6 Strategies for Smart Year-End Planning

Top-Rated Trusts and Estates Attorney John O. McManus Identifies End-of-Year Tax Strategies in Light of New Tax Environment and Annual Year-End Action Items

NEW YORK, NY, Nov. 13, 2018 (GLOBE NEWSWIRE) -- via NEWMEDIAWIRE -- New U.S. tax laws should impact Americans’ year-end tax strategies, as they seek to manage and maximize their wealth. Top-rated estate planning law firm McManus & Associates today outlined “6 Strategies for Smart Year-End Planning” as part of its Educational Focus Series. During a recent conference call with clients, the firm’s Founding Principal and AV-rated Attorney John O. McManus covered year-end strategies triggered by the new tax framework, as well as annual estate planning to-dos. Listen to McManus’s recommendations by visiting https://bit.ly/2F4wiaU.   

“Before we know it, the calendar will turn to 2019,” commented McManus. “Until December 31st, there’s a window of opportunity that shouldn’t be missed for sophisticated estate tax and income tax planning. Inaction can end up costing you a lot of money.”

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    TAKE ADVANTAGE OF A LIMITED-TIME OPPORTUNITY: Since the estate tax was not repealed at the end of last year and the increased estate tax exemption is temporary, what can high-net worth families do to minimize future estate tax?

·         ANNUAL GIFT EXCLUSIONS: Make $15,000 ($30,000 for a married couple) annual exclusion gifts to children, grandchildren, and other loved ones into flexible and protected Irrevocable Trusts before December 31st.

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?

·         CHARITABLE CONTRIBUTIONS: Consider gifting to a family-controlled charitable vehicle, such as a Private Foundation or Charitable Remainder Trust, before December 31st, in order 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?

·         PRE-LIQUIDITY PLANNING: Establish a Non-Grantor Trust in Delaware or Nevada to hold assets before the liquidity event so that state capital gains tax will not be levied.

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?

·         LIFE INSURANCE AS AN INCOME TAX PLANNING SOLUTION: Whole life insurance continues to appreciate in value—free of income tax—and represents an efficient and appropriate component of a diversified portfolio.

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 part of any well-constructed estate plan?

·         LIFE INSURANCE AS AN ESTATE TAX PLANNING SOLUTION: Permanent insurance coverage owned by an Irrevocable Life Insurance Trust must remain a crucial component of any smartly-designed estate plan.

6.    THINK OUTSIDE THE BOX: For those who have estate tax vulnerabilities but are elderly or are in poor health, the acquisition of a life insurance policy may be uneconomical or impossible, but how can those individuals use life insurance to reduce state and federal estate tax while also creating wealth for future generations?

·         One may loan significant funds to acquire a policy on the life of a child or an in-law. The loan may be dramatically discounted upon the grandparent’s death and thereby reduce state and federal estate tax at that time.


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

o   Concern: Without properly prepared incapacity documents, family members may not be able to speedily or appropriately intervene to assist with medical, financial, personal, and legal matters during a time of emergency.

o   Remedy: Review and/or prepare current health care directives, living wills, HIPAA releases, and powers of attorney to ensure core protections are effectively in place to allow family members to act immediately.

·         The dangers of passing away without a will

o   Concern: Without a properly structured Last Will and Testament, state law will dictate the distribution of assets in a manner that fails to reflect one’s intentions and without any opportunity to mitigate estate tax or shelter the assets from future attack.

o   Remedy: High-net worth individuals require Last Wills and Testaments in order to specify their preferences regarding the disbursement of the inheritance and to establish trusts that leverage estate tax exemptions and protect the assets from creditors, law suits, and future spouses.

·         Probate pitfalls

o   Concern: Public probate proceedings cause unnecessary expense, delay, and frustration before heirs can receive their inheritance, especially if one has interests in multiple states.

o   Remedies: Establish Revocable Living Trusts and other planning approaches that will minimize the extent to which an estate will be subject to the purview of the Court.

·         Insurance as creditor-protection planning

o   Concern: More than ever, people are concerned about professional and personal liability and strategies for preserving assets for their loved ones.

o   Remedy: The cash value of life insurance policies is generally creditor-protected nationwide and is one of the only classes of investments that enjoys this benefit.

·         Foreign reporting requirements

o   Concern: Those who receive gifts or inheritances from non-resident aliens or who hold bank accounts or other financial investments overseas are exposed to significant monetary and criminal penalties if they fail to meet U.S. reporting guidelines.

o   Remedy: Seek proper guidance from professionals with expertise in international tax matters to be made aware of circumstances that make reporting necessary, in addition to the appropriate forms to be filed.

·         U.S. estate tax exposure for non-resident aliens

o   Concern: Those who have family members who reside overseas and who are not citizens may be unaware that the U.S. assets of their family members will incur significant estate tax, because the typical gift and estate tax exemptions are not available to them (limited to $60k, rather than $11.2MM).

o   Remedy: The non-resident alien family members must consider wealth transfer opportunities using non-U.S. assets and exempt assets (such as life insurance) to mitigate or eliminate this tax liability.

·         Business succession issues


·         Concern: The death or disability of a partner in a business risks the productive operation of the business by the remaining partners due to the involvement of the deceased or disabled partner’s family.

·         Remedy: All partners must enter into a buy-sell arrangement to protect the business and ensure that the deceased or disabled partner’s family is fairly compensated. The most effective means of financing the buyout is through life and disability insurance for each partner.


·         Concern: The death of an important partner or employee will be significantly detrimental to the profitability of a business.

·         Remedy:  The business should acquire insurance on the life of the partner or employee to replace income lost in the near-term and to provide the business with immediate liquidity and a long-term cash reserve to hire others to perform the responsibilities of the deceased employee.

For help with implementation of year-end tax and income planning strategies, call McManus & Associates at 908-898-0100. Learn more about the award-winning firm at www.mcmanuslegal.com.

About McManus & Associates

Over twenty-five years ago, McManus & Associates was founded to deliver the highest quality estate planning services that the largest firms promise with the more intimate, personalized relationships that a sophisticated boutique law firm can offer. Since that time, some of the most prominent families in finance, media, academia and medicine — both domestic and international — have relied on McManus & Associates to serve as their advisor in wealth and family mission planning.


Contact Data