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Advice for Elderly Parents
Old 06-14-2010, 10:22 AM   #1
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Advice for Elderly Parents

My DW's parents are retired and living in a nursing home. In reviewing their assets I found that they have a hugh sum (500k) in six month T-bills paying nearly zilch, that they've been rolling over for years. They may need much of theses funds for future nursing home expenses so preservation of principle is important to them. They are ultra conservative.

I feel they should at least look putting these funds into CDs and creating a ladder so they can spread the maturity out over the next couple of years.

Any suggestions / comments?
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Old 06-14-2010, 11:22 AM   #2
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My DW's parents are retired and living in a nursing home. In reviewing their assets I found that they have a hugh sum (500k) in six month T-bills paying nearly zilch, that they've been rolling over for years. They may need much of theses funds for future nursing home expenses so preservation of principle is important to them. They are ultra conservative.

I feel they should at least look putting these funds into CDs and creating a ladder so they can spread the maturity out over the next couple of years.

Any suggestions / comments?
When we get yield-maximizing questions of this nature, a reflex reaction is more non-financial questions:
Why is this any of your business?
Have your spouse's parents asked for your help?
What do her parents want to do?

Without their support/cooperation you're just looking for trouble and raising family strife. Even with their support/cooperation you're just setting yourself up to be the one to get the anxious phone calls and the inevitable whipping-boy blame.
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Old 06-14-2010, 11:32 AM   #3
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Why is this any of your business? It's not. Couple of their kids asked my opinion.

Have your spouse's parents asked for your help? No. Dementia is setting in and parents are having difficulty keeping track of their medication let alone their finances.

What do her parents want to do? See answer above.
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Old 06-14-2010, 02:16 PM   #4
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When we get yield-maximizing questions of this nature, a reflex reaction is ...
Well, it wasn't *my* reflex reaction. I think it's good of moguls to be looking out for the in-law's best interests.

But it is true that you need to make sure that any/all involved are on the same page. Sounds like they will need the liquidity, so keep that in mind for the ladder. If all agree, it's just a matter of comparing the ladder to the treasuries. I guess I'd keep the ladder pretty short though.

Good luck - ERD50
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Old 06-14-2010, 05:50 PM   #5
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This article about how unattractive CD rates are just now ran in this morning's paper: CD rates: Rates on deposit products at lowest levels in years - chicagotribune.com

Might be best to leave the money where it is for a while longer.
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Old 06-15-2010, 12:49 AM   #6
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Ask how much could be needed per year and build a ladder of CD's to handle at least at the long end you can get 2.5% (or move to a bond fund and take a bit more risk)
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Old 06-15-2010, 05:05 AM   #7
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A few comments:

  1. If it has not been done yet... Someone in the family needs to get Power of Attorney for Health and Finance. They should have a living will. Make sure they have basic estate provisions taken care of. Responsible Son or Daughter... it an be a couple of people. If they both have early dementia... but can still make decisions, it may not be too late. Talk with an attorney
  2. The PA will have a fiduciary responsibility to make decisions in the interest of the parents.
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Old 06-15-2010, 08:54 AM   #8
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What chinaco said...
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Old 06-15-2010, 09:09 AM   #9
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Chinaco thanks. All that has been done except the Financial POA and that is in the works.
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Old 06-15-2010, 10:18 AM   #10
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Dealing with parents in similar situation, and as Chinaco said, POD is absolutely essential, and getting a Durable POD is essential.

The sooner this is done, the sooner you can get it to the various financial institutions where accounts are held. That process was very painful, and required POD being modified, because each bank wants to review the POD and make sure it conforms to their conditions. Was a royal pain in the ass getting accomplished across multiple institutions.

Assuming parents aren’t “gone” yet relative dementia will make the process much easier. Time is of the essence…
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Old 06-15-2010, 12:50 PM   #11
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One wants to avoid the guardianship process if possible, in particular the 3rd party guardian. My Aunt needed a guardian and had not set up a POA so that the guardian came along and took her to the cleaners, about 100k worth. (The Guardian is now being prosecuted for doing this to a number of people, the courts did not do any job of oversight, the guardian did not even prepay the funeral) In addition to the POA consider funeral arrangements, because it makes it that much easier at time of need if the basic arrangements are made. Recall that in addition the POA expires upon death, so that there is a window where a 3rd party needs to pay expenses until the estate is opened. Prepaying the funeral avoids putting this burden on anyone.
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Old 06-15-2010, 01:33 PM   #12
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LARS is 100% right. Been there, done that...alzheimer's disease. Fortunately, my parents made and paid for their burial costs years in advance of their need. FIL did not. While he was in hospice, BIL took MIL to funeral home to make arrangements. We learned that if plans are made/paid in advance of death, there is still a significant discount involved even if death is imminent. FIL's funeral was less than a week later.
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Old 06-15-2010, 03:57 PM   #13
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This is the ideal situation for a joint revocable living trust funded with their assets. Unfortunately their mental abilities may not be sufficient to do this but it would make it much easier for the trustees to pay their bills and manage their savings. We had our parents trusts at Fidelity.
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