How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

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anders37
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How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by anders37 »

My mother is 80, has been widowed for 30 years, she's in GREAT shape physically, but she has about 5-6 days a month where she feels mentally fuzzy and can't remember all of the accounts that she has, sometimes looks at statements and doesn't recognize what they have to do with her, etc. She has about $3.3m in a brokerage account that is 28/17/55 (stocks/bonds/cash). My siblings and I have lovingly hounded her to do SOMETHING with SOME of the cash and she announced out of the blue to me today that she would like to get at least $300K ($100K/each) in the hands of her 3 kids right away to help with college, weddings, health insurance for early retirees, a new roof for a house, etc. She started 529's for all 10 grandkids about 20 years ago and has always put $5k/year divided by number of grandkids still in or pre-college. Four of the 529's are still open with one finishing next year and 3 starting college in 2 years (those are my kids). Part of her wants to gift more to each of her three 50-something kids, but she is haunted that she and/or they would have to pay gift tax (I don't think this is the case because her net worth is $5.7m and she has never gifted before outside the regular modest 529 contributions).

As one of the potential beneficiaries of $100K, I can think of plenty of good reasons to do this, but are there downsides to consider? Here are her stats:

* NW = $5.7m
* Owns her home/no mortgage. Has an apartment above her garage for an eventual caregiver to live in.
* Runs her entire household and pays all of her expenses (except income tax!) out of her $1800/month Social Security check
* Has Tricare for Life health insurance on top of Medicare
* $4.2K/ month from various pensions that she puts in her brokerage account
* $13K/month income from rental properties (that she owns outright ) that also goes in to her brokerage account.
* Takes an RMD of $9500/ year from an ancient IRA Annuity worth about $190K
* Created an Irrevocable Trust 25 years ago- it owns a paid-up $500K life insurance policy on her that is designated to pay any estate taxes
* $220K in CDs maturing in 2022
* Brokerage account (mentioned above) $3.3M AA= 28/17/55 (stocks/bonds/cash) - as mentioned above, she adds about $215K/ year to brokerage cash because she never spends her pension, rental property income, or IRA RMD--she lives off her $1800/month Social Security.

How much cash should she have? What should she do with the excess? She is obsessed with trying to be a good steward of her wealth (she is beyond thrifty), but she tends to get analysis-paralysis and she let's "perfect" get in the way of "pretty good" when it comes to decisions about parking her $$ someplace productive. Her memory challenges have her thinking she doesn't want to be in the market because she remembers buying some individual tech stocks at the top of the market in 1999 and taking a beating. (She never seems to remember that she owns some Vanguard funds that have done very nicely.) She is in shock that CDs and online Savings Banks pay next to nothing -- she thought she could always find some place to make a % or 2.

While I'm grateful that she's thinking about gifting her kids, it worries me that she thinks (as she announced to me today) that giving each of us kids $100K should get things back in balance and take care of her excess cash situation. I tell her that that would be amazing and lovely, but that I think she needs to explore putting another $500K or so to work somehow. I am her closest child geographically and she tells me daily (if not twice daily) how she HAS to get some of that $$ working-- that she's sick to her stomach thinking about inflation eating away at it, etc.

Would be grateful for enlightenment/ feedback. Sorry for the long first post -- I'll get the knack of summarizing eventually. Thank you!
Actin
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by Actin »

It really doesn't matter what her AA is. The game is so thoroughly won that the market has no impact on her financials at this point. Estate planning for the future with a good lawyer is more important than her AA right now. You could pretty much out there entire brokerage account into VTSAX. A correction tommorow wouldn't change her life at all.
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BL
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by BL »

She is fine financially no matter what she does.

Please don't "hound" her to do something with her cash, because you are creating unnecessary stress that she doesn't need. (I am relating to her rather than to you kids who don't want her to waste money that could possibly be earning more income even at more risk.) Being able to Sleep Well At Night (SWAN) is very important as we reach this age and older.

I expect she would qualify to be a member of Navy Federal Credit Union (I see she has Tricare for Life) where you can still get Certificates for 0.9% for 2 years or other choices. It may not be worth considering adding another account, however, at the current low rates.

I would encourage the gifting to her children, and possibly to a charity she is eager to support, as the estate exemption is currently $11.58 million. Report (but no tax due) on IRS Form 709 available online or have your tax preparer do it, if gifts are over 15k/person/year. In 2025 the tax reverts to the lower past amount which could be a future concern.

If she has not done estate planning and health and financial decision planning, a visit to an estate attorney is in order.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by ivgrivchuck »

There is nothing wrong with being generous. I would encourage that.

Objectively, if her goal is to leave most of her assets to her children, the AA is too conservative. But it's her money, and she might not want to risk it.
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celia
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by celia »

anders37 wrote: Wed Oct 14, 2020 11:04 pm As one of the potential beneficiaries of $100K, I can think of plenty of good reasons to do this, but are there downsides to consider?
She sounds like she may be on the border of cognitive decline. (Note that it is difficult for you to recognize it as you probably see her frequently and she is changing ever so slowly. I know, since I was in that situation too and didn't recognize the signs.) If she doesn't have an estate plan, she needs to get one soon or at least see a lawyer to see if she is capable to make one with legal assistance. She is on the verge of needing someone else to make her major financial decisions. If she is agreeable about this, it will relieve her of the responsibility. Spending her SS each month can be her goal for now, as long as SHE thinks she can manage it. (Think of it as being her spending allowance.)

But the big downside here is you shouldn't do anything unless all your siblings agree. If one of you suggests she invest in xxxx, the others will easily complain that is not reasonable for her. You'll never win any argument. But if she chooses who to be her successor trustee, she can create a living trust, resign as trustee, and have the successor trustee become the trustee and then take actions on her behalf. Would your siblings agree with this approach and that she now needs help?
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by Stinky »

anders37 wrote: Wed Oct 14, 2020 11:04 pm
* Brokerage account (mentioned above) $3.3M AA= 28/17/55 (stocks/bonds/cash) - as mentioned above, she adds about $215K/ year to brokerage cash because she never spends her pension, rental property income, or IRA RMD--she lives off her $1800/month Social Security.
Welcome to the Forum!

How is she investing the new $215k per year that is going into her brokerage account? If she were to direct that into equities like Total Stock Market, she would slowly increase her equity allocation and be using dollar cost averaging to do it.

Absent total cognitive decline or being taken advantage by fraudsters, she has zero risk of running out of money during her lifetime. If she wants to make more cash gifts in reasonable amounts to her children / grandchildren / (soon to be) great-grandchildren, more power to her.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by Escapevelocity »

Does she have POA and advance directives set up? Don't wait until her cognition is a major issue before addressing those things.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by 8foot7 »

anders37 wrote: Wed Oct 14, 2020 11:04 pm she has about 5-6 days a month where she feels mentally fuzzy and can't remember all of the accounts that she has, sometimes looks at statements and doesn't recognize what they have to do with her, etc.

anders37 wrote:
she announced out of the blue to me today that she would like to get at least $300K ($100K/each) in the hands of her 3 kids right away to help with college, weddings, health insurance for early retirees, a new roof for a house, etc.
I would tread very, very carefully. She may feel differently today, or next week. Coupled with this gift coming from your prompting, I would feel very uncomfortable accepting this. Have you spoken with your siblings about it?
anders37 wrote: it worries me that she thinks (as she announced to me today) that giving each of us kids $100K should get things back in balance and take care of her excess cash situation. I tell her that that would be amazing and lovely, but that I think she needs to explore putting another $500K or so to work somehow.
If she would feel better deploying $300k as gifts and that satisfies her, I don't understand why you would be pushing her to put another half million at risk--a risk she clearly doesn't need to take, having won the game.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by iamblessed »

I would have three years in cash. The rest in Vanguard LifeStrategy Conservative Growth Fund if I was her.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by mrh »

Although your mother may be experiencing subtle signs of cognitive decline, in some respects she seems pretty darn sharp to me. For one thing, there are a number of financial analysts in the media who are comparing the current frothiness of the stock market to the tech bubble of 1999. She is also worried about inflation eating away at her cash, which is certainly more than legitimate. I don't have any bright ideas about what to do, sorry, because in fact I am in somewhat the same boat, having an unusually large amount of cash right now that I have no idea what to do with. By the way, has your mother considered a position in precious metals, no income I know - but it can be a good hedge against inflation.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by afan »

There a bigger priorities than gifting strategy here.

She should create a living trust and put all her assets in it. Ideally, she should have all the financial accounts in one institution, bank or brokerage, to minimize the number of separate items to track.

She should appoint a co trustee to manage the trust now. That can be one of the siblings but it may be better to hire a bank trust department bor a trust company.

As part of setting up the trust, she will deal with an estate planning attorney who can help her think through her options about gifting now, paying tuition for grandchildren, charitable gifts and so forth.

She needs to plan for the possibility of ending up in a skilled nursing facility. If she declines enough mentally or eventually physically, staying at home with a solitary caregiver may not be practical. Find out what a good CCRC, assisted living or nursing home would cost in an area where she would want to live. Then make a plan that ensures she could pay for it for as long as she could plausibly live. I would go with 25 years.

Taking this approach will give a good idea of her financial status versus what could become a much more expensive life going forward. $1,800/month would not come close to covering a decent place.

Once these ducks are in a row, she could make a more informed decision about gifting. Although her assets seem ample, they are first there to support her. I would make absolutely sure she is safe, come what may to the economy or her care needs.

It is too soon the think about how much money she should give away, or to whom. Bringing in a corporate trustee as well as an estate planning lawyer will get ideas from people who will not see their welfare affected by what she decides to do.

If it were my mom, I would have her hold onto her money until all future possible needs, at much higher expenses, were fully funded.
Beyond that, MAYBE, gift some of the excess income, without touching principal.

I would argue that she should give up managing her investments as soon as the trust and estate plan are in place. Then let the trustees decide how to invest in safe assets. Continuing to do it herself is a problem waiting to happen. Having a disinterested trustee will cost money but protect the entire family from discord if she ends up directing more money to some sibs than to others. Or giving away what one sib thinks is too much and another thinks is too little.

She should not be too concerned about the low yields. She does not need the income and inflation is historically low as well.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by 123 »

80 may be the new 60. She may well have 15 - 20 years ahead of her. From my perspective any gifting that applies against her lifetime free limit is likely premature.

Personally I think she will likely have more care and respect for her assets while they are with her then any gift recipients would.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by willthrill81 »

Escapevelocity wrote: Thu Oct 15, 2020 7:13 am Does she have POA and advance directives set up? Don't wait until her cognition is a major issue before addressing those things.
That was the first thing that came to my mind as well.
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anders37
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by anders37 »

Actin wrote: Wed Oct 14, 2020 11:51 pm Estate planning for the future with a good lawyer is more important than her AA right now. You could pretty much out there entire brokerage account into VTSAX. A correction tomorrow wouldn't change her life at all.
Thank you - this is really helpful.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by 000 »

Biggest future risk IMO is elder abuse / fraud / theft or making bad decisions due to dementia, not asset allocation.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by anders37 »

OP here. Wow - I'm overwhelmed by all the replies and wonderful advice here! Thank you, thank you, thank you to you all. I am not clear on how to properly reply to everyone individually, so I will attempt to respond and send appreciation in this message. You all have helped me more than you know.

My biggest takeaway is that the best way to nurture my mother right now is to be a cheerleader for letting go of her lifelong mantra (and indoctrination of all of her children) to ALWAYS keep your capital working and growing. I am going to frame it to her that just like ceasing to wear white shoes after Labor Day is the "proper" thing to do, letting go of trying to grow your portfolio/legacy and/or hedge against inflation is the "proper" thing to do in your silver years. That it's not just "okay," but it's ADVISED by the experts for people in her position to put the brakes on trying to grow, and to instead focus on enjoying life, minimizing risk , and worrying about "SWAN."

She does have a Living Trust, advance directive, medical POA, POA, updated will. It makes me sad to think about it, but she's even so organized that she bought 15 cemetery plots together and composed an inscription for a central family stone. We see each other 5-7 days a week and are close, close friends in addition to being mother/daughter. She had wanted me to be her trustee/executor/POA, but I specifically asked her to appoint my most left-brained sibling (former CPA). That sibling does not want to think of her as anything other than the resourceful, sharp-as-a-tack mother we've always had, but I will broach a conversation (that I admit I'm pretty much dreading) about the need to lighten her burden. I believe my mother will actually be relieved when we all work out what that will look like, but said sibling is going to have a hard time thinking of our mother as less switched on and sharp.

So, while it's hard to admit she is firmly a "silver" now, I am relieved and exhilarated to begin espousing a "cruise control" approach to her. I am going to suggest she put the brakes on gifting anything to us or anyone, and tell her I'm sorry I ever parroted her own life-long advice back to her about "needing" to get her cash to work :).

P.S. I am particularly looking forward to telling her that I posted on an internet advice board and that tons of kind people repeatedly said she should relax because she's "won the game." (I hadn't heard that term before, but I think and hope she will get a kick out of it and feel some pride -- I am beyond proud of her and look forward to supporting her and encouraging her to rest on her laurels a bit!)
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by bearwithbear »

OP,

Many of the seniors I know (and I am one of them) want to be able to gift to children and grandchildren. How about a discussion with your mother about birthday gifts - everyone gets a check for $x for a birthday gift. Wedding, graduation, Xmas, you get the idea. What I have heard many, many times over the years: "I can't get out and shop like I used to so I hope you can use the cash to get what you want" or some variation.
The senior does not feel left out. With your mom, what ever numbers she decides on would work. But they should be the amount that she would spend today, not in anticipation of estate taxes.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by pasadena »

Reading this post with my morning coffee just made my day.

I don't have anything constructive to say, except that if it makes her happy to give $100k to each of her children, then by all means, she should do just that. She clearly can afford it, and if it were me, I would probably enjoy giving money while I live, and make people happy, than wait until after I die.

If she's physically healthy, I would also see about the 4 of you going for a really nice vacation together. There is nothing better than spending more time with your mom while she's still there and healthy.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by NotWhoYouThink »

She does have a Living Trust, advance directive, medical POA, POA, updated will.
That's nice, but....
Are her home, her rental properties, and her brokerage account titled to the living trust? Many people set up trusts and never fund them, or create accounts outside the trust over the years.
Is there a co-trustee? Who is/are successor trustee/s? If she becomes unable to manage her affairs how hard would it be for someone to step in? A general POA is almost impossible to use with most financial institutions, a springing POA even harder. Much easier if there is trust paperwork with the co-trustee named, and a trust written so that the co-trustee doesn't have to prove her cognitive decline before stepping in.
So maybe you and your siblings can have a call to review the trust and account titling and make sure you have a plan.
My biggest takeaway is that the best way to nurture my mother right now is to be a cheerleader for letting go of her lifelong mantra (and indoctrination of all of her children) to ALWAYS keep your capital working and growing. I am going to frame it to her that just like ceasing to wear white shoes after Labor Day is the "proper" thing to do, letting go of trying to grow your portfolio/legacy and/or hedge against inflation is the "proper" thing to do in your silver years. That it's not just "okay," but it's ADVISED by the experts for people in her position to put the brakes on trying to grow, and to instead focus on enjoying life, minimizing risk , and worrying about "SWAN."
Huh? that's not my read of most of the comments upthread, but maybe that's the right way to talk to your mom.
Interests rates used to be higher because inflation used to be higher. That wasn't necessarily good thing.
Interest rates are low now because inflation is low. Again, not necessarily a good thing, but that's the way things work.
The advice above is that she has the ability to take risk (because she doesn't need the money at all) but not the need to take risk (because she doesn't need to grow her nest egg) so it is entirely up to her personal preference. If she wants more growth she can take a little risk. Or not, her choice.

As far as gifting, I think that's a great idea if she is comfortable with it. I like the idea above of gifting to children/grandchildren annually, maybe on their birthdays, and then getting to hear from them what they did with their money. That might be fun. Or not, it depends. If they use the money to buy expensive toys or get full sleeve tattoos she might not appreciate hearing that's where her money went.

I find her relationship with money a little sad. She seems to be collecting it without using it, and still worrying about how to grow it more. For what?
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by hi_there »

I think we are missing the big picture. Sure maybe there is some obscure rule that will cause some economic loss or tax, but is that really important? The utility benefit to the 3 kids will far outweigh whatever that loss is. Her utility loss is almost zero, since she's not going to spend the money. Even if she pays full gift tax, it is still worth giving the money. She can probably gift $1 million to each kid and still not have a real spending impact on herself.

It is a good idea to rationalize the gift like you suggested, for college, weddings, etc. It is good to make it like a family pool, and not for you to buy a Corvette or something.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by celia »

NotWhoYouThink wrote: Fri Oct 16, 2020 9:30 am
My biggest takeaway is that the best way to nurture my mother right now is to be a cheerleader for letting go of her lifelong mantra (and indoctrination of all of her children) to ALWAYS keep your capital working and growing. I am going to frame it to her that just like ceasing to wear white shoes after Labor Day is the "proper" thing to do, letting go of trying to grow your portfolio/legacy and/or hedge against inflation is the "proper" thing to do in your silver years. That it's not just "okay," but it's ADVISED by the experts for people in her position to put the brakes on trying to grow, and to instead focus on enjoying life, minimizing risk , and worrying about "SWAN."
Huh? that's not my read of most of the comments upthread, but maybe that's the right way to talk to your mom.
+1

My read on the above threads is that the mom may have cognitive decline that is not being addressed by her family. Creating and funding a trust before it is needed is an excellent way to have someone help manage her assets when she is unable. It is best if that is addressed before she is evaluated for it (and may need to take meds to slow the progression). Mom should now certainly enjoy life without any worries while the trustee takes care of her money for her. That would likely give her peace of mind. The trustee is like having a personal advisor to take care of your affairs.

And you don't have to start cognitive decline to resign as trustee of your own trust. We have several relatives who resigned when they were about 90. That gives the new trustee time to get used to what the grantor intended and to address any problems with the trust itself.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by geerhardusvos »

A living trust is the way to go here, and supporting her through any cognitive decline. Otherwise her asset allocation over the next 10 to 15 years isn’t going to make or break anything including her heirs.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by Katietsu »

Random thoughts...
- If she wishes to stay in her home for the rest of her life, she has the means to do so. It might increase her expenses to $300,000 a year but she can afford it. Whether or not this would be better than a move to a group care setting is going to depend on her personality, condition, and whether or not a pandemic is occurring.
-She would feel better about gifting $300,000. This is a small enough percentage that I would let her do it. I would want the kids to use some of the funds for something specific that they can tell her about and that she would feel good about.
-For now, I would not try to change her control of her day to day expenses. Even if there is unrecognized decline, the damage here is limited. I would make sure all the accounts had the POA’s functional. I would set up withdrawal alerts. This might be something that you could easily get your brother on board with right away.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by FelixTheCat »

My suggestion for Mom is annual family vacations. Have Mom pick a place, pay for the adventure and all of you go.
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anders37
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by anders37 »

Deleted due to messed up attempt at quoting.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by anders37 »

celia wrote: Thu Oct 15, 2020 2:28 am
anders37 wrote: Wed Oct 14, 2020 11:04 pm As one of the potential beneficiaries of $100K, I can think of plenty of good reasons to do this, but are there downsides to consider?
She sounds like she may be on the border of cognitive decline. (Note that it is difficult for you to recognize it as you probably see her frequently and she is changing ever so slowly. I know, since I was in that situation too and didn't recognize the signs.) If she doesn't have an estate plan, she needs to get one soon or at least see a lawyer to see if she is capable to make one with legal assistance. She is on the verge of needing someone else to make her major financial decisions. If she is agreeable about this, it will relieve her of the responsibility. Spending her SS each month can be her goal for now, as long as SHE thinks she can manage it. (Think of it as being her spending allowance.)

But the big downside here is you shouldn't do anything unless all your siblings agree. If one of you suggests she invest in xxxx, the others will easily complain that is not reasonable for her. You'll never win any argument. But if she chooses who to be her successor trustee, she can create a living trust, resign as trustee, and have the successor trustee become the trustee and then take actions on her behalf. Would your siblings agree with this approach and that she now needs help?
Thank you for this! Yes, she would absolutely consider resigning as trustee. I told her that I'd learned here that there is no shame in resigning as trustee if she's just tired and stressed and feeling mentally fuzzy (i.e., that it doesn't mean she's totally incapacitated). Some background is that she set up a revocable living trust close to 25 years ago. All of her properties and 95% of her accounts are titled with "trust" after her name, although some of them reference the creation date of her trust and some don't (I always wonder if she needs to go through and perfect those erratic titles at various institutions or if they're ok as long as they have "HER NAME Trust" in the title). I told her I would ask about that on here. I also told her I would ask what it would "look like" to slowly start taking steps to pass the baton from her to successor-trustee-sibling(?). I would imagine they could start by going around to 4-5 institutions in our community and finding out what they want/need to be satisfied that the baton is being voluntarily passed. She really liked the idea of working together to get things changed over gracefully (I think she's actually excited about it because she confided to me today that in addition to worrying about doing something with her cash, she was starting to get nervous about everything she was hearing about likely changes to the estate & gift tax exemption amount with the election--she said the last thing she wanted was to toss & turn at night about acting on that at just the right moment in just the right way... Thank you so much--if you have time, I know she would love more info on how a dignified, voluntary baton-pass would work.
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by Outer Marker »

Finances are not a worry here. She can and should gift the $300,000 tomorrow and see her generosity at work.

I have been though the slow and difficult process of the decline and eventual passing of three elder relatives, where I was the "responsible party." I'd highly recommend she transition now to a nice "independent living" facility with eventual "assisted living" level of care. People tend to put it off too long, and by the time they realize they are not able to live at home it is too late to make a smooth transition and fully integrate into the community. My mom loved her house, but recognized that her quality of life was much better with companionship, meals, and activities at assisted living. With her level of resources, she can afford a really nice place.

Ditto on the advice to hire an estate planning attorney.

I'd encourage her to turn the finances over to Vanguard PAS. That puts the fiduciary response on them, and takes you out of the loop for any differnces of opinion among you, your sibilings, and your mom on how the assets should best be managed.
NotWhoYouThink
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by NotWhoYouThink »

I told her I would ask about that on here. I also told her I would ask what it would "look like" to slowly start taking steps to pass the baton from her to successor-trustee-sibling(?).
What does the trust say? Is a co-trustee named? Is there a process described for a successor trustee to take over while she is alive? If not, you may need to modify the trust.
increment
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by increment »

anders37 wrote: Sun Oct 18, 2020 2:51 am All of her properties and 95% of her accounts are titled with "trust" after her name, although some of them reference the creation date of her trust and some don't (I always wonder if she needs to go through and perfect those erratic titles at various institutions or if they're ok as long as they have "HER NAME Trust" in the title).
If the trustee(s) change, you will probably need to change the title of record on each of the properties and accounts. (For financial institutions, adding a trustee may require filling out "new account" paperwork for each remaining trustee.) That would be a natural time to check on whether the trust's official name should be used.
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celia
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by celia »

anders37 wrote: Sun Oct 18, 2020 2:51 am Thank you so much--if you have time, I know she would love more info on how a dignified, voluntary baton-pass would work.
The answer is partly in her trust. She made the rules when she created it with a lawyer. (She may first want to review it in case she wants to change anything in the trust before stepping aside.)

If she has died, the new trustee would just need a death certificate. If she is incapacitated, the trust likely says if 1 or 2 doctor notes (or anything else) is needed. If she wants to resign, she writes herself a resignation letter that the next trustee can use to gain control. Or she can appoint someone to be her co-trustee and each of them could make decisions separately from each other (as stated in her letter or a trust amendment). Of course, this should be notarized so someone witnesses her signing voluntarily.

I have 2 relatives who are now in the hand-off stage. They are in assisted living now and are much happier since they don’t have to worry about anything house related or about money. Their kids are taking care of cleaning out, fixing things and selling the house.

My in-laws went with a third co-trustee (a son) when they turned 90. That gave the son a head start on understanding their bills and taxes and the parents could answer questions while they were still alive.

I started a special needs trust last year for a relative and funding for it happened this year (after real estate was sold). I found that some banks take the trust document (or Certificate of Trust) more literally than others in what the trust is called. This new trust had a line that the trust will be named xxxx (without a date of trust) and one bank refused to put the date on the bank account. The Vanguard account I wanted to link it to was titled “xxxx (date)” and I was afraid they wouldn’t link up without more paper forms sent in. So I found a way to get the bank to put the date on the account by bringing in the entire trust instead of the Certificate they had used for account opening. (This trust has a possible long life after I die, so I’m trying to do everything to make it easier for future trustees.)

Also, there is no shame if a trustee feels it is too big a burden. If their own life or their own health is too complicated, s/he can resign and have the following trustee serve.
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anders37
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by anders37 »

Stinky wrote: Thu Oct 15, 2020 4:43 am
anders37 wrote: Wed Oct 14, 2020 11:04 pm
* Brokerage account (mentioned above) $3.3M AA= 28/17/55 (stocks/bonds/cash) - as mentioned above, she adds about $215K/ year to brokerage cash because she never spends her pension, rental property income, or IRA RMD--she lives off her $1800/month Social Security.
Welcome to the Forum!

How is she investing the new $215k per year that is going into her brokerage account? If she were to direct that into equities like Total Stock Market, she would slowly increase her equity allocation and be using dollar cost averaging to do it.

Absent total cognitive decline or being taken advantage of by fraudsters, she has zero risk of running out of money during her lifetime. If she wants to make more cash gifts in reasonable amounts to her children / grandchildren / (soon to be) great-grandchildren, more power to her.
Thank you for this idea. She has NOT been investing the annual pension/rental income and that is what prompted this whole thread. She has just let the brokerage put it in an FDIC insured bank for about 1/10th of a percent for a few years and it has been bugging her that it is just sitting there, but she has had 'analysis paralysis' as to what to do with it.

I will pass your suggestion (about DCA-ing future rental/pension income in to a simple total market fund as a way to slowly increase her equity allocation) on to my sibling who would be her co-trustee if she goes that route (and who is already her successor trustee the way the trust is written now). My mother (and all of us children) have had a blind spot about the fact that it is not "all or nothing" when it comes to managing her affairs (all of which are in her trust). Until about 12 months ago I would NEVER ask her about her affairs (considered bad manners) but now she not only tolerates affectionate butting-in, but she APPRECIATES it and was quick to say she'd like to hand off almost everything when we all brainstormed this weekend.

THANK YOU AGAIN for your feedback - it ( and other replies) have been so helpful and have got us talking in a productive manner as a family!
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Re: How much cash does 80 y.o. FI ($5.8m NW) mother need? She's curious about gifting, places to park cash

Post by KyleAAA »

Sounds like she could give away all $3.3mm and be fine. Doesn't matter what she does. Let her leave it in cash if it makes her feel better.
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