McManus Interviewed for Benefits Selling Magazine

An article, titled “The End,” that appeared in the April 2013 issue of Benefits Selling Magazine is worth digging into. Drawing from insight shared by experts like John O. McManus, McManus & Associates founding principal, reporter Paula Aven Gladych relays valuable intel related to end-of-life planning.

What’s one of the catch 22’s that Gladych unearths thanks to McManus? “Many people don’t realize that beneficiary designations on life insurance policies and retirement accounts trump whatever is written in a final will and testament.” From the piece:

Many parents place one of their children on their accounts as a joint account holder so they can help pay bills. What most people don’t realize is that when the parent passes away, no matter what is listed in the will, the person who is listed on the joint account will inherit that money. This can cause many problems among other beneficiaries who believe they are entitled to their share of that money, McManus said.

McManus also emphasizes a seemingly obvious but often overlooked step that needs to be taken – more than once:

Individuals need to make sure their documents are current. They need to review them every so often to make sure that what people think they will receive when they die is what they will actually receive, said John McManus, founding principal at McManus & Associates , an estates and trusts law firm in New York.

That means reviewing documents and walking through their provisions, deciding how they want to dispose of their assets and naming representatives who will make sure their assets are distributed as they intended.

But, as Gladych points out, things aren’t always so straightforward – especially when it comes to the tax system. In the piece, McManus has a word of advice, which he often shares with clients:

Each state has its own exemption when it comes to estate taxes. Some states, like New York, will allow individuals to pass down the first $1 million to heirs tax free. Anything above that $1 million will be taxed. McManus counsels his clients to gift that money while they are still alive to avoid hefty taxation later.

Gladych is right: planning for the future isn’t just about retirement accounts or what you want to do with all of your free time…people also need to plan for what comes after their retirement—end-of-life planning. To find more valuable tips, read the full story.

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?

McManus shares insight based on over two decades of experience for CreditCards.com article

 

Reporter Melody Warnick recently turned to McManus & Associates to get a better understanding of financial challenges faced by emancipated minors — few and far between, but common for child actors, young professional athletes and teen pop stars, for example. In her CreditCards.com story, “Emancipated minors may get freedom, but don’t count on credit,” Warnick explains that emancipation is a legal proceeding that grants adult status to a teen and frees her to make her own medical decisions, sign contracts and otherwise manage her life — and finances — independently.

A quote from John O. McManus, top-rated lawyer and founding principal of McManus & Associates, helps kick off the piece:

“There are instances when there’s a child actor or someone like an Olympic athlete, and the parents are managing their assets, and there’s a concern that they’re not acting in their best interest,” explains John McManus, an attorney and owner of McManus Legal, based in New York City. “The child also has to show that, despite their chronological age, ‘I am deemed to be independent and ready to make decisions on my own.'”

Based on over two decades of experience as a practicing attorney, John goes on to point out that:

“Emancipation is very, very unusual,” says McManus. “[The bar] has very little experience in the mechanics of it, because it’s just a very infrequent thing to see.” In some states, there aren’t even set procedures for allowing minors to petition for independence, let alone sufficient case history to establish guidelines for independence.

But there are things that minors, emancipated or not, can do to build credit and establish a solid financial footing for themselves, says Warnick:

1. Become an authorized user.

2. Sign a contract.

3. Get a debit card.

4. Talk to your financial aid adviser.

5. Get help.

Check out Warnick’s full story for an explanation of each item on this list. And to learn more, listen to a recent client conference call held by the firm on the “Top 10 Planning Issues for Recently Emancipated Children (over 18) and Minors.”

McManus & Associates in New York Times article, “Growing Up With A Trust”

The New York Times today published an article with the headline “Growing Up With A Trust,” written by well-known “Wealth Matters” columnist Paul Sullivan. The story appeared online and in print, as well, on page F9 of the publication’s New York edition.

McManus & Associates worked hand-in-hand with Sullivan on this story, both in facilitating a conversation with one of our clients who shared insight on an anonymous basis and in providing expertise on preparing heirs for inheritance. From the article:

Steve, whose wealth was earned in financial services rather than inherited, is still working out a plan with his wife for telling their three sons about their inheritances. He asked that his name be withheld because he did not want his neighbors in the New York area to know about his money.

In his 40s and retired for more than a decade, he appears to be a model client for any trust and estate planner: he has already put more than $10 million in various trusts. “He’s a thoughtful, meaningful guy, and he has more time than our normal client,” said John O. McManus, his lawyer at McManus & Associates.

He is proud of the provisions written into the trusts for his children, which will keep them from having full access to the money until they are 35. Yet, though he has not done so, talking to his sons about his wealth is also important, even though all three are not yet 10.

To read on, visit http://www.nytimes.com/2013/03/26/your-money/trust-fund-children-need-an-education-about-money.html?pagewanted=all.

Top AV-rated Attorney John O. McManus was happy to weigh in on this important topic, because the firm is committed to helping its clients transfer not only assets, but also family values. As discussed in the piece, conversations with beneficiaries about wealth are part of an ongoing process, not just a one-time event. Through the creation of a Family Mission Statement, McManus & Associates can help you initiate these critical discussions and best prepare your heirs for a productive life filled with success that positively impacts society.

McManus & Associates is ready to talk you through this challenging, yet important process. Give our office a call at (908) 898-0100 to get started.

BenefitsPro Relays Estate Planning Guidance from McManus & Associates

Top-rated estate planning attorney and founding principal of McManus & Associates John O. McManus last month chatted with Paula Aven Gladych, writer for BenefitsPro, about why even people who aren’t in the top 1 percent of earnings need to undertake estate planning. Individuals who earn between $250,000 and $1 million won’t have to worry about paying federal estate taxes, since the exemption is $5.25 million, but “they still have to worry about state exemptions, which are all over the map.” As pointed out in Gladych’s article, “Even middle-income earners should have an estate plan.”

Flickr/401 (K) 2013

From the piece, which is based on McManus’s interview with Gladych:

“People are not going to give a large amount of their assets away during their lifetime. If a client has $1.5 million during their lifetime, they may need every dollar of that to live from. If they become terminal, a quality financial advisor and attorney will say, ‘let’s move money off the balance sheet now.’ The fact is, by moving it you’ll avoid the imposition of state tax when you pass away. The problem in the past is people are not doing it because they only give away $750,000 to $1 million on the federal level,” McManus said. “The concern is that states will smarten up and impose a gift limitation equal to the death tax limitation.”

Why should middle-income earners consider putting money away in a trust? Read the rest of the story to find out.

More recently, Paula Aven Gladych interviewed McManus again for a piece, titled “Legacy, estate planning as important as retirement.” As captured by Gladych, “planning for the future isn’t just about retirement accounts or what you want to do with all of your free time. According to financial experts, people also need to plan for what comes after their retirement—end-of-life planning.”

McManus’s advice is captured in the story as follows:

Individuals need to make sure their documents are current. They need to review them every so often to make sure that what people think they will receive when they die is what they will actually receive, said John McManus, founding principal at McManus & Associates, an estates and trusts law firm in New York.

That means reviewing documents and walking through their provisions, deciding how they want to dispose of their assets and naming representatives who will make sure their assets are distributed as they intended.

There is a catch 22, however. Many people don’t realize that beneficiary designations on life insurance policies and retirement accounts trump whatever is written in a final will and testament.

Many parents place one of their children on their accounts as a joint account holder so they can help pay bills. What most people don’t realize is that when the parent passes away, no matter what is listed in the will, the person who is listed on the joint account will inherit that money. This can cause many problems among other beneficiaries who believe they are entitled to their share of that money, McManus said.

Each state has its own exemption when it comes to estate taxes. Some states, like New York, will allow individuals to pass down the first $1 million to heirs tax free. Anything above that $1 million will be taxed. McManus counsels his clients to gift that money while they are still alive to avoid hefty taxation later.

Check out more important estate planning tips in the story here.

Investment News: “A flightplan for snowbirds”

Investment News has created a helpful, interesting slideshow that anyone attempting to escape cold northern winters (or really anyone who spends a good deal of time in a state that is no longer their primary residence) should check out to avoid issues of residency and, therefore, being taxed in more than one state. Investment News bases the nine tips on guidance from McManus & Associates founding principal John O. McManus. From the slideshow intro:

There’s nothing like a cold, northern winter or a chilly tax environment to inspire American retirees to head south. But if you plan to pack your bags for good, it may be easier to shed your overcoat than your status as resident of your former home state, warns John McManus, the founding principal of the New York area trust and estate planning firm McManus & Associates. He offered the following tips on how to enjoy hot weather without ending up in hot water with tax collectors in your previous domicile.

The feature shares important but sometimes overlooked suggestions like change your gym membership right after you move and use cash when visiting your previous state of residence, if possible. To learn about more steps you can take to shed the double layers and the double tax payments, click through the full slideshow “A flightplan for snowbirds” here.

Article for LifeHealthPro from McManus & Associates: “The Road Ahead for Estate Planning”

Penned by John O. McManus, founding principal of McManus & Associates, the article “The Road Ahead for Estate Planning” is today featured by LifeHealthPro. LifeHealthPro is a go-to resource for advisors, insurance wholesalers, CPAs and estate planning attorneys.

In the piece, John discusses the several surprising outcomes regarding estate planning that emerged as part of the fiscal cliff deal and outlines the new tax rates and exemption amounts. He also recommends several “tactics to try.” From the article:

Here are a few of the trust and non-trust estate planning strategies that married and single persons should explore in 2013:

  1. Foundations: With increased taxes, gifts to charity have a greater tax-deductible value. Gifts to foundations allow full deduction in the year of the gift, whereas transfers out of foundation can be as small as 5 percent on an annual basis, allowing assets in the foundation to continue to grow.
  2. Charitable trust: These enable one to make gifts to charity and receive immediate deductions. One can continue to receive income from the charitable gift for a period of time. Gifts can also be made where the charity gets a distribution each year and the loved ones receive the remainder.
  3. Family mission planning: The family mission and preparing heirs for inheritances are critical to ensuring a successful transfer of wealth and family values, to helping minimize conflict and maximize harmony and to supporting charitable endeavors.
  4. Life insurance trusts: Funding a trust with a life insurance policy is a smart way to get a windfall of cash when someone passes away to pay off estate taxes. It’s also an avenue for getting a big asset off of one’s balance sheet, keeping a large amount of cash safe and protected. Make sure the trust is named as the beneficiary and policy owner (e.g., John Doe Irrevocable Trust). If a house is put into a trust and the house is insured, make sure to get the insurance policy changed to reflect the ownership by the trust. The trust should be the primary insured on the policy, and the individual can be the secondary.

And cautioning readers to be mindful of what’s ahead that could impact estate planning, he shares this observation:

Several valuable opportunities emerged as part of the fiscal cliff negotiations that pleasantly surprised the estate planning community. We are not completely out of the woods, however, with the debt ceiling debates just around the corner. When it comes to safeguarding wealth and family values, it’s important now to look ahead without losing sight of what’s in the rearview mirror.

Read the whole thing at http://www.lifehealthpro.com/2013/02/22/the-road-ahead-for-estate-planning. Also keep an eye out for John’s piece in Monday’s Life Insurance Insider e-newsletter. Next week will be a special estate planning edition.

Courtesy of LifeHealthPro

CPA Practice Advisor: “Estate planning after the fiscal cliff: Top 10 Steps”

CPA Practice Advisor today published an article utilizing the guidance that McManus & Associates recently offered to clients via a conference call on next steps in light of the fiscal cliff deal. A quote from the firm’s founding Principal John O. McManus in the piece, titled “Estate planning after the fiscal cliff: Top 10 Steps”:

Many Americans will experience significant income tax increases as a result of the ‘fiscal cliff’ deal, but there is good news with respect to the estate tax. The newly established permanent estate tax gives wealth planners certainty that has been lacking for more than a decade – but what if Connecticut’s law encourages other states to also create a gift tax even lower than the federal exemption amount? The fact that they could do it retroactively is a real concern.

The story goes on to say:

The firm has offered the following tips:

Post-Fiscal Cliff Estate Planning: Top 10 Questions Answered in Light of the Deal

1.  The new tax rates and exemption amounts are set. What can you expect to pay for estates over $5.25MM?

a. Federal estate tax rate moves up from 35% to 40% with the exemption amount now at $5.25MM, which will be adjusted annually for inflation.
b. The Lifetime Gift Exemption amount (the total that can be given during one’s lifetime, separate from the much smaller Annual Exemption gifts) has been unified with the Estate Tax Exemption amount at $5.25MM.
c. For income tax purposes, individuals earning in excess of $400K and couples filing jointly earning in excess of $450K will be taxed at 39.6%, which does not include the new 3.8% tax on investment income, capital gains and dividends that was enacted to fund Obamacare.
d. Anyone earning less than $400K will continue at the ‘Bush era’ tax rates. However, the payroll tax for Social Security has been restored from 4% to 6% so paychecks will be smaller.
e. Two limits on tax exemptions and deductions will be reinstated: Personal Exemption Phase-out will be set at $250K, and the Itemized Deduction Limitation kicks in at $300K.

2. What are the estate-tax “traps” to be wary of?

a. The exemption amounts for state estate taxes are much lower than the federal exemption amount. While no federal estate tax will be paid on an estate up to $5.25MM, a large state estate tax liability could be due in certain states.
b. For anyone owning Real Property in a state that is outside of one’s primary residence, one’s heirs will have to endure the arduous and often expensive process of out of state probate, or ancillary probate in addition to probate in one’s state of primary residence. Employing a Revocable Living Trust can eliminate the need to undertake probate in multiple states.

3. Lifetime gifts in excess of $2MM in CT are subject to tax; is this a warning for similar gift limitations in other states?

a. When the federal lifetime gift exemption amount jumped to $5MM, the state of Connecticut passed legislation to tax any gifts made over $2MM.
b. With the precedent set and with states looking for additional income, it is possible that others states will follow. Additionally, such laws can be made retroactive.

4. With the new permanency in the estate tax exemption, which taxpayers should make gifts over $5.25MM and pay gift tax (a strategy widely used for many prior generations)?

a. With some certainty that estate tax will not evaporate and the $5.25MM exemption amount will remain unchanged, individuals will now employ taxable gifts again.
b. Taxpayers whose net worth continues to grow in excess of $5.25MM will look to transfer assets and pay the gift tax.
c. Gifts made during one’s lifetime will enjoy a more favorable tax treatment, will suffer less shrinkage due to taxes, will avoid state estate taxes and will enjoy future growth free of any state and gift tax.

5. For estates below $5.25MM, who should employ trusts in their wills?

a. Trusts provide a greater level of asset protection, so one can be assured that, in the event of reversals in life including divorce (the single largest creditor attack on wealthy families), trust assets will be protected and can continue to grow tax-free and provide for heirs.
b. Flexibility in trusts even allows access to trust assets via a power to appoint and to remove trustees. Trusts protect the value and future growth of any discounted assets and can employ generation skipping tax free.
c. Trusts also allow for the minimization of state estate taxes.

6. What is meant by “spousal portability” and “unification” of the exemption amounts? Does this eliminate the need for certain planning?

a. Portability allows the surviving spouse to utilize any remaining portion of their deceased spouse’s Federal Estate Tax exemption amount. To elect portability, the executor handling the estate of the spouse who died must file an estate tax return (Internal Revenue Service Form 706), even if no tax is due. This return is due nine months after death.
b. Unification: The federal exemption amount for estate tax and lifetime gifting has been unified. That means both exemption amounts will be set at $5.25MM this year and adjust annually for inflation.
c. For tax efficiency purposes, married couples now enjoy the ability to pass to loved ones $10.5MM free of estate tax.

7. The Generation Skipping Tax Exemption amount is also set at $5.25MM; who should take advantage of it?

a. Assets in trust not used by loved ones can skip to the next generation tax-free. Such a skip would normally constitute a generation-skipping tax event, which imposes a 40% tax.
b. The GST exemption employed in trust can avoid taxes for transferees for 100 years or more, including all the growth in the portfolio.
c. The most widespread use of the GST exemption is for wealthy individuals whose children already enjoy enough assets, will be earning enough assets, or will inherit enough assets to assure the greatest likelihood the trust assets will not be spent during the children’s lifetimes.

8. Looking forward to March 2013 and the “debt ceiling” debates, what detrimental effect could such negotiations have on state estate taxes?

a. Regarding revenue to individual states, the high federal estate tax exemption amount will ultimately reduce the states’ future estate tax revenue due to lifetime gifts.
b. Previously, there was a state “pick-up” estate tax that allowed states to collect estate tax from the federal government without additionally charging the estate of the decedent. This was accomplished by giving taxpayers a dollar-for-dollar credit for any state estate taxes paid. The credit expired, which caused most pick-up taxes to automatically expire.
c.  It is possible that states will construct new methods to make up for budget shortfalls, particularly if the debt ceiling debates carry on.

9. What are the trust and non-trust estate planning strategies that married and single persons should undertake in 2013?

a. Foundations: With increased taxes, gifts to charity have a greater tax-deductible value. Gifts to foundations allow full deduction in the year of the gift, whereas transfers out of foundation can be as small as 5% on an annual basis, allowing assets in the foundation to continue to grow.
b. Charitable trust: These enable one to make gifts to charity and receive immediate deductions. One can continue to receive income from the charitable gift for a period of time. Gifts can also be made where the charity gets a distribution each year and the loved ones receive the remainder.
c. Family mission planning: The family mission and preparing heirs for inheritances will be a critical to ensure that conflict is minimized and harmony maximized, to ensure motivation to grow the assets and to support charitable endeavors.

10. What critical gift tax consequences must be avoided for gifts made in 2012? When does the statute of limitations clock begin?

a. The final step to ensure the completion of any gift you have made to a trust is the timely filing of a gift tax return. Avoid professionals who do not have expertise in making significant gifts into trust.
b. Filing of a complete return starts the 3-year clock with the federal government. Once the statute of limitations has run, the IRS can no longer audit the return.
c. If a return is prepared but does not meet the specific adequate disclosure requirement, the statute of limitation does not begin to run.

To listen to the full recording of the conference call upon which the CPA Practice Advisor article is based click here.

The piece closes with another quote from McManus:

Several valuable opportunities emerged as part of the ‘fiscal cliff’ negotiations that pleasantly surprised the estate planning community, but we’re not completely out of the woods – the ‘debt ceiling’ debates, for example, are just around the corner. Keeping track of how the ever-evolving legal landscape impacts wealth preservation is a full-time job, but one that we’re here to help with.

John McManus called “best guy out there” in estate planning – Avvo client review

McManus & Associates Founding Principal John O. McManus recently received a client rating worth sharing on Avvo.com. According to Avvo’s “About Us” page, the site “empowers consumers by rating lawyers, and having these real lawyers answer their questions – all for free.”

Reviewing John’s services, a client called John the “best guy out there” when it comes to tax and estate planning attorneys. The client gave John a perfect six stars – an “excellent” rating – overall and also when asked to rate him in the categories “Trustworthy,” “Responsive,” “Knowledgeable” and “Kept me in informed.”

Recommending John, here’s what the client had to say:

What a great place to walk into. John was great using metaphors to translate the legal language, but not reducing it to useless pieces. I felt like I was important to creating the plan and could really speak to the fine points of the strategies used when I had completed all my documents. Thanks for a highly personal and professional experience!

We greatly appreciate this feedback, and if you’re a client of McManus & Associates, we welcome your thoughts, too.

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.