Great grandmother, $2MM excess funds, seeking advice

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
morphos
Posts: 10
Joined: Sun May 20, 2012 9:20 am

Great grandmother, $2MM excess funds, seeking advice

Post by morphos »

Hey everyone, I'm seeking advice from those with more life experience approaching end of life and simple estate planning. My wife and I are late 30's, approaching FI, and haven't lost a parent as an adult yet.

After 97 years of an exceptional life, my wife's grandmother has been living comfortably for 15 years with my wife's mother as her primary caregiver in Missouri. Grandmother and her late husband raised six children in the Bay Area. Between the sale of property and decades of pension, military retirement, and social security, grandmother now has all of her healthcare, needs, and desires met and no concern about cash flow. She gets to see her 2 year old great grand-daughter often too!

My wife's mother would love a safe recommendation on how to make a good decision about the funds currently in a savings account, currently ~$2 million. Settling the estate eventually in the next few years shouldn't be contentious between the six sibling families, but she feels responsible for ensuring safety for the excess above FDIC limits. The whole family are pretty great, calm folks with mostly personal taxes / finance experience - and my wife (and I) has no interest in an inheritance. Prioritizing family member's health and needs will always come first.

As the trusted in-law, I've been asked to give advice. I'm comfortable doing so and then stepping entirely back.

Questions:
  1. A bit of protection against inflation seems the most prudent for consideration of the estate. TIPS or an alternative for some or most of the funds above an emergency cash balance for unexpected needs?
  2. Any gifting that should be considered now?
ivgrivchuck
Posts: 1672
Joined: Sun Sep 27, 2020 6:20 pm

Re: Great grandmother, $2MM excess funds, seeking advice

Post by ivgrivchuck »

morphos wrote: Sun Jun 20, 2021 9:10 am Questions:
  1. A bit of protection against inflation seems the most prudent for consideration of the estate. TIPS or an alternative for some or most of the funds above an emergency cash balance for unexpected needs?
  2. Any gifting that should be considered now?
1) She clearly has more than she will ever need. Gifting some of that money to her children seems like a good idea, if that is what she wants.

2) The easiest way to solve the FDIC concerns seems like dividing the money into multiple banks. I would stay with big well-known banks, you can get 0.5% savings account rate without too much trouble.

3) Putting some of the money into a short term TIPS fund, like VTIP, is a reasonable move in my opinion. Although one needs to understand that reducing inflationary risk means taking nominal risk. If inflation runs lower than expected (especially if we run into deflation), money will be lost in nominal terms. If she is not comfortable with this (most people can only think in nominal term, not in real terms), then it is best just to stick with savings accounts and CDs.
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
User avatar
retired@50
Posts: 12830
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Great grandmother, $2MM excess funds, seeking advice

Post by retired@50 »

If the great grandmother needs to retain the money, just in case of some unforeseen expense, then dividing up among several banks is certainly one way to go. Safe and easily understood.

If parting with some of it now is acceptable, she could give $15,000 to every living relative she cares to, and let them invest it in a way that suits their particular needs. This would probably bring her some happiness, as well as the recipients.

Some might use it for a down payment on a house, or car, or pay off debt, whatever the individual situation required. I can imagine the flood of thank-you cards would bring her joy.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
User avatar
gobel
Posts: 553
Joined: Mon Feb 08, 2021 3:50 pm

Re: Great grandmother, $2MM excess funds, seeking advice

Post by gobel »

She could add the 6 children as beneficiaries to her savings account and boost her FDIC coverage now to 1.5m, and simplify the transfer of assets later when she passes (assuming that's what she wants).
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Great grandmother, $2MM excess funds, seeking advice

Post by Gill »

gobel wrote: Sun Jun 20, 2021 10:52 am She could add the 6 children as beneficiaries to her savings account and boost her FDIC coverage now to 1.5m, and simplify the transfer of assets later when she passes (assuming that's what she wants).
Not really a good idea in the event one or more children predecease her. Not all that unlikely as children are probably in their 60's and 70's.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
User avatar
AndrewXnn
Posts: 236
Joined: Thu Jan 02, 2014 6:55 pm
Location: God's Country

Re: Great grandmother, $2MM excess funds, seeking advice

Post by AndrewXnn »

Because the market has recognized the risk of inflation for such a long period of time, the current cost of inflation protection is outrageous.

For example, 5 year TIPs are currently yielding -1.64%.

That's correct: NEGATIVE :annoyed

There was a time, a very long time ago when TIPs had positive yields.
Qualified Nuclear Engineer & NYS Licensed Professional Engineer
User avatar
rob
Posts: 5247
Joined: Mon Feb 19, 2007 5:49 pm
Location: Here

Re: Great grandmother, $2MM excess funds, seeking advice

Post by rob »

If she is never going to need it then I would invest in stocks and look at how to get that to the grandkids if the parents can live without it.... funding college or alike and an aggressive gift program.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
DEBTINATOR
Posts: 125
Joined: Thu Oct 20, 2011 8:05 pm

Re: Great grandmother, $2MM excess funds, seeking advice

Post by DEBTINATOR »

There’s no reason she can’t give more than the 15k now, because most of this money should be invested or used according to the heirs goals and objectives. 15k is just the annual exemption. She still has an 11m exemption, she can chose to jump start using that now. For instance if she wanted to give out 6x100k now to the families to help with a down payment or home remodel or pay for a grandchild’s school, that seems reasonable and would likely give them some enjoyment.

I’d still want to keep a good amount for her, but it sounds like given the pensions, ss, etc and her age 1m is probably more than enough.
HomeStretch
Posts: 11419
Joined: Thu Dec 27, 2018 2:06 pm

Re: Great grandmother, $2MM excess funds, seeking advice

Post by HomeStretch »

Good advice from other posters.

Also consider whether spending some of the money might make sense. Perhaps there is (are) some thing(s) that might make your grandmother-in-law’s (GIL) life easier/happier. Perhaps funds could be used to give her caretaker (MIL) regular assistance with/time off from house/caretaking chores or to send MIL on periodic well-deserved vacations.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Great grandmother, $2MM excess funds, seeking advice

Post by dbr »

I think I agree on the FDIC thing with just using enough banks to cover it. If you want really safe someone could help get a Treasury Direct account set up and put it all in T-bills. Myself that seems an unwanted complication.

Inflation is long term risk but not a short term risk. I am not sure I would get spooked about it. In any case a "little bit" of inflation protection is exactly that, a little bit. As pointed out above short real yields are at about -2% which means there is no short term inflation protection you would want to pursue. At the same time the real yield on nominal accounts is equally negative right now.

Depending on your judgement regarding family dynamics, which seem to be positive, I would think gifting money to the obvious people would make more sense than agonizing over how to keep the money safe for the same people to inherit not too far into the future.

Just two bits.
User avatar
celia
Posts: 16774
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Great grandmother, $2MM excess funds, seeking advice

Post by celia »

Gill wrote: Sun Jun 20, 2021 11:12 am
gobel wrote: Sun Jun 20, 2021 10:52 am She could add the 6 children as beneficiaries to her savings account and boost her FDIC coverage now to 1.5m, and simplify the transfer of assets later when she passes (assuming that's what she wants).
Not really a good idea in the event one or more children predecease her. Not all that unlikely as children are probably in their 60's and 70's.
Gill
She could list the 6 beneficiaries with “per stirpes” after each name. Then if beneficiary “X” dies, their share will go to “X”’s children.
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Great grandmother, $2MM excess funds, seeking advice

Post by Gill »

celia wrote: Sun Jun 20, 2021 6:30 pm
Gill wrote: Sun Jun 20, 2021 11:12 am
gobel wrote: Sun Jun 20, 2021 10:52 am She could add the 6 children as beneficiaries to her savings account and boost her FDIC coverage now to 1.5m, and simplify the transfer of assets later when she passes (assuming that's what she wants).
Not really a good idea in the event one or more children predecease her. Not all that unlikely as children are probably in their 60's and 70's.
Gill
She could list the 6 beneficiaries with “per stirpes” after each name. Then if beneficiary “X” dies, their share will go to “X”’s children.
I don’t believe a bank or mutual fund will allow that. They don’t want the responsibility of chasing down unnamed beneficiaries.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
Post Reply