Asset Simplification Question

[Islandtraveler]

I have been giving a lot of thought to the question of how DW would handle her finances should I croak before her. Our portfolio is on the complicated side due to my own need to be involved. Try as I might, she has no interest in getting involved in our finances so I think it prudent to simplify our assets. I don’t want her to get wrapped up with a FI as I am concerned that she would be taken advantage of. My thought would be 45% in VBTLX, 45% in VTSAX and 10% in VFSUX which would act as a cash proxy. I would arrange 2 months living expense in her checking account with an automatic monthly deposit out of the short term bond fund. All dividends would be swept back into that fund and every January the bond and equity funds would be re-balanced. The brokerage could be given instructions of how this would be executed which I think is pretty simple to do. Anyone else have similar thoughts on the matter? Input and discussion would be appreciated.

 

[RunningBum]

Is there a big cap gains hit to switch over to this, or is most of this buried in IRAs?

One option would be to direct her to VG portfolio management for 0.3%. I don't know that the brokerage will manage the rebalancing just with those instructions, for free, but I may be wrong.

But another thought on this is that as you get older, you may not want to keep up with this, so maybe simplifying it before then is wise.

 

[pb4uski]

If you're ok with a more conservative or more aggressive AA you could go all Wellesley or all Wellington and then have an automatic monthly redemption moved to her checking account. No rebalancing needed... Wellesley or Wellington do it for you.

If you really want a 50/50 AA, then you could go with 50/50 Wellesley/Wellington and an automatic monthly redemption moved to her checking account and just forget about rebalancing.

 

[Islandtraveler]

75% of the funds are in taxable accounts so re-allocation will take some time with an eye on CG. I could look into VG to manage the account as an alternate thought, but that would amount to over 15 k a year. I have a hard time wrapping my arms around that. I'm too much of a tightwad. Then again, this isn't about me.

 

[Islandtraveler]

If you're ok with a more conservative or more aggressive AA you could go all Wellesley or all Wellington and then have an automatic monthly redemption moved to her checking account. No rebalancing needed... Wellesley or Wellington do it for you.

If you really want a 50/50 AA, then you could go with 50/50 Wellesley/Wellington and an automatic monthly redemption moved to her checking account and just forget about rebalancing.

Funny you should mention that. That was my initial thought exactly until I recently read a thread about the tax inefficiency of those funds.

 

[pb4uski]

Funny you should mention that. That was my initial thought exactly until I recently read a thread about the tax inefficiency of those funds.

Is your DW going to give a tinkers dam about tax efficiency?

If tax efficiency is a concern, you could hold Wellington in taxable and Wellesley in tax-deferred as a small step to mitigate the tax efficiency.

 

[Islandtraveler]

Good point. That is my hang up, not hers.