.

Conference Call: Top 10 Planning Opportunities to Consider Before 2021

McManus & Associates Founding Principal John O. McManus recently held a conference call with clients to provide timely information on how the new Biden administration may impact estate planning. During the call, McManus highlighted opportunities and offered guidance on how to respond to these possible changes. Listen to the recording and find a list of topics that were covered below.

1.   Utilize your lifetime exemptions – Use it or lose it: these exemptions are set to sunset after 2025 or sooner by legislative action (possibly retroactive to January 1, 2021).

2.   Lock in now the lower Estate and Gift transfer tax rates.

3.   Sell appreciated assets prior to the potential increase in Capital Gains tax rates.

4.   Avoid the potential future limitations on Grantor retained Annuity Trusts.

5.   Sell appreciated assets to a defective Grantor Trust using the current low federal interest rate.

6.   Make intra-family loans to take advantage of today’s low interest rate environment.

7.   Create a Charitable Lead Annuity Trust if you are charity minded.

8.   Take advantage of valuation discounting before it is eliminated.

9.   Take advantage of Spousal Access Trusts so that you can continue to have access to the transferred funds.

10.Review your year-end philanthropic planning especially for gifting low basis stock.

Don’t miss these opportunities to protect your assets and build wealth. Contact McManus & Associates now to review your Estate Plan and ensure it reflects your current personal and financial goals: 908-898-0100. 

Conference Call: What Tax and Estate Planning Must You Be Prepared to Implement Before December 31st

It’s important to anticipate potential 2020 Election outcomes as you steer your estate planning. What specific actions should you consider taking before 2021? Listen to McManus & Associates Founding Principal John O. McManus’s recent guidance to clients:

1.    How will a change in the administration impact income taxes? Ordinary income and capital gains rates are expected to rise for families making in excess of $400k and many favorable income tax benefits may be limited or eliminated. 

2.    Likewise, what will Vice President Biden’s possible election mean for the ability to transfer wealth? The gift and estate tax exemptions will almost certainly be reduced by at least 50% with a possibility that gift and estate tax rates may increase to 50% or beyond. 

3.    What current financial indicators make this period of time a helpful environment for wealth transfers? Undervalued assets and business interests due to the pandemic and continuing rock-bottom interest rates are positive elements that foster that success of certain transfer strategies. 

4.    Why should you consider gifting closely-held businesses and interests in other private family entities before year-end? During President Obama’s tenure, Treasury Regulations were proposed that would eliminate valuation discounts between family members (and other wealth transfer tools) and it is possible that those restrictions will be revisited if a shift in control of government occurs.

McManus & Associates can help you take advantage of this window of opportunity before it closes. Call us today at 908-898-0100.

McManus Featured as Expert Speaker on “Estate Freeze Due Diligence”

An estate freeze is a power strategy for wealth management. Practitioners must be diligent in utilizing this estate planning tool, however, because even the most basic estate freeze can create a minefield of potentially negative estate, income tax, and family problems.

McManus & Associates Founding Principal John O. McManus was recently an expert speaker for the Lorman Education Services webinar, “Estate Freeze Due Diligence,” during which he outlined practical applications of estate freeze techniques and their benefits (which should be weighed in light of one’s expectations and business, financial, and personal goals). The presentation also provides an understanding of the common implementation challenges and pitfalls that can accompany an estate freeze strategy and, just as important, ways in which those dangers can be avoided and addressed.

See and listen to John’s presentation on the topic by clicking below. For more questions or more detailed guidance, call McManus & Associates at 908-898-0100.

John O. McManus – PowerPoint Presentation, “Estate Freeze Due Diligence” (PPT)

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: 10 Precautions for Protecting the Benefits of Your Private Foundation

Interested in protecting your estate and maximizing the impact of your charitable giving? Then establishing a Private Foundation is worth your consideration.

A Private Foundation provides the ability to retain control over the administration and investment of assets that have been recognized as important for future grant-making. By making gifts from your Foundation to charities in increments over time, you can extend your influence over the ongoing use of your gifts.

While there are many advantages of Private Foundations, there are also often-overlooked pitfalls (see below), which McManus & Associates Founding Principal John O. McManus recently discussed with clients, as part of the firm’s educational focus series. To listen, click here:

 

1. Using care when compensating family members through the foundation
2. Beware the penalties for self dealing
3. How to address office sharing with family offices
4. Promptly addressing misuse of foundation funds or income
5. Why you should avoid legally binding pledges
6. How to protect the founder’s mission
7. When to seek legal advice
8. How to exercise expenditure responsibly
9. Identifying any benefits from joint investments or co-ownership
10. Using caution with ticketing and fundraising events.

For guidance on the creation or management of a Private Foundation, contact McManus & Associates at 908-898-0100.

7 Immediate Steps to Protect Your Information from Being Misused due to the Equifax Data Breach

If you are one of the 143 million American consumers whose names, Social Security numbers, birth dates, addresses, driver’s license numbers, credit card numbers and other personal identifying information was exposed in the data breach at Equifax, which stretched from mid-May through July of this year, here are seven immediate steps to stop the hackers from further victimizing you:

1.    Determine whether your information may have been exposed. Using a secure computer and an encrypted network connection, go to https://www.equifaxsecurity2017.com/potential-impact/ and enter your last name and the last six digits of your Social Security number. Doing so will reveal whether you are among those affected by the breach.

2.    Sign up for a year of free credit monitoring from TrustedID Premier, which will be offered by the above site after completing step one. All U.S. consumers – whether their information was obtained or not – can enroll. The deadline is November 21, 2017.

3.    Systematically review your existing bank, credit card and insurance accounts for fraudulent transactions. If any unrecognized charges appear, contact your bank, credit card company or insurance provider immediately to report the issue.

4.    Visit annualcreditreport.com to check your credit reports from Equifax, Experian, and TransUnion for free. If you see any accounts or activity that you don’t recognize, identify theft could be the culprit, and you should go to IdentityTheft.gov to learn more about what to do.

5.    Consider placing a security freeze or a credit freeze on your report, which locks down your credit. According to the Federal Trade Commission, this “lets you restrict access to your credit report, which in turn makes it more difficult for identity thieves to open new accounts in your name.” Note: Scammers can still make changes to your existing accounts, despite a security freeze.

6.    Alternatively, consider creating a fraud alert to flag creditors that you may be a victim of identity theft, and they should verify that anyone seeking credit in your name is really you. Creditors will still be able to get a copy of your credit report as long as they take steps to verify your identity. This may prevent a scammer from opening new accounts in your name, but this alert is not likely to stop abuse of your existing accounts.

7.    File your taxes as soon as possible to avoid tax identity theft, which is when someone uses your Social Security number to steal your tax refund or to get a job. Being proactive and filing first (before a fraudster) eliminates this vulnerability.

For additional guidance related to management of your wealth, visit www.mcmanuslegal.com or call 908-898-0100.

McManus Interviewed for Wall Street Journal’s “Watching Your Wealth” Podcast

In the Wall Street Journal’s newest “Watching Your Wealth” podcast, Veronica Dagher interviews McManus & Associates Founding Principal John O. McManus on red flags that warn you your adult kids are using you for your money and/or are trying to get a bigger share of your estate. In the episode, Veronica does a “fun estate planning quiz” with John, as well, and asks him to share the best and worst estate planning advice he’s ever heard, what an estate can and can’t buy, and what he would do with $1M after tax if he inherited it.

Click here to listen to the quick, 11-minute episode: http://bit.ly/2pckWFo

To set up a time to discuss the family dynamics impacting your estate plan with the McManus & Associates team, give us a call at 908-898-0100.

Are Your Adult Children Using You For Your Money?

McManus & Associates’ John McManus discusses the red flags your children may be taking advantage of you financially and how to better communicate with them about money.

11 min: LISTEN