Author Topic: What to do with my mom's money  (Read 2273 times)

justchecking

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What to do with my mom's money
« on: October 10, 2017, 08:05:57 AM »
I will make this quick because I love me some brevity and also because I do not have all of the details, which is why this is not in the case study portion.  In May my dad died suddenly of a heart attack and he handled the finances for my mom.  She has now asked me to come on board and make sure that she is not doing anything crazy with their money and that they are not being taken by their financial planner.  So full disclosure, my parents are mustachian per se, but they are quite frugal.  They downsized and bought a house near less than 3 miles from me and have no mortgage.  They own their car outright and have no other debt to speak of.  The house was a foreclosure and we did a lot of work on it so it is in tip top shape.  I have two questions.  1.  What should my mom do with the 403b's she has inherited(see below) 2.  She wants to set up an investment (she is open to anything here investment property, money market account, IRA, Bitcoin, literally anything) with the remainder of his life insurance that she would be able to draw on the interest and donate to a charity every year.  I would love some suggestions.

Her accounts are as follows and are all invested with a fiduciary

IRA ~145,000 never taken distributions from this
403b ~225,000 in a tax sheltered annuity that can be taken out or switched to a different investment.  They were drawing on this but it stopped when he died
2nd 403b ~25,000 also in TSA never taken distributions also could be taken out of TSA

100,000 in a checking account left from life insurance which needs some investment
3900/month in guaranteed pension for the rest of her life.  This amount is more than enough for her expenses and she is thinking about starting to save/donate excess money from this income stream. 

The fiduciary is pushing to re-up the TSA's and get her locked in to that 7% guaranteed growth for another 7 years. 

I am open to any and all suggestions.  I know there will be some calls for facepunches about the management fees from the invested accounts, but take it easy on us we are trying to do better. 

Cwadda

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Re: What to do with my mom's money
« Reply #1 on: October 10, 2017, 08:55:22 AM »
Quote
The fiduciary is pushing to re-up the TSA's and get her locked in to that 7% guaranteed growth for another 7 years.
If you are already locked into an annuity that returns 7%, I'd stick with it.  Also, you are paying the fiduciary to act in your best interest, so that's not bad thing. Might as well get what you're paying for.

You definitely don't need $100k sitting in a checking account, especially if the pension covers all living expenses. I assume all the funeral expenses/debts have already been covered.  I don't know the full details about the annuity but it seems like a good option.  That or a taxable Vanguard brokerage account.

Another thing: it's always good to sit down and take a look at her will. Consult with an attorney to make sure everything is satisfactory to her when she goes.

Lulee

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Re: What to do with my mom's money
« Reply #2 on: October 10, 2017, 09:01:04 AM »
First, my condolences to you and your mom on your loss.  And kudos to you for stepping up to learn what you need to in order to take care of your mom at a time when neither of you are really up for it.

I'm just starting my own journey as far as investing (the frugality part has been an economic necessity for generations so that's reflexive).  So I haven't a lot of advice like others here can offer. 

I would meet with the fiduciary and ask for very detailed info about the fees on all her investments in their care and express that you are not comfortable making LONG term commitments at this point. If they are even half-decent humans, they'll know you are struggling at this moment and should offer shorter term options along with the info on fees you asked for.  If they push on anything long term, it's a sign to get all monies out of their care as they are putting themselves above your mother's needs.

It would be worth talking with someone like a tax lawyer/CPA who knows the laws of your state and can help you two negotiate the financial repercussions of losing your dad  As your mom would like to donate to charity yearly, perhaps they could help you work through the possibilities of what can be done.  What comes to my mind is some creating some form of charitable trust with some funds, maybe in your dad's name, so she can do this in a way that minimizes any taxes.  Perhaps, if possible, as a revocable trust so if she needs the money later in life for her own care such as in a nursing home, the capital would be available to her.

Again, my sincerest condolences.  I lost my own dad a few years ago after a very, very long decline and it still rocked my world in the worst way.  Do your best to allow yourselves time to recover from the shock, even if it costs a little cash.  Her pension is sufficient to live on so taking a short term hit in fees for a year while you study and research what to do is NOT face-punch worthy.

ROF Expat

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Re: What to do with my mom's money
« Reply #3 on: October 10, 2017, 09:04:23 AM »
It is hard to give specific advice without more details of how the money is currently invested. 

That said, if your Mother has no debt and can live off her $3900 monthly pension alone, the short answer is "Whatever your Mom wants."  If your Mom doesn't foresee needing the income from her money for regular expenses, there is no need to press her to maximize efficiencies if she isn't comfortable doing that. 

I'd start by talking to your mother about what she wants to do with her money and her tolerance for risk and market swings.  With good answers to those questions, you can start to formulate a plan.  Personally, I wouldn't want to put her into anything she couldn't fully understand and feel comfortable with.  Two things to think about:  How old is your mother?  And how secure do you consider her pension? 

BTW, it is hard to imagine bitcoin being an appropriate investment for any significant amount of money for your mother, but you will almost certainly need to create some growth.  If your mother is likely to have a long life expectancy (hopefully), you will want tobe able to make up for losses to inflation in her pension. 

MDM

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Re: What to do with my mom's money
« Reply #4 on: October 10, 2017, 10:56:00 AM »
Quote
The fiduciary is pushing to re-up the TSA's and get her locked in to that 7% guaranteed growth for another 7 years.
If you are already locked into an annuity that returns 7%, I'd stick with it.
One has to be very careful parsing the terms of an annuity.  It's not impossible, but it is implausible that she actually gets "7% guaranteed growth".  E.g., if she invests $100K now is she "guaranteed" to be able to withdraw $160,578 with no penalty in 7 years?

Because "3900/month in guaranteed pension for the rest of her life...is more than enough for her expenses" she has zero need for any kind of annuity, and should avoid them like the plague.  She should also avoid the person pushing the annuity, and take all her business elsewhere (unless this really is the only annuity on the planet that will guarantee 7% growth and penalty-free withdrawal).

There is no "best" investment or group of investments, but to keep things as simple as possible putting everything into the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) is a reasonable alternative to which others could be compared.

MDM

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Re: What to do with my mom's money
« Reply #5 on: October 10, 2017, 11:04:57 AM »

Catbert

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Re: What to do with my mom's money
« Reply #6 on: October 10, 2017, 12:15:46 PM »
I would not make any major changes for 6 months to a year.  And since her pension is enough to live on she doesn't need to.  Her expenses may change more that you anticipate either up or down.  Maybe she'll want to travel more...or less.  Maybe she'll need/want to pay someone to do the chores you dad use to handle.

That said, I would cross bitcoins and rental real estate off your list of possibilities.  As others have noted, be very careful when considering annuities.  The whole language of annuities is intended to mislead the innocent.   That "guaranteed 7% growth" is 7% growth of the income base, not an actual amount she'd be able to withdraw in a lump sum.  Also let's say they'll give you a "7% withdrawal rate" - that doesn't mean you're earning 7%.  That likely means you're eating into principle.

Also are you sure that her financial advisor is a fiduciary? 

Cwadda

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Re: What to do with my mom's money
« Reply #7 on: October 10, 2017, 01:06:48 PM »
Quote
The fiduciary is pushing to re-up the TSA's and get her locked in to that 7% guaranteed growth for another 7 years.
If you are already locked into an annuity that returns 7%, I'd stick with it.
One has to be very careful parsing the terms of an annuity.  It's not impossible, but it is implausible that she actually gets "7% guaranteed growth".  E.g., if she invests $100K now is she "guaranteed" to be able to withdraw $160,578 with no penalty in 7 years?

Because "3900/month in guaranteed pension for the rest of her life...is more than enough for her expenses" she has zero need for any kind of annuity, and should avoid them like the plague.  She should also avoid the person pushing the annuity, and take all her business elsewhere (unless this really is the only annuity on the planet that will guarantee 7% growth and penalty-free withdrawal).

There is no "best" investment or group of investments, but to keep things as simple as possible putting everything into the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) is a reasonable alternative to which others could be compared.

Agreed.

I'm just going off what the OP has written.  I don't think annuities are a great investment in most cases.  If the advice was coming from anyone other than a fiduciary, I'd be quick to suggest other options.

MDM

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Re: What to do with my mom's money
« Reply #8 on: October 10, 2017, 01:13:01 PM »
I don't think annuities are a great investment in most cases.  If the advice was coming from anyone other than a fiduciary, I'd be quick to suggest other options.
Trust your judgment!

Remember Bernie Madoff? He too claimed he was a fiduciary investment advisor.

Cwadda

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Re: What to do with my mom's money
« Reply #9 on: October 10, 2017, 01:19:26 PM »
I don't think annuities are a great investment in most cases.  If the advice was coming from anyone other than a fiduciary, I'd be quick to suggest other options.
Trust your judgment!

Remember Bernie Madoff? He too claimed he was a fiduciary investment advisor.

Yeah, I assume OP and his/her parents have made those judgments when selecting their fiduciary. Be very wary.

Heroes821

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Re: What to do with my mom's money
« Reply #10 on: October 10, 2017, 01:24:01 PM »
Something to think about that I didn't see mentioned already.

How old is mom?

Are you an only child?

What does your mom or you want to happen to this money?  Does she want it to go to you in someway after she passes, does she want to donate it all to a charity or cancer research?

I haven't had to deal with these laws for awhile, but I remember a huge issue when my Grandmother went into a nursing home and one of the medicare requirements involved all assets being liquidated to pay for her care. Nothing could go to the family unless it was gifted or sold 2 years before she went to the nursing home.  At least to my dad and uncles it was a big problem for them surrounding the family house that they grew up in.

From the OP it doesn't seem like that specific situation would be an issue for you, but I think knowing long term what your mom wants to happen is important.


MDM

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Re: What to do with my mom's money
« Reply #11 on: October 10, 2017, 01:29:43 PM »
I don't think annuities are a great investment in most cases.  If the advice was coming from anyone other than a fiduciary, I'd be quick to suggest other options.
Trust your judgment!

Remember Bernie Madoff? He too claimed he was a fiduciary investment advisor.

Yeah, I assume OP and his/her parents have made those judgments when selecting their fiduciary. Be very wary.
In case it wasn't clear, "Trust your judgment!" referred to your "I don't think annuities are a great investment in most cases."  In other words, your initial reaction seems correct. :)

Cwadda

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Re: What to do with my mom's money
« Reply #12 on: October 10, 2017, 02:21:28 PM »
I don't think annuities are a great investment in most cases.  If the advice was coming from anyone other than a fiduciary, I'd be quick to suggest other options.
Trust your judgment!

Remember Bernie Madoff? He too claimed he was a fiduciary investment advisor.

Yeah, I assume OP and his/her parents have made those judgments when selecting their fiduciary. Be very wary.
In case it wasn't clear, "Trust your judgment!" referred to your "I don't think annuities are a great investment in most cases."  In other words, your initial reaction seems correct. :)

Gotcha :)

affordablehousing

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Re: What to do with my mom's money
« Reply #13 on: October 11, 2017, 06:18:05 PM »
Bitcoin....all.the.way.

;)