Hear firm Principal John O. McManus discuss the valuable estate planning-related items that should be reviewed with one’s financial and insurance advisors now. Click below to hear him share the latest developments related to estate planning predictions, strategies, and dangers.
LISTEN: Top 10 Ideas to Discuss with Your Financial Advisors Now
Top 10 Ideas to Discuss with Your Financial Advisors Now
Leading trusts and estates planning firm McManus & Associates identifies 10 estate planning strategies that should be considered early in 2012
Top AV-rated attorney John O. McManus offers free expert guidance via conference call recording
NEW YORK, NY – Americans, particularly high-net-worth individuals, should investigate financial strategies to build and preserve their assets now, with the expectation that the five million dollar gift credit may expire on December 31, 2012. Based on more than two decades of experience working with prosperous and successful clients across generations, John O. McManus – top AV-rated trusts & estates attorney and founding principal of tri-state-area-based McManus & Associates – today released a report, entitled “Top 10 Ideas to Discuss with Your Financial Advisors Now.”
During a recent conference call with clients, McManus shared the latest developments related to estate planning predictions, strategies, and dangers. To hear him discuss the valuable planning-related items that should be reviewed with one’s financial and insurance advisors now, visit https://mcmanuslegal.com/2012/02/conference-call-top-10-ideas-to-discuss-with-your-financial-advisors-now/.
“Ensuring that the least amount of one’s money goes to Uncle Sam and the most stays in his or her pocket must be a proactive, ongoing process,” said McManus. “Estate planning is a highly strategic practice, and the tools and tactics used to protect individual and family wealth evolve as the legal and tax environment changes. McManus & Associates is excited to share 10 strategies that should be explored with your financial and insurance professionals right away.”
Top 10 Ideas to Discuss with Your Financial Advisors Now
1. Utilizing term life insurance with Qualified Personal Residence Trusts (QPRTs) and Grantor Retained Annuity Trust (GRATs)
- Life insurance policies purchased by an ILIT for the duration of the Initial Term of a GRAT or QPRT hedge against the mortality risk of those strategies and the inclusion of GRAT or QPRT assets in the estate.
2. Using whole life insurance and annuity contracts as an alternative asset protection strategy
- For those who prioritize asset protection (i.e. doctors, business owners, etc.), these financial instruments cannot be accessed by creditors.
- There is an added benefit of tax-free appreciation.
3. Converting to Roth IRAs before income tax rates rise
- For those who are concerned that the capital gains rate will rise, it is sensible to consider converting from a traditional IRA to a Roth IRA and paying the capital gains tax at the current rates.
- Future distributions from the Roth IRA are not subject to ordinary income tax.
- Older individuals also have the ancillary benefit of reducing estate tax exposure by removing assets from the estate to pay the taxes.
4. Exploring charitable trusts with large IRAs for second marriages
- Large IRAs can pass into testamentary Charitable Remainder Trusts to enjoy the estate charitable deductions while preserving the tax-deferred benefits of the IRA for beneficiaries.
- Those in second marriages use Charitable Remainder Trusts to ensure that children (of a first marriage) benefit from the IRA after the spouse passes away.
5. Re-introducing 2nd-to-die life insurance policies in anticipation of increased state and federal estate taxes
- Those with taxable estates view 2nd-to-die life insurance purchased by an ILIT as a cost-effective way to defray the depletion of the estate by prospective taxes.
6. Insurance policies on the lives of young children held by trust
- Insuring children is a cost-effective way to establish their insurability from an early age. Tthe cash value of a policy may appreciate tax-free and be used for college, down payments on a child’s first home, wedding for children, etc.
- Use of a trust is recommended so the policy is not included in the parents’ estates if child passes away and so proceeds to pass tax-free to the child’s future children or living siblings.
7. Reviewing existing life insurance policies owned by trusts
- Case law in recent years focuses on the role of the Trustee of an Irrevocable Life Insurance Trust and compels them to determine that policies owned by the ILIT are prudent investments.
- For the Trustees to avoid possible liability, it is important to professionally review policies at least every three years to confirm they are performing efficiently and determine whether it is necessary to purchase different insurance.
8. Establishing lines of credit as a gifting strategy for low basis or illiquid assets
- If low basis assets are gifted, original basis carries through to beneficiaries, meaning capital gains tax would be high if assets are sold.
- If assets are not gifted, they may be subject to estate tax, but they will receive a step-up in basis at the time of death, meaning capital gains tax is effectively minimized.
- To receive benefit from gifting and maintain a step up in basis on death, an alternative is to consider using low basis asset to secure a line of credit and withdrawing from line of credit to make gifts to beneficiaries.
9. Transferring large cash value whole life insurance policies into trust with retained access for the insured
- Current $5.0MM lifetime gift exemption, which expires January 1, 2013, affords individuals the opportunity to gift policies with large cash values into an ILIT to avoid estate tax.
- The ILIT can be designed with provisions to allow the Trustee to borrow against the cash value and then to make a loan to the Grantor if needed.
10. Decanting trusts to enable the gift tax-efficient purchase of additional life insurance
- In New York, it is possible to decant the ILIT by statute to allow for the transfer of policies to a new ILIT with additional Crummey beneficiaries if it becomes desirable to consider a trust with different provisions.
- Other uses for decanting are changing the timing of the distributions of the insurance proceeds to beneficiaries, revising Trustees, amending remote beneficiaries, etc.
For more information on McManus & Associates, visit www.mcmanuslegal.com.
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About McManus & Associates
McManus & Associates, a trusts and estates law firm, was formed in 1991 by John O. McManus to provide the high quality experience of the largest firms coupled with the intimacy and efficiency of a specialized boutique firm. Over 20 years later, McManus & Associates continues to earn its reputation for integrity, intellectual ability, efficiency, and enduring relationships.
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