Thoughts on Unexpected 150k...Help!

[MustacheCash]

I have an unusual circumstance, one that I never thought I would ever have.  I was not prepared for this, which is why I am asking for ANY and ALL opinions on what to do.  Please help!

My father recently passed away and unbeknownst to me, had an annuity that after all of the BS fees and everything, the payout should be around $150,000.  My mother is still alive and well (in her early 80s), but I am "in charge" of it and the money will eventually be split between 3-4 people.  I am not sure of the time line, but I am thinking 5-20 years before anyone would want/need it.  She wants it accessible if needed.  I initially thought a brokerage account of a 50/50 split of VBTLX (Total Bond) and VTSAX (Total Stock Market).  Should it be a taxable account?  Should it be in my name or her name?  Joint account?

Please tell me why I am wrong and any advice is welcome.  Thank you so much in advance!

[MustacheCash]

Sorry about the multiple post; not sure what happened there.

Thanks for your input!  I am actually the only beneficiary and I am also the POA.  While my mother is a great woman, my father made the right call by giving this responsibility to someone else!  Good call on the beneficiaries though...I think I may put my siblings down as the beneficiaries.

Because I am not sure my mother will ever need/want this money, I thought I would play it conservatively with 50% bonds.  Personally, I stick with 90/10, but I realize I am not the only one who will benefit from this.

[talltexan]

You say that your mother might not ever want or need the money? Is there a way that having 4% of the money available each year could improve her lifestyle? Pay for maintenance on a home or something?

[MustacheCash]

My mother lives way below her means so she easily (and happily) lives on Social Security.  She will likely never need or want any of this 150k, but she and I would like for it to be accessible if needed.  A brokerage account affords this option, but I was not sure if there was another option out there (taxable or not) that would be better.  This is kind of uncharted territory for all of us.

I want her to actually have distributions from this, but I kind of have a feeling she will never want to do that.  That is why I do not want it to be tied up anywhere.  She obviously knew about this annuity as well, but wants it for the children (us).

[runewell]

I am "in charge" of it and the money will eventually be split between 3-4 people. 

Why isn't it split between 3-4 people already?  Does it need to meet mom's needs first?  What exactly does the will say?
If it goes to mom first, I would put it in a mom IRA.  I think you want to have the money if the proper account with the proper owner and new beneficiaries before you start messing with investing it (on her behalf).

[MustacheCash]

That is a good question.  My father set up the annuity and only put me as the beneficiary, and apparently at the request and/or approval of my mother.  In the meantime, they wanted me to be the POA a few years ago (unrelated to this, to my knowledge).  It will not be split right now because my siblings are less than responsible and the other potential people it would eventually go to are now underage.  I am fine with it going to her, but that is not what she wants.  "Kids and grandkids" is what she currently wants.

I agree the account is definitely first and foremost, which is why I am asking for advice.  I thought about an IRA, but that is less accessible and quite frankly, she may be starting to show signs of dementia so it probably needs to go through me first.  I thought about 529s for the underage, but again is less accessible in case she actually does need it for medical expenses, for example.  Perhaps 529s are the end result, but for right now I need to park it somewhere.

[Lobo]

Brokered CD's pay out spendable interest at least twice a year and there is no risk to principal if held to maturity.  This is a very conservative suggestion, - but your timeline is not clearly defined at this point and there seems to be a lot of variables in motion.  At this point it may be more important to not lose any of the value rather than go for max long term returns.

[Jrr85]

That is a good question.  My father set up the annuity and only put me as the beneficiary, and apparently at the request and/or approval of my mother.  In the meantime, they wanted me to be the POA a few years ago (unrelated to this, to my knowledge).  It will not be split right now because my siblings are less than responsible and the other potential people it would eventually go to are now underage.  I am fine with it going to her, but that is not what she wants.  "Kids and grandkids" is what she currently wants.

I agree the account is definitely first and foremost, which is why I am asking for advice.  I thought about an IRA, but that is less accessible and quite frankly, she may be starting to show signs of dementia so it probably needs to go through me first.  I thought about 529s for the underage, but again is less accessible in case she actually does need it for medical expenses, for example.  Perhaps 529s are the end result, but for right now I need to park it somewhere.

Unless I am misunderstanding what you are saying, you are the legal owner of the annuity.  If intended your mother to receive the benefit of the money but for you to manage it for her, naming you as the beneficiary was not the way to do that. 

If you plan on divvying this money up in 10 or 20 years, you might want to resolve the legal ownership of it now, as with growth, it could cause gift tax complications when you want to distribute it (and tax complications from earnings before then) 

[MustacheCash]

That is a good question.  My father set up the annuity and only put me as the beneficiary, and apparently at the request and/or approval of my mother.  In the meantime, they wanted me to be the POA a few years ago (unrelated to this, to my knowledge).  It will not be split right now because my siblings are less than responsible and the other potential people it would eventually go to are now underage.  I am fine with it going to her, but that is not what she wants.  "Kids and grandkids" is what she currently wants.

I agree the account is definitely first and foremost, which is why I am asking for advice.  I thought about an IRA, but that is less accessible and quite frankly, she may be starting to show signs of dementia so it probably needs to go through me first.  I thought about 529s for the underage, but again is less accessible in case she actually does need it for medical expenses, for example.  Perhaps 529s are the end result, but for right now I need to park it somewhere.

Unless I am misunderstanding what you are saying, you are the legal owner of the annuity.  If intended your mother to receive the benefit of the money but for you to manage it for her, naming you as the beneficiary was not the way to do that. 

If you plan on divvying this money up in 10 or 20 years, you might want to resolve the legal ownership of it now, as with growth, it could cause gift tax complications when you want to distribute it (and tax complications from earnings before then)

Thanks for the response.  As with most things in my family, there is a lot of incorrect and misinformation.  I am currently in the process of this and I am getting more and more information with each day.  So, I was actually not the beneficiary, but my mother was (thank goodness).  I was told I was, but actually saw the paperwork today to confirm.  It is now in her name with me being the only beneficiary.  Everything else is the same as far as I know.

This is a fixed annuity and based on the terms, it does NOT need to be paid out now (more previously incorrect information).  I have never liked annuities and do not know much about them, but I understand it can stay there for now and can be taken out at any time.  So, the question remains...what is the most appropriate account and specific funds?  I am still thinking a brokerage may be the way to go, but still not 100%.  I believe a CD leaves it less liquid and perhaps too conservative.  Would it be a bad idea to just leave it in the blasted annuity at a guaranteed rate of 3%?  I am not sure about the costs though, but I will be finding that out.

[ChpBstrd]

OK, so here's what we know.

Ownership: mom's
Objectives: insurance first, inheritance second

This could get messy in a couple of ways:
1) Siblings think you might have done something shady to be named beneficiary (e.g. emotional pressure) and they challenge your inheritance of this money.
2) Some optional medical/life expenses come along, such as a risky and expensive surgical procedure that might extend her life a couple years (real-life example, my father-in-law had open heart surgery at 88 years old. In hindsight, it was a bad call.). Suddenly, those who stand to inherit the money are torn about what to do and feel entitled to opinions. The people who don't want to put her through medical experimentation get in a fight with those fighting to save momma.
3) Mom's will says divide everything evenly or percentage-wise among X people. Oh, and you're beneficiary on this account. There is a dispute about whether the entire estate is divided evenly or the entire estate minus this account. You end up with less of the rest of the estate than your co-beneficiaries.

I suggest putting it in a joint brokerage account, AND having mom update her will to specify exactly who gets the contents of this account, and how the account factors into any other divisions. A lawyer is necessary to get the wording airtight.

For asset allocation, I think 60% stocks 40% bonds would be fine because near-term volatility reduction is not an objective, but leaving a nice inheritance is. Also, bonds aren't as low-risk as they used to be.

[MustacheCash]

OK, so here's what we know.

Ownership: mom's
Objectives: insurance first, inheritance second

This could get messy in a couple of ways:
1) Siblings think you might have done something shady to be named beneficiary (e.g. emotional pressure) and they challenge your inheritance of this money.
2) Some optional medical/life expenses come along, such as a risky and expensive surgical procedure that might extend her life a couple years (real-life example, my father-in-law had open heart surgery at 88 years old. In hindsight, it was a bad call.). Suddenly, those who stand to inherit the money are torn about what to do and feel entitled to opinions. The people who don't want to put her through medical experimentation get in a fight with those fighting to save momma.
3) Mom's will says divide everything evenly or percentage-wise among X people. Oh, and you're beneficiary on this account. There is a dispute about whether the entire estate is divided evenly or the entire estate minus this account. You end up with less of the rest of the estate than your co-beneficiaries.

I suggest putting it in a joint brokerage account, AND having mom update her will to specify exactly who gets the contents of this account, and how the account factors into any other divisions. A lawyer is necessary to get the wording airtight.

For asset allocation, I think 60% stocks 40% bonds would be fine because near-term volatility reduction is not an objective, but leaving a nice inheritance is. Also, bonds aren't as low-risk as they used to be.

You pretty much nailed everything!  You have great insight and it is much appreciated.  Suggesting she update her will is VERY good advice.

I am sorry to hear of your father-in-law, but I will be taking your experience into consideration if needed.  As for the siblings, I don't really care what they think because I will be doing the right thing, regardless of perception.  All decisions will be made, medical or otherwise, without money in the equation.  Or whatever my mother wants.  In the end, everything will be even.

I would be fine with an AA of 60/40, but what about the funds?  Stick with Total SM and Total Bonds or are there more conservative bonds you would recommend?

[MustacheAndaHalf]

The $150,000 exits the annuity and becomes your mom's cash, at which point it has no beneficiary as it's just cash.  At that point it's next step is your Mom's estate, which requires going through probate.  A legal question that I cannot answer for you: do "payable on death" (POD) instructions on a brokerage account go through probate?

Sounds like you want to help your mom open an account at Vanguard, and list you and your sibblings as beneficiaries.  I'm ignoring your comments about siblings who are irresponsible (and I'm not a lawyer), but a spendthrift trust may be a better approach.  For you personally it would suck to be the trustee in that situation, and would change your relationship with your siblings in a negative way.

Your allocation makes sense.  If you will manage the account, you could even go with: 
40% Vanguard Total Stock Market (U.S.)
20% Vanguard Total International
40% Vanguard Total Bonds

That's roughly $100/month income from the bonds, which is taxable.  I think that's too small to have an impact on your mom's social security payments, but another option is a tax-exempt bond fund.

[MustacheCash]

The $150,000 exits the annuity and becomes your mom's cash, at which point it has no beneficiary as it's just cash.  At that point it's next step is your Mom's estate, which requires going through probate.  A legal question that I cannot answer for you: do "payable on death" (POD) instructions on a brokerage account go through probate?

Sounds like you want to help your mom open an account at Vanguard, and list you and your sibblings as beneficiaries.  I'm ignoring your comments about siblings who are irresponsible (and I'm not a lawyer), but a spendthrift trust may be a better approach.  For you personally it would suck to be the trustee in that situation, and would change your relationship with your siblings in a negative way.

Your allocation makes sense.  If you will manage the account, you could even go with: 
40% Vanguard Total Stock Market (U.S.)
20% Vanguard Total International
40% Vanguard Total Bonds

That's roughly $100/month income from the bonds, which is taxable.  I think that's too small to have an impact on your mom's social security payments, but another option is a tax-exempt bond fund.

Very good points all around.  Obviously, I want to avoid probate in the future and hopefully this can be clearly stated in the will.  I am also not sure how probate works from the estate after death.  A trust is also something to think about, but the last I looked into one for something unrelated, it was more expensive than I thought it would be.

Yes, a Vanguard account is what I thought would be best in this scenario.  I did not even think about international exposure, because I was too focused on being conservative.  Thanks for the input!

Does anyone know a website or graph where I can put these three funds in and see what the TOTAL return (- expenses, of course) would be from two points in time?

[Bicycle_B]

Related to your calculation request:  portfoliocharts.com has a calculator for calculating long term returns of various portfolios based on historical returns of each investment type, but does not include expenses or tax. 

https://portfoliocharts.com/
https://portfoliocharts.com/calculators/
https://portfoliocharts.com/portfolio/long-term-returns/

[MustacheCash]

Related to your calculation request:  portfoliocharts.com has a calculator for calculating long term returns of various portfolios based on historical returns of each investment type, but does not include expenses or tax. 

https://portfoliocharts.com/
https://portfoliocharts.com/calculators/
https://portfoliocharts.com/portfolio/long-term-returns/

Exactly what I wanted to see!  Thanks!