Author Topic: My dad died. What do I do with Mom's finances  (Read 3511 times)

justchecking

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My dad died. What do I do with Mom's finances
« on: January 16, 2018, 09:15:05 AM »
My father passed away in May of 2017.  My mom, 64, lives really close to me and my brother.  She is in great health.  She and my dad split the financials and she understands how much she has and what she needs.  She is frugal, but not Mustachianian.  What I mean by that is that she and my dad have always had a financial planner who looks after there money.  They took the planner's advice on the products that he sold.  Now that my dad is gone my mom has an opportunity to change what those investments look like and she is willing to take my advice over the planner's if it makes sense to her.  The good news is is that if she just stays with what she has she will probably be fine and if she changes she could grow her wealth with low risk.  Her current income from pension and SS is much more than she needs to live on. 

Here is what here numbers look like.

Pension that is guaranteed forever: 2800 after tax and health insurance which is also guaranteed through pension
Social Security: 950 after tax
IRA   149,600
403b #1 266,683 Income lock annuity through VALIC
403b #2 27,152 invested in VALIC mutual funds

House is paid for and has new almost everything. 
Car is paid for and has plenty of life left in it.
My brother and I are committed to having her stay in her house or with us as long as possible as she ages.

Questions:
Should she just get out of the annuity and combine the two 403b accounts and invest in an index fund herself?

The financial planner is asking her to get this life insurance policy that she can draw on the payout to pay for medical expenses.  This is more expensive than her current policy that is for 100,000 and the premium does not go up until 2021. Advice?

How can she safely grow this money?

Do we just keep on with the financial planner and have me and my crazy mustachian ways not get involved?


Sibley

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Re: My dad died. What do I do with Mom's finances
« Reply #1 on: January 16, 2018, 09:18:50 AM »
Why does your mother need life insurance? Does she have a dependent? I'd check to make sure this financial planner has a fiduciary duty and is fee only, no commission. Cause that seems a little wacky to me.

And sorry for your loss :(

slappy

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Re: My dad died. What do I do with Mom's finances
« Reply #2 on: January 16, 2018, 09:43:40 AM »
Why does your mother need life insurance? Does she have a dependent? I'd check to make sure this financial planner has a fiduciary duty and is fee only, no commission. Cause that seems a little wacky to me.

And sorry for your loss :(

It sounds more like a hybrid long term care policy that has a life insurance payout if she never needs LTC.

radram

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Re: My dad died. What do I do with Mom's finances
« Reply #3 on: January 16, 2018, 10:46:16 AM »
Here is an interesting thread on this topic.

https://www.bogleheads.org/forum/viewtopic.php?t=93768

I would pay particular attention to:

1. An annuity INSIDE a 403b makes little sense. You do not need deferred growth inside a qualified account, as it is already shielded from taxes until withdrawal.

2. Fees. What are the fees to move the money? Compare that to the saved expenses of using index funds through Vanguard or similar. With her age, it might be quite inexpensive to move it, making the payback more immediate.

I bet you could do better.

Let us know how it goes.


frugaliknowit

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Re: My dad died. What do I do with Mom's finances
« Reply #4 on: January 16, 2018, 11:59:19 AM »
So sorry about your loss.

Based on your information, assuming none of you are dependent on her income (in which case she should have life insurance) I would dump the annuities, dump the planner (life insurance to pay for medical...nah!!!) and either:

1.  Hire a "fee only" planner, putting the approx. $450K into low cost index funds, dialing the risk according to your mom's tolerance (50/50???).

2.  Just follow Paul Merrimans recommended mutual fund mix for Vanguard, once she picks her stock/bond allocation (60/40, 50/50, 40/60, whatever...https://paulmerriman.com/vanguard/).  In trying to gauge the risk of an asset mix, you and/or your mom can look at these tables:  https://paulmerriman.com/fine-tuning-tables-2017/

Best of luck and congrats to your parents for preparing so well!

justchecking

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Re: My dad died. What do I do with Mom's finances
« Reply #5 on: January 16, 2018, 05:36:49 PM »
Thanks for the advice.  Does anyone else have any thoughts?

Bracken_Joy

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Re: My dad died. What do I do with Mom's finances
« Reply #6 on: January 16, 2018, 05:52:15 PM »
I'm sorry for your loss!

A long term care policy could be a good option, research the costs there. LTC will eat assets faster than you can even imagine =(

Another Reader

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Re: My dad died. What do I do with Mom's finances
« Reply #7 on: January 16, 2018, 07:08:35 PM »
Your mother has health insurance and will go on Medicare in a years.  She does not need a high commission life insurance policy to pay medical expenses.  She needs to dump her commission-based planner and move her investments to Fidelity or Vanguard.  She can invest in low cost index funds according to her risk tolerance, which is probably low.

The Valic annuity was probably the only choice at the time.  It was common for teachers and some other groups to be offered only investments in annuity wrappers.  Figure out how it pays out and how much it would cost to get her investments out of it.  Then decide the best course of action.  The other Valic account can be closed and rolled over to an IRA.

Long term care insurance policies are very expensive and the benefits are limited.  I would not go that route.  Most people that end up in nursing homes spend less than a year there.  Your mother has money for three years plus the house could be sold.  Medicaid would take over after all her assets were exhausted.

At 70, she will be required to take minimum distributions from her retirement accounts.  It will not be that much at first, but you should plan what to do with that money.

Your mother is lucky to have two sons that are looking out for her best interests.  Good job!

Linea_Norway

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Re: My dad died. What do I do with Mom's finances
« Reply #8 on: January 17, 2018, 05:54:21 AM »
The life insurance sounds like a big no to me. Assurances are something you buy for an unforeseeable event that will cause you (or your relatives) a financial problem. Your mother doesn't have anyone left who need to pay the mortgage on the house when she dies. Who should receive the life insurance? You and your brother can just inherit what is left of her stash.
If the life insurance is meant to pay out a sum for your own mother for medical expenses, then she could probably better save her money some other way? I cannot imagine the insurance would pay out more than she put in. It wouldn't be profitable otherwise.

civil4life

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Re: My dad died. What do I do with Mom's finances
« Reply #9 on: January 17, 2018, 09:29:48 AM »
I agree with all that has been said.

The only other thought I have is has she done appropriate estate planning?  Not to avoid taxes although important, but like you are concerned with the long term care and selling the house.  Many look into trusts or gifting/selling their homes to their children to protect the asset from being used for long term care.  However these have look back periods and other issues.

 

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