Financial advice

[rolexjim]

So, here are the circumstances:

My mother is 87 years old and in declining health. She has been home bound for almost 20 years with permanent back issues which have seen her suffer 2 failed surgeries.
She is financially secure with no debts, over $7k/mo income from real estate properties, and she receives social security, as well as TriCare for her health needs.

She has single handedly provided the financial needs for 2 of my siblings who suffer from mental health issues. Her portfolio of stocks, mutual funds and insurance have grown tremendously since the rise of the economy and stock market these last few years, with a value of over $700,000. She started this over a decade ago to help provide money to care for my 2 siblings upon her death.

Unfortunately, my sister died from a drug overdose 2 years ago. She was the sibling with the most needs. My brother, who's issues are much less severe, is on disability but still lives on his own as well as maintaining a small mobile home and a car, which he drives to do volunteer work at or local VA hospital. He is 67 years of age.

Her portfolio has grown tremendously and is at a level that should provide ample financial means for my brother. Keeping in mind he is a veteran so health care is really not much of an issue. He lives a modest life and doesn't need much more than his disability income provides.

My question is this: Should her portfolio be liquidated and placed into several FDIC insured accounts so as to maintain their current value (depreciation withstanding), or should it be left as is, but at the mercy of a market which has been very bullish but could turn into a bear, leaving it to anyone's guess as to it's value in 5, 10, or 20 years?

Keep in mind: I have no play in this game. Any money left at her death is to be placed into a trust for my brother. Upon his death, the money is to go to certain charitable foundations.

I just want what is best for my family.

I have an opinion as to which avenue is appropriate, but I would love to hear the opinions and ideas of the forum members.

Thanks for any words you wish to express.

[VICI]

How old is your brother? What type of drawdown would he use from the $700k per month / year?

[rolexjim]

Originally Posted by VICI

How old is your brother? What type of drawdown would he use from the $700k per month / year?

I suppose that would be helpful

He is 67 years old and is probably only "currently" receiving a few hundred dollars per month from my mother to subsidize his disability income.

[mannyv11]

Originally Posted by rolexjim

I suppose that would be helpful

He is 67 years old and is probably only "currently" receiving a few hundred dollars per month from my mother to subsidize his disability income.

With that said, I am the type of guy who generally plays it very safe in my investments and sounds like the current value would hold him and your mother over for longer than they would need it.

[VICI]

Inflation is invisible until it is felt.

Putting $700k in a savings acct will have a negative real return (minus taxes and inflation).

It all depends on his lifestyle and what may be unforeseen expenses that he might need or want to incur.

What’s most important is that have a professional review of the investment holdings to see what is their upside vs risk. The issue that I’ve seen is that most financial advisors aren’t more knowledgeable than their clients. So referrals, screening is key.

You might want to take a few years worth of expenses that he would normally withdraw from the account and put that in a higher yielding savings acct.

If the investments have a good risk return, you might want to consider holding as the global economy is on an uptrend.

[returntorolex]

Are you the trustee?

[Flstfirider]

Leave it alone, don’t panic if the market goes bearish...the market is cyclical and historically will go up over time.

[rolexjim]

Originally Posted by returntorolex

Are you the trustee?

No

[rolexjim]

Originally Posted by Flstfirider

Leave it alone, don’t panic if the market goes bearish...the market is cyclical and historically will go up over time.

Understood. Just would hate to need the money in a bear market, but I get the point.

[Flstfirider]

Originally Posted by rolexjim

Understood. Just would hate to need the money in a bear market, but I get the point.

Keep in mind any stock sale you make will be subject to capital gains tax, in your case likely based on a long term holding.

[CamSLC]

Originally Posted by Flstfirider

Keep in mind any stock sale you make will be subject to capital gains tax, in your case likely based on a long term holding.

The cost basis is adjusted when on the date the grantor passes. And this amount wouldn't be subject to the estate tax. It sounds like this account wont change hands until that happens.

There are a lot of alternatives between an active stock portfolio and a stagnant savings account approach. I would get with the financial advisor and examine your brothers actual needs over the next 20 years. Income, growth, preservation etc...

So sorry to hear about your ailing mother. Hopefully her remaining time is pain free and she gets to spend it with the ones she loves. My mother was bed ridden for her last few years in a assistance home. It's was a very difficult time.

[GB-man]

I would seek out a certified financial planner that comes recommended from multiple people you trust. Someone who works for a flat fee.

[tbonesteak]

I’d leave $500k in there, remove $200k for emergency use, living costs, etc... If his lifestyle is simple, that $200k should last a long time, and if he needs money when the market turns bearish, he doesn’t have to pull out. Furthermore, if he doesn’t touch that money, he can actually put it back in when the market turns bearish.

Just some random advice from an internet guy, obviously a CFP would be best.

[bdex75]

If your mother is living on income from SS and rental property, she is not drawing this account down. If your brother will need some income from the assets when your mother is gone but the principal balance will go to charity at his death have you considered a CRT? Gets him an income for as long as he is alive and the rest goes to charity. Get a partial current income tax deduction to offset other income.

At a minimum I would calculate what kind of income your brother will need per year. Take 3-5 years or so of income and put that into something that is very low risk (read: fixed) as to not have to liquidate money in the market if the market is in a downturn. The other option with the dollars for income may be some type of annuity but chose carefully there. Invest the rest somewhat moderately as it will be going to the charity anyhow.

I know several “experts” have been saying that the US equity market is going to crash for a couple years now. A couple of the big economists whose blogs I read aren’t convinced the US equity market is overvalued right now. A good balanced portfolio is your friend in my humble opinion.


Bottom line is find a reputable financial advisor that has the ability to act as a fiduciary. They should be securities licensed (Series 6 or 7 and 65/66) and be able to be checked out on FINRA Broker Check.

Not sure where you are in SC but I may be able to get you a name of an advisor to interview to see if they are the right person for the job. DM me if you wish.


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[Carrera911]

I find it noble that after his death the money will go to charity and not to you.
I am not a financial advisor therefor I will not be able to give you any further comments.

[worldfamoussam]

I think it's really about diversifying it. Some of it should definitely be in conservative investments, some in balanced growth. Probably your best bet is to find a very well-regarded, scrupulous manager to handle it.

[FrankNYC]

I wouldn’t pull all of it out of the market. Just find a ratio you’re comfortable with—like 50% in fixed income and 50% in equities. You should also consider placing a portion of your money in higher yielding fixed-income investments, such as corporate bonds and foreign debt. This way, you get some of the safety of fixed income but at a higher yield than bank CDs.
If you’re really uneasy about the market you could also structure your portfolio and get rid of your highest risk sectors—like technology and small caps and load up on dividend payers like energy, consumer staples, etc. the problem with this, however, is you lose diversification

[FrankNYC]

If you do go to a financial planner make sure they are fee-only. Be wary of “free” financial advice as these planners typically get a commission from the products they sell

[Sprta]

Seek out a professional financial planner, let them design a portfolio to address your requirements. They are experts most of us are not.

[ejvette]

Seek the advice of a professional but I would definitely not leave it fully invested in equities.

[locutus49]

I would put all the money in blue chip dividend paying stocks and never sell them, just collect the dividends. Whether the market goes up or down, stocks continue (with a few exceptions) to pay dividends.

[AzPaul]

Since the holdings have a specific purpose, and they've already grown to a size where they're able to fulfill that purpose, moving the ship to safe harbor makes all the sense in the world.

[rolexjim]

Lots of good thoughts here. The portfolio is currently "managed" by an investment professional but I have my doubts about his concern for clients. It seems to me that he would initiate a possible modification of course for her portfolio considering her age when it was created, how many years have passed, and it's stated purpose when open.

I'll be discussing this with her this week and see if she has any thoughts.

Thanks again.