Tag: taxes

InvestmentNews Publishes Slideshow Based on McManus’s Year-End Tax Advice

6 tax strategies for year-end planning

New U.S. tax laws should inspire some Americans to pursue year-end tax strategies that will seek to maximize their wealth, according to John McManus, founding principal of McManus & Associates. He said these strategies make sense given the new tax framework, as well as estate planning recommendations. Click through the different strategies and listen to Mr. McManus discuss these strategies here.

Give it away sooner rather than later

Given that the increased estate tax exemption is temporary, high-net-worth clients worried about future estate taxes should make $15,000 (or $30,000 for a married couple) annual exclusion gifts to children and grandchildren into flexible irrevocable trusts before Dec. 31. Right after Jan. 1, give the gift again.

Offsetting gains due to growth

If a client sold appreciated investments or a business in 2018, that will spark capital gains taxes, so offset those by donating to a family-controlled charitable vehicle like a private foundation or charitable remainder trust before Dec. 31.

Think before you sell

Given the new limitation on the state and local tax (SALT) deduction for federal income taxes, clients should think before they sell appreciated investments or a business in the next few years because those sales will lead to unusually high capital gains taxes. But if they establish a non-grantor trust in Delaware or Nevada to store assets prior to a liquidity event, they can avoid state capital gains tax.

Investment diversification with insurance?

With the SALT deduction now constrained, think more about income tax exposure on investments. Consider whole life insurance, which continues to appreciate in value without resulting in income taxes due, and represents an efficient component of a diversified portfolio.

Tax benefits of insurance

High-net-worth families who will still have state and federal estate tax exposure should be thinking about how to utilize insurance. Permanent insurance coverage owned by an irrevocable life insurance trust should be a component of smart estate plans.

Creative solutions

Here’s a three-generation plan: A grandparent could loan significant funds to their child to acquire a life insurance policy for their grandchild. That loan can be structured to be dramatically discounted upon the grandparent’s death, thus cutting state and federal estate taxes. This arrangement allows the insurance policy to be free of taxes all the way down to the grandchild.

See the InvestmentNews slideshow with photos here.

Conference Call: 10 Tax Planning To-Dos to Check Off Your List before the End of 2018

With only one month left in 2018, time is running out to finish your wealth management to-dos. We’ve made your list, but it’s time to check it twice.

Today, McManus & Associates held a call with clients to provide guidance on the items below. Click to hear the half-hour discussion led by the firm’s Founding Principal John O. McManus:

 

1.  FREELY GIVE: Make annual exclusion gifts up to $15,000 for individuals and $30,000 for married couples, per chosen loved one.

2.  REAP (LOSSES TO OFFSET) WHAT YOU’VE SOWED: Harvest losses to offset capital gains in your securities portfolio.

3.  MIND YOUR HEALTH: Take advantage of this year’s lower threshold for Medical Expenses.

4.  USE A TAX RATE IN ITS INFANCY: Review your children’s portfolio income for application of the revised Kiddie Tax.

5. GIVE THOUGHT TO GIVING: Bunch your charitable deductions in the same year. The deduction for cash donations to public charities has increased to 60% of the taxpayer’s adjusted gross income.

6.   FUEL INVESTMENT VEHICLES: Establish and fund qualified plan contributions.

7.  TAKE A BREAK TO RECONSIDER BREAK-UPS: If planning to execute a divorce or separation agreement, you may want to do so before year-end. Otherwise, moving forward, the payer of alimony will no longer get a deduction on his or her tax return, and the recipient will no longer have to include the alimony as taxable income.

8.  DON’T WAIT TO COMPENSATE (YOURSELF):

An owner of an S Corp must pay themselves a reasonable compensation (what someone in a similar job would be paid). Therefore, make sure you pay yourself a salary before year- end.

9.  RESERVE TIME TO REVIEW YOUR WITHHOLDING:

The 2017 Tax Act lowered the tax rates and changed the tax bracket income ranges. Therefore, now is the time to do a “check-up” to see if your current tax withholding will be sufficient for next year’s income.

10.  MAKE A MOVE: Make distributions of income from trust accounts and estate accounts to lower their income tax liability.

Conference Call: 6 Strategies for Smart Year-End Planning under New Tax Laws

Before we know it, the calendar will turn to 2019. Today, McManus & Associates Founding Principal John O. McManus held a conference call with clients to impart insight on year-end tax strategies, in light of the new tax laws, to implement by December 31st. McManus also covered annual end-of-year essentials. Listen to a recording of the discussion by clicking below:

 

 

1.    TAKE ADVANTAGE OF A LIMITED-TIME OPPORTUNITY: Since the estate tax was not repealed at the end of last year and the increased estate tax exemption is temporary, what can high-net worth families do to minimize future estate tax?
2.    GET SET TO OFFSET: If you’ve already sold appreciated investments or a business in 2018 and will incur significant capital gains taxes, what can you do to enjoy a deduction and aid in offsetting the gain?
3.    PLAN TO SAVE: The drastic limitation on the State and Local Tax (SALT) Deduction for Federal income tax purposes means that those who anticipate selling appreciated investments or a business in the next few years will experience unusually high capital gains taxes—but what can you do so that State capital gains taxes will not be imposed?
4.    ADD TO YOUR INCOME TAX TOOLBOX: In spite of the marginal reduction of the Federal income tax rates, now that the Federal deduction on SALT has been significantly constrained, we will all have even more income tax exposure on investments. Can life insurance function as an income tax planning solution?
5.    ENSURE YOU’RE UTILIZING INSURANCE: High-net worth families will continue to have State and Federal estate tax exposure, so what must remain an essential component of any well-constructed estate plan?
6.    THINK OUTSIDE THE BOX: For those who have Estate Tax vulnerabilities but are elderly or in poor health, the acquisition of a life insurance policy may be uneconomical or impossible for those individuals, but how can life insurance reduce State and Federal Estate Tax while also creating wealth for future generations?

 

ADDITIONAL YEAR-END ESSENTIALS

 

THE ABCs OF ESTATE PLANNING PROTECTIONS: Regardless of tax law changes, it’s important to go back to the basics with estate planning on an annual basis. Proper year-end planning should always consider the following:
·     Incapacity concerns
·     The dangers of passing away without a will
·     Probate pitfalls
·     Insurance as creditor-protection planning
·     Foreign reporting requirements
·     U.S. estate tax exposure for non-resident aliens
·     Business succession issues

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.

Trusts & Estates (WealthManagement.com) Publishes Byline by John O. McManus

Ten Estate Planning Strategies While Waiting for Tax Reform

How to proceed until Congress takes action.

John McManus | May 12, 2017

The election of Donald J. Trump to the presidency and Republican control of both houses of Congress make estate tax reform extremely probable in the next two years. However, given the new administration’s other proclaimed priorities, including the repeal of Obamacare, minimization of illegal immigration, increases in defense spending and infrastructure improvements, there are likely several months before Congress turns its attention to a tax system overhaul.

Conference Call: 10 “Must Do” Estate Planning Strategies While We Wait for Congress to Act

The election of Donald Trump to the presidency and Republican control of both houses of Congress make estate tax reform extremely likely in the next two years.  However, given the incoming administration’s other proclaimed priorities, including the repeal of Obamacare, minimization of illegal immigration, increases in defense spending and infrastructure improvements, there are already questions about the feasibility of adopting all of the proposed tax initiatives. Furthermore, there is much uncertainty about particular aspects of the Republican tax proposal (including a replacement tax on the wealthy), and there is already concern about the likely impermanence of any new legislation. These factors highlight the importance of flexibility in preparing an estate plan and proceeding with wealth transfers suited to the current political and economic circumstances.

In a recent conference call with clients, McManus & Associates Founding Principal John O. McManus highlighted the current appealing strategies and opportunities available as part of an estate plan. Click below to hear him discuss the following list:

LISTEN HERE for details: “10 ‘Must Do’ Estate Planning Strategies While We Wait for Congress to Act”

  1. Annual exclusion gifts
  2. Lifetime exemption gifts
  3. Short-term and mid-term Grantor Retained Annuity Trusts (GRATs)
  4. Estate Freeze Installment Sales
  5. Family Limited Partnerships
  6. Upstream Gifting
  7. Community Property Trusts
  8. Charitable Remainder Trusts (CRT)
  9. Drafting Flexibility in Core Planning Documents
  10. Philanthropic Planning

3 Last-Minute Income Tax Strategies

Photo credit: Lendingmemo

Photo credit: Lendingmemo

Scrambling as we approach April 18th? Here are three last-minute tax strategies to harness for proper management of the deadline.

If you need additional time to file your personal income tax return, file an extension:

The deadline to file your tax return is April 18, 2016 (April 19, 2016, if you live in Maine or Massachusetts).

If you cannot file your return on time, apply by the due date of the return for an extension.  You can receive an automatic six-month extension for your personal income tax return if you file Form 4868 by the tax filing deadline.  (If you are mailing the extension, you should mail it certified with a return receipt, so that you have proof of the mailing date.) The extension gives you until October 17, 2016 to file your 2015 return.

This extension is for filing only and does not allow you more time, without penalty, to pay your tax liability for 2015.  Although the extension will be allowed without payment, you will be subject to interest charges and possible late payment penalties on 2015 taxes not paid by April 18th (or April 19th in Maine or Massachusetts).

If the amount paid with Form 4868, plus withholding and estimated tax payments for 2015, are less than 90% of the amount due, you will be subject to a late payment penalty (one-half of 1% of the unpaid tax per month).

MarketWatch Publishes Article on Cutting Capital Gains Authored by McManus

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5 ways to protect your estate from capital gains taxes

Published: Dec 25, 2015 6:04 a.m. ET

Traditional estate planning is being turned on its head

By JOHN O. MCMANUS

The time-honored approach to estate planning is being turned on its head by significant tax law changes that have taken effect in recent years.

Long-term capital gains tax rates now range from 25% to 33% (when you add together the top federal, state and local rates and Obamacare’s Medicare surtax). So now that the federal estate tax exemption is $5.43 million ($10.86 million for a couple’s combined exemptions), many Americans may no longer be exposed to federal estate taxes, making taxes on income and capital gains more prominent.

In fact, some legal practitioners who spent the first half of their careers zealously transferring assets out of their clients’ estates to avoid estate taxes now expect to spend the second half pushing assets back into their clients’ estates because the estate planning paradigm has changed.

What are the best ways to strategize around capital gains taxes to keep them as low as possible?

Rundown of the tax rules for gifts

To answer that, it helps to first understand the rules about gifts and taxes.

InvestmentNews Features McManus Column for The Tax-Conscious Adviser

Below is an advice column on capital gains tax strategies by John O. McManus that was published by InvestmentNews for its regular feature, “The Tax-Conscious Adviser.”

Investment News

 

 

tax concious adviser

Estate plans require a fresh look

Thinking around bequests shifts as capital gains tax and estate tax exemption rise

Nov 29, 2015 @ 12:01 am

By John O. McManus

Significant tax law changes mean it’s time to dust off your estate plan. Long-term capital gains tax rates now range from 25% to 33%, with the combination of the top federal, state and local rates and the Medicare surtax. This hike in capital gains tax rates, coupled with the greater federal estate tax exemption, calls for a fresh look at planning strategies.

With the current $5.43 million federal estate tax exemption ($5.45 million for 2016), many people may no longer be exposed to federal (and possibly state) estate taxes. Thus, maneuvering around capital gains tax becomes the primary concern.