Where do we put 74 year old mother-in-laws money?

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p1muserfan
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Where do we put 74 year old mother-in-laws money?

Post by p1muserfan »

My wife and I recently sold her mom's house (she's now in assisted living and loving it) and I had my wife close her mom's taxable account at Ameriprise.
So with my goal to have my mother-in-law not outlive her money, where do we invest the Ameriprise money and the proceeds from the house? Is an IRA out of the question because of her age? She'd have to deal with RMD, correct? Although I want her to have access to it of course. I guess I'm looking for something tax efficient that will also generate income, although she doesn't need it at the moment. She brings in enough from Social Security and her deceased husbands military and job pensions to more than cover her expenses.
I've got a workplace 401K with Fidelity and my wife has a rollover IRA with Vanguard but the situation with my mother-in-law is something I'm clueless about, I could really use some advice. Thanks
Last edited by p1muserfan on Sat Apr 18, 2020 11:45 am, edited 1 time in total.
retired@50
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Re: Where do we put 74 year old mother-in-laws money?

Post by retired@50 »

p1muserfan wrote: Sat Apr 18, 2020 10:10 am My wife and I recently sold her mom's house (she's now in assisted living and loving it) and I had my wife close her mom's brokerage account at Ameriprise. There were 9 funds that made up the account, I don't know the exact ones at the moment.
So with my goal to have my mother-in-law not outlive her money, where do we invest the Ameriprise money and the proceeds from the house? Is an IRA out of the question because of her age? She'd have to deal with RMD, correct? Although I want her to have access to it of course. I guess I'm looking for something tax efficient that will also generate income, although she doesn't need it at the moment. She brings in enough from Social Security and her deceased husbands military and job pensions to more than cover her expenses.
I've got a workplace 401K with Fidelity and my wife has a rollover IRA with Vanguard but the situation with my mother-in-law is something I'm clueless about, I could really use some advice. Thanks
What was the nature of the account at Ameriprise?

Was it an IRA, or a Roth IRA, or a taxable account?

See link to Asking Portfolio Questions. viewtopic.php?f=1&t=6212

If you provide the needed information you'll receive much more comprehensive responses.

Regards,
This is one person's opinion. Nothing more.
TheGreyingDuke
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Re: Where do we put 74 year old mother-in-laws money?

Post by TheGreyingDuke »

p1muserfan wrote: Sat Apr 18, 2020 10:10 am My wife and I recently sold her mom's house (she's now in assisted living and loving it) and I had my wife close her mom's brokerage account at Ameriprise. There were 9 funds that made up the account, I don't know the exact ones at the moment.
So with my goal to have my mother-in-law not outlive her money, where do we invest the Ameriprise money and the proceeds from the house? Is an IRA out of the question because of her age? She'd have to deal with RMD, correct? Although I want her to have access to it of course. I guess I'm looking for something tax efficient that will also generate income, although she doesn't need it at the moment. She brings in enough from Social Security and her deceased husbands military and job pensions to more than cover her expenses.
I've got a workplace 401K with Fidelity and my wife has a rollover IRA with Vanguard but the situation with my mother-in-law is something I'm clueless about, I could really use some advice. Thanks
Absent more detail some superficial comments...
1) IRA contributions need to come from earned income, so that is not an option
2)It seems that she is investing for the next generation(s) as she has no need for the capital and maybe not the income.

If #2 is true, then a simple solution is a 2 or 3 fund approach or one of the Vanguard all-in-one funds i.e. LifeStrategy fund.
"Every time I see an adult on a bicycle, I no longer despair for the future of the human race." H.G. Wells
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CAsage
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Re: Where do we put 74 year old mother-in-laws money?

Post by CAsage »

p1muserfan wrote: Sat Apr 18, 2020 10:10 am My wife and I recently sold her mom's house (she's now in assisted living and loving it) and I had my wife close her mom's brokerage account at Ameriprise. There were 9 funds that made up the account, I don't know the exact ones at the moment.
Hope you've done a good estimate of any capital gains from selling those 9 funds and house, and set that money aside mentally for taxes. Look into whether you should pay that now, as if Mom's taxes jump, she may owe estimated taxes (look into rules on "safe haven", the IRS generally requires you to pay as you go on taxes annually). And for Mom's account ... a Retirement 2020 fund or balanced all-in-one fund might be good. There are existing threads on tax efficient investing as well.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
ralph124cf
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Re: Where do we put 74 year old mother-in-laws money?

Post by ralph124cf »

Does she have long term care insurance? If not, it is probably too late to buy now, but this will inform the choice of investments if the money may be needed for long term care. If long term care insurance is in place already, then investments can be more aggressive.

Ralph
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p1muserfan
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Re: Where do we put 74 year old mother-in-laws money?

Post by p1muserfan »

retired@50 wrote: Sat Apr 18, 2020 10:24 am
p1muserfan wrote: Sat Apr 18, 2020 10:10 am My wife and I recently sold her mom's house (she's now in assisted living and loving it) and I had my wife close her mom's brokerage account at Ameriprise. There were 9 funds that made up the account, I don't know the exact ones at the moment.
So with my goal to have my mother-in-law not outlive her money, where do we invest the Ameriprise money and the proceeds from the house? Is an IRA out of the question because of her age? She'd have to deal with RMD, correct? Although I want her to have access to it of course. I guess I'm looking for something tax efficient that will also generate income, although she doesn't need it at the moment. She brings in enough from Social Security and her deceased husbands military and job pensions to more than cover her expenses.
I've got a workplace 401K with Fidelity and my wife has a rollover IRA with Vanguard but the situation with my mother-in-law is something I'm clueless about, I could really use some advice. Thanks
What was the nature of the account at Ameriprise?

Was it an IRA, or a Roth IRA, or a taxable account?

See link to Asking Portfolio Questions. viewtopic.php?f=1&t=6212

If you provide the needed information you'll receive much more comprehensive responses.

Regards,
It was a taxable account
Topic Author
p1muserfan
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Re: Where do we put 74 year old mother-in-laws money?

Post by p1muserfan »

CAsage wrote: Sat Apr 18, 2020 10:39 am
p1muserfan wrote: Sat Apr 18, 2020 10:10 am My wife and I recently sold her mom's house (she's now in assisted living and loving it) and I had my wife close her mom's brokerage account at Ameriprise. There were 9 funds that made up the account, I don't know the exact ones at the moment.
Hope you've done a good estimate of any capital gains from selling those 9 funds and house, and set that money aside mentally for taxes. Look into whether you should pay that now, as if Mom's taxes jump, she may owe estimated taxes (look into rules on "safe haven", the IRS generally requires you to pay as you go on taxes annually). And for Mom's account ... a Retirement 2020 fund or balanced all-in-one fund might be good. There are existing threads on tax efficient investing as well.
I did not estimate capital gains from selling the 9 funds or the house but have definitely thought about it. Will probably contact my CPA and deal with taxes now if I can before investing
Topic Author
p1muserfan
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Re: Where do we put 74 year old mother-in-laws money?

Post by p1muserfan »

ralph124cf wrote: Sat Apr 18, 2020 10:43 am Does she have long term care insurance? If not, it is probably too late to buy now, but this will inform the choice of investments if the money may be needed for long term care. If long term care insurance is in place already, then investments can be more aggressive.

Ralph
She does not have long term care insurance...that we know of. Trying to figure out and organize her finances has been a chore. She's not incapacitated, just clueless
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Ged
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Re: Where do we put 74 year old mother-in-laws money?

Post by Ged »

Probably a lifestyle fund. However with more information we might come up with a more optimal suggestion.
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CAsage
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Re: Where do we put 74 year old mother-in-laws money?

Post by CAsage »

p1muserfan wrote: Sat Apr 18, 2020 10:57 am I did not estimate capital gains from selling the 9 funds or the house but have definitely thought about it. Will probably contact my CPA and deal with taxes now if I can before investing
You can make a quick estimate on the house, your Mom as a single woman she can exclude $250K from net profits (sale less expenses escrow, broker fees, etc) minus original cost plus all improvements (not repairs!). If it's under that number, then don't worry. If your Mom had the house jointly with a deceased spouse, there might be a step-up in the cost basis (just fishing for ideas here). Otherwise, start digging for numbers.
Ameriprise should provide the capital gains on sales, but sometimes you need to grab that before you close the account (in case they are less than cooperative now). Contact them soon, as CPA will need that info.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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p1muserfan
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Re: Where do we put 74 year old mother-in-laws money?

Post by p1muserfan »

CAsage wrote: Sat Apr 18, 2020 11:50 am
p1muserfan wrote: Sat Apr 18, 2020 10:57 am I did not estimate capital gains from selling the 9 funds or the house but have definitely thought about it. Will probably contact my CPA and deal with taxes now if I can before investing
You can make a quick estimate on the house, your Mom as a single woman she can exclude $250K from net profits (sale less expenses escrow, broker fees, etc) minus original cost plus all improvements (not repairs!). If it's under that number, then don't worry. If your Mom had the house jointly with a deceased spouse, there might be a step-up in the cost basis (just fishing for ideas here). Otherwise, start digging for numbers.
Ameriprise should provide the capital gains on sales, but sometimes you need to grab that before you close the account (in case they are less than cooperative now). Contact them soon, as CPA will need that info.
I think we lost money on the house, we sold to a flipper, it"s in really bad shape, so no worries about net profits. I did download the year end tax statements from Ameriprise, so that's good. CPA will get a call Monday
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LilyFleur
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Re: Where do we put 74 year old mother-in-laws money?

Post by LilyFleur »

I would put it in a Schwab designated beneficiary brokerage account. You'll have lots of options for investing at Schwab, and they have customer service 24/7 both on the phone and on chat.
HomeStretch
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Re: Where do we put 74 year old mother-in-laws money?

Post by HomeStretch »

Is MIL on Medicare? If so, the premiums she pays will increase at various income levels due to IRMAA. So it is helpful to estimate her 2020 modified adjusted gross income and the IRMAA impact, if any. If she is close to crossing an IRMAA tier (resulting in higher premiums), you may want to see if you can control income for the remainder of 2020 to avoid crossing the tier.
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Watty
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Re: Where do we put 74 year old mother-in-laws money?

Post by Watty »

In addition to all the investing considerations you also need to consider all the family dynamics that go on. You could set up a very appropriate portfolio only to have it do badly because of the market and that might cause your MIL or some other relative to question what you are doing with her money.

Likewise if you have a portfolio that needs to be routinely be rebalanced then when your MIL is older and may be less mentally capable then she may have a hard time understanding what you are doing. If she mentions to someone at the assisted living facility that you might be doing something inappropriate with her money then they may be required to contact the state to start an investigation. Sadly it is not uncommon that people will take advantage of elderly relatives so they may take any comments like that very seriously.

You also need to have it set up so that someone else can easily manage it if something happens to you and your wife.

There is also a really good chance that your MIL could live into her 90s or even to be over 100 so just putting it all into CDs or Government bonds could be a problem because of future inflation.

It would be good to keep the portfolio as simple as possible and to have it on "automatic pilot" as much as possible so that little need to be done with it. It would not be supper tax efficient but you should take a look at a target retirement income fund or one of the life strategy funds. If the tax impact of those is not too significant they could work for her.

https://investor.vanguard.com/mutual-fu ... estrategy/#/

https://investor.vanguard.com/mutual-fu ... olio/vtinx

It would also be good to keep some emergency money at a local bank or credit union.

One thing to watch out for is that many brokerages want any power of attorney documents to be done on their forms so it would be get that setup what she is still able to do that.
RetiredAL
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Re: Where do we put 74 year old mother-in-laws money?

Post by RetiredAL »

Watty wrote: Sat Apr 18, 2020 12:42 pm
You also need to have it set up so that someone else can easily manage it if something happens to you and your wife.

It would also be good to keep some emergency money at a local bank or credit union.

One thing to watch out for is that many brokerages want any power of attorney documents to be done on their forms so it would be get that setup what she is still able to do that.
To the OP: I concur with Watty's items listed above.

I waited to long on bring others onto the line-of-procession, and now can't access my Dad due to Covid lock-down to get everything signed. I have a sister who doesn't want the responsibility, so one my adult kids will do it.

I put a years worth of ALF $ into my Dad checking account 2 months ago. The ALF auto-debits each month. His LTC insurance reimburses to his checking. If so some reason the LTC payment stops and something happens to me, they have a year to get it straightened out.

By all means use the brokerages/banks POA forms. They process THEIR forms as an administrative task. Submitting a general POA requires their law dept to get involved. Joint ownership of Bank/Savings accounts my be an option. Do not "joint" anything that could get a step-up basis.

Keep copies of what you submit and after they grant you Agent Rights, get a screen capture of that info. I had a dickens of a time with Wells Fargo Brokerage and my Dad's IRA over was I agent or not. Paperwork was signed and accepted by his "advisor", who accepted my instructions for years, but when the advisor left WF, all WF could say was was not in their computer. That turned into a 4 month battle with them that only got resolved after I ( We ) created a new IRA account at Schwab and had Schwab transfer the contents of the WFA IRA to Schwab. Schwab accomplished in 4 days what WF could not do in 4 months.

And don't forget the HealthCare Directives and HIPPA authorizations. Most states have state approved HC and HIPPA forms you can download and fill out. Keep those, along with a copy of the Medicare ID, readily accessible, you will need them if she has to go to a hospital.
TN_Boy
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Re: Where do we put 74 year old mother-in-laws money?

Post by TN_Boy »

p1muserfan wrote: Sat Apr 18, 2020 11:00 am
ralph124cf wrote: Sat Apr 18, 2020 10:43 am Does she have long term care insurance? If not, it is probably too late to buy now, but this will inform the choice of investments if the money may be needed for long term care. If long term care insurance is in place already, then investments can be more aggressive.

Ralph
She does not have long term care insurance...that we know of. Trying to figure out and organize her finances has been a chore. She's not incapacitated, just clueless
Can she deduct the cost of living at that facility?

https://www.elderlawanswers.com/tax-ded ... costs-7184

That is, does she need help with activities of daily living, or does she have a dementia diagnosis?
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p1muserfan
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Re: Where do we put 74 year old mother-in-laws money?

Post by p1muserfan »

Wow! I didn't expect all the responses but you folks have brought up a lot of things I didn't think of. I'll try to add more information about the situation.
1. My wife is the lone beneficiary of her mother's will, life insurance, you name it. HealthCare Directives and HIPPA authorizations were taken care of when the will was redone. She's also on her mom's Wells Fargo account and has full attorney-in-fact for pretty much everything. MIL 's idea.
2. She's fully functional at the assisted living facility, so there's no deduction there. The monthly rent for the facility is auto drafted every month from her checking account.
3. She is on Medicare and also pays about $300/month for Mutual of Omaha supplemental insurance. Will do some research on IRMAA, heard about it for the first time this week on the Ric Edelman podcast.
4. I was thinking about one of the LifeStrategy funds before I even posted. I put my wife's rollover IRA into the LifeStrategy Growth a few years ago. Not sure that would be appropriate for MIL, maybe Conservative Growth.
5. Basically I would like the MIL to have some fun and spend her money reasonably, she doesn't owe us a thing. I want to make that happen and do right by her. My dad left my sister and I 50k worth of IRS debt because he stopped paying taxes the last 7 years of his life. That wasn't cool. At least we had his house to sell to pay them.
5. I'm not sure if I need our financial planner to help us with some of this or my CPA. Heck,maybe both!
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