Tag: seniors

Advice for Seniors from McManus Meets the Big Screen, Thanks to WealthManagement.com

WealthManagement.com/Trusts & Estates published the below byline by John O. McManus as a slideshow! Click here to read John’s advice, accompanied by entertaining movie stills.

John O. McManus | Oct 29, 2018

As clients age, there’s a significantly greater risk of incapacity. The failure to prepare a healthcare directive and living will, authorization for release of protected health information, and durable general power of attorney means that family members will be compelled to seek court intervention if your client becomes unconscious, has diminished capacity, or experiences some other emergency. This results in unnecessary delay and expense and will be completely inadequate if a client’s loved ones need to make a healthcare decision or act on their relative’s behalf with respect to financial, legal or personal matters. It’s essential to ensure basic protections are in place so that loved ones can act immediately in the event of these issues.

The need for the court to oversee the administration of an estate can be time-consuming, costly and frustrating. Proper planning will allow for the probate process to be completed with greater expediency. This includes the preparation of revocable living trusts, the assets of which will not be subject to court review (even if the property is owned in another state) and updates to the titling and beneficiary designation of your client’s assets to ensure a far more efficient estate administration.

Dramatically reduce a client’s future potential federal estate tax by utilizing the temporary increase to the lifetime gift exemption. The Tax Reform and Jobs Act enacted at the beginning of 2018 significantly raised the federal estate tax exemption, but the current law will expire no later than Dec. 31, 2025. Furthermore, Congress can take action sooner to reduce the increased exemption. Therefore, high-net worth individuals and families must strongly consider leveraging the exemption while it’s available in order to remove appreciating and/or discountable assets from the taxable estate.

Help a client understand the tax implications of the transfer of wealth across multiple generations to preserve their legacy for the descendants. The generation-skipping tax and the use of the GST exemption are among the most sophisticated planning concepts, but it’s essential to consider this issue as part of the larger estate plan. Bequests in trust to grandchildren, the design of a dynasty trust and the proper reporting of gifts are all connected to the deployment of the GST exemption and avoids the imposition of additional tax when an inheritance is received by more remote descendants.

Evaluate strategies to avoid a potential increase in federal income taxes due to limitations on state and local tax deductions. Different types of out-of-state trusts (particularly those based in Delaware and Nevada) provide planning opportunities before the liquidation of an appreciated investment or business. Furthermore, life insurance, Roth IRA conversions and contributions to charitable vehicles (including private foundations and charitable remainder trusts) afford clients opportunities to mitigate state income tax exposure.

Review the power of a step-up in basis upon death, reducing capital gains tax and delivering income tax savings your client’s loved ones can enjoy. Families must consider proper planning in advance of death. Asset transfers to an ailing spouse, community property trusts, asset swaps from existing irrevocable trusts and asset upstream gifting to parents are all options to put the surviving spouse, children and other heirs in the best position to sell an appreciated asset tax-free.

The cost of long-term health care could drastically deplete an estate, but strategies may be available to mitigate the attrition of assets. In addition to traditional long-term care policies, life insurance policies can be structured with an accelerated death benefit to cover the cost of nursing home care and/or provide wealth replacement if other resources are diminished. Medicaid trusts and supplemental needs trusts also afford the possibility that assets may be preserved for the use of a surviving spouse or provide a meaningful legacy for children without sacrificing the ability to qualify for governmental benefits.

Protect the inheritance of your client’s heirs and ensure wealth is not diverted, in case a child’s marriage fails or there’s some other attack by a plaintiff’s lawyer. A properly structured trust for the benefit of a child or grandchild under a will or revocable trust can serve to secure an inheritance from an estranged spouse. It’s also important to evaluate how these benefits can be enhanced through a prenuptial agreement or other prenuptial planning measures. Such a trust can insulate the assets from attacks resulting from personal or professional liability, creditors and other legal claims.

Ensure the inheritance of your client’s children and grandchildren will be used to enhance their standard of living, while preserving their ability to receive Social Security or Medicaid. If a client’s child or grandchild directly receives from the estate or benefits from a conventional trust, it will likely disqualify them for needs-based government benefits, forcing the funds to be used for basic living expenses and health care. Incorporating a supplemental needs trust into the estate plan will prevent the inheritance from being treated as a resource of that child or grandchild, which will allow for the continuation of payments from these programs. The assets of the trust can then be sheltered for uses not covered by the government, including social, cultural, entertainment activities, travel, visitation with family members, educational and vocational programs, and other quality of life considerations.

Aid your client’s loved ones in the effective deployment of the wealth they pass along by imparting their family mission and values, including the intrinsic benefits of philanthropy. As a first step, encourage adopting a family mission as part of the estate plan as a means of conveying these wishes and expectations. Recognize the importance of gradually integrating children and grandchildren into the estate plan through periodic family meetings with the family’s professional advisors, which will help them to understand the purpose of the estate plan and the various considerations that go into preserving wealth for the next generation. Finally, those families who adopt charitable giving as a core tenet of the estate plan should include children in the implementation of those activities, including the continued support of causes supported by the family, the identification of new causes that align with donative intent and the development of relationships in the philanthropic community to ensure charitable gifts will have the greatest impact.

Conference Call: Top 10 Dangers and Opportunities for Seniors

Unique challenges face us all as we grow older and become “seniors,” but with proper planning, you and your loved ones can be well-prepared to successfully navigate this stage of life.

Today, John O. McManus held an educational conference call with clients to discuss the “Top 10 Dangers and Opportunities for Seniors” – whether it’s you, your parents or your grandparents. Click below to listen to the enrichment call recording, which covers the following topics:

 

1.    Anticipate, Before It’s Too Late: As we age, there is a significantly greater risk of incapacity. It is essential to ensure basic protections are in place so that loved ones can act immediately in the event of an emergency.

2.    Spend a Little Time Planning to Save a Lot of Time Doing: The need for the Court to oversee the administration of an estate can be time-consuming, costly, and frustrating. Proper planning will allow for the probate process to be completed with greater expediency.

3.    Take Advantage of the Opportunity of a Lifetime (Gift Tax Exemption): Dramatically reduce future potential federal estate tax by utilizing the temporary increase to the lifetime gift exemption.

4.    Don’t Skip Over Generation-Skipping Tax: Understand the tax implications of the transfer of wealth across multiple generations to preserve your legacy for your descendants.

5.    Decrease Your Chances of an Increase in Federal Income Taxes: Evaluate strategies to avoid a potential increase in federal income taxes due to limitations on state and local tax deductions.

6.    Step Up Your Planning with a Step-Up in Basis: Review the power of a step-up in basis upon death, reducing capital gains tax and delivering income tax savings your loved ones can enjoy.

7.    Plan for Long-Term Care in Short Order: The cost of long-term health care could drastically deplete an estate, but strategies may be available to mitigate the attrition of assets.

8.    Expect the Best, Plan for the Worst: Protect the inheritance of your heirs and ensure wealth is not diverted, in case a child’s marriage fails.

9.    Pay Special Attention to Special Needs: Ensure the inheritance of your children and grandchildren can be used to enhance their quality of life, while preserving their ability to receive governmental benefits.

10. Prepare Your Heirs: Aid your loved ones in the effective deployment of the wealth you pass along by imparting your family mission and values, including the intrinsic benefits of philanthropy.

NBC News: “Seniors face retirement ‘perfect storm’ in 2013”

John O. McManus, founding principal of McManus & Associates, recently spoke with CNBC Reporter Mark Koba about whether 2013 is a bad year to retire, with the predicted fiscal cliff and, even if it’s resolved, the larger numbers of workers leaving their jobs for retirement. According to Koba, an estimated 7 million Americans will reach the age of 65 by the start of 2013.

John’s thoughts are found throughout Koba’s article:

As it stands now, the top tax rate on capital gains will jump to 23.8 percent from 15 percent and the top tax rate on dividends nearly triples to 43.4 percent from 15 percent. And any fiscal deal will likely include higher tax rates so seniors had better count on that when they plan for their retirement, said John O. McManus, CEO of McManus & Associates, a trust estates law firm.

“Many seniors may want to postpone retirement in 2013 because they just don’t know what their tax rates will be,” McManus said. “If the markets don’t perform well and tax rates go higher, seniors will have a lot less money to spend. There’s a lot of uncertainty about where this will all end.”

But McManus said even planning for tax increases won’t be easy.

“If someone retires in January but a deal isn’t reached until March, will tax rates be re-retroactive? That’s a big risk for someone thinking about retirement,” said McManus.

And after looking at the thoughts of various experts, Koba gets it right: “While 2013 presents unique problems, analysts say that in the end, planning for retirement never comes at an easy time, fiscal cliff or not.”

A quote from John closes out the piece:

“It’s not to say that 2014 will be a better year to retire,” said McManus. “There are always a lot of things people can’t control, like the markets and global issues. I’m just saying that if you think about retiring in 2013 you need to take care and take caution.”

Read the whole article here.

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