Mom is trying to hold more "cash" ...

[Sunset]

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Originally Posted by clifp A couple of thoughts. If your mom is in position where pension, SS, are enough to meet her current needs than she is in slightly better than my mom was. Odds are that she will be leaving you a nice inheritance, so in that respect having high stock allocation is fine. What isn't fine is not having enough cash in case things could bad with her health, it could be yuan displacing the dollar (or far more likely in your mom's case Apple having a couple of bad years.) I've been managing my 89 mom money passively for 20 years and actively for 5 years. When she first moved into her retirement home a few years ago her income from SS, a small pension, and mortgage payment from her granddaughter were sufficient to pay for her expenses. So she only needed to tap a small portion of the income just under $1 million portfolio. A couple of years ago we hired a terrific home care worker to help her with various things (shower, remember meds etc.) to the tune of 15-20K/year additional. So now she needs all the income from her portfolio to support. Looking down the line is certainly possible that she'll need to move into a nursing home in the future. In her area nursing homes run about $90K a year, when I subtracted the her current income of 50K that lead to a shortfall of 40K/year. I figured there was no way she is going to last more than 2-3 year in nursing home. (She lives in Oregon has made it really clear she rather die sooner than later). I ended up sticking 100K in cash which is sufficient for 2.5 years. I continue to manage the rest of the portfolio with the assumption that much of it will be an inheritance for myself and my sisters. Of course stuff happens and she may need to spend all of it. So my advice is to sit down with her and do a bit of crystal ball, and figure out what her future cash needs might be and then sell enough Apple stock to make that is secure. Then work on further reducing the Apple position.

+1

I'll only add, that by viewing which shares were owned by Dad , the basis may be higher so less tax implication to your Mom.
Plus you can spread the selling over the calendar years, it doesn't have to be all in this year. Again to minimize the tax hit.

[pb4uski]

The tax bite might not be too bad as a result of the partial or whole step up in basis from when you Dad died.

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If you own stock or other assets with a spouse as joint tenants or tenants by the entirety—forms of ownership often used by married couples that ensure that on the death of one co-owner the survivor becomes the sole owner—the basis is adjusted upward on the death of the co-owner. Basically, the survivor is treated as though he or she inherited half of each share of stock, with its basis increased to current market value. In certain so-called community property states, the entire basis of community property—not just half—may be increased to date-of-death value upon the death of one spouse. Since that could have a major impact on the taxes due when the stock is sold, check this point carefully if you live in one of these states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin.

[Steelart99]

pb4uski,
yes ... there was a step up in basis for half of all the stock they had, but it was when Apple was quite a bit lower (mid 2012). Since then the stock has done "well" so there is still a fairly significant tax consequence for selling.

Mom doesn't really want to touch it since it is what Mom & Dad wanted to pass down to us kids. We all feel that she just needs to do with it as she pleases ... spend it, donate it, whatever. They earned it and she should feel free to move it about at her pleasure.

Mom has decided to go visit a fiduciary next week and is taking along her accountant. I should be able to discuss things further with her after that. Thanks again to everyone who piped in here!

[ERD50]

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Originally Posted by Steelart99 pb4uski, yes ... there was a step up in basis for half of all the stock they had, but it was when Apple was quite a bit lower (mid 2012). Since then the stock has done "well" so there is still a fairly significant tax consequence for selling. Mom doesn't really want to touch it since it is what Mom & Dad wanted to pass down to us kids. We all feel that she just needs to do with it as she pleases ... spend it, donate it, whatever. They earned it and she should feel free to move it about at her pleasure. Mom has decided to go visit a fiduciary next week and is taking along her accountant. I should be able to discuss things further with her after that. Thanks again to everyone who piped in here!

What do expect to get from the fiduciary? If your Mom doesn't want to sell anything, what's the point? I guess you could discuss hedging strategies (buying puts), but that could get expensive over time.

Unless you think the fiduciary can explain to her that these specific stocks may have no sentimental value to the kids, and should be looked at simply as their $ value? I sort of doubt she will be swayed, it's an emotional thing.

At any rate, I think it is helpful to have some kind of game plan when going in to see any professional. I'd suggest you have some idea what you are looking for, as well as being open to ideas you might not have thought of.

-ERD50

[RunningBum]

I'm confused because in your first post you say she's concerned about not holding enough cash, but in your last post you say she doesn't want to part with any of the AAPL. I know those two things don't have to be in conflict since she probably has enough in other investments to convert to cash, but that would make her even less diversified. Sounds like she's got a sentimental attachment to a stock, which isn't a good thing. Somehow you need her to understand that what you all appreciate is that she and your dad are passing down anything, not a specific stock. Maybe you can show her some full history stock charts of some similar type tech stocks like INTC and CSCO, which went way up but fell back and are still worth less than half their peak value.

[Steelart99]

The sentimental attachment IS there since that was my Dad's approach. I'm hoping a fiduciary might help her see that she should at least start considering a more diversified portfolio. She does have enough other, non-Apple investments to increase her cash position to where she should be comfortable, albeit even less diversified.

So to back up a bit, Mom did not handle any of the investments prior to Dad's passing. She has basically just held course for several years ... and done well with that. Recently, she has been reading "stuff" that has caused her some angst that she believes can be addressed by increasing her cash allocation. Thus my original post; I was not sure what to tell her might be the options for "cash". I've always recommended that she have more diversification, but as I said in my last post, she sees this as their inheritance to us and prefers to maximize that. That is where I hope the fiduciary might be able to show her the volatility/dangers of staying with her allocation as-is.

Unfortunately, I live in a different state and simply can't make it to her place to go see the fiduciary next week. Having said that ... maybe I really need to make the trip regardless ...

[RunningBum]

Can you be phone conferenced in? Skype?

[Clone]

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Originally Posted by Steelart99 Mom did not handle any of the investments prior to Dad's passing. ... Recently, she has been reading "stuff" that has caused her some angst that she believes can be addressed by increasing her cash allocation. ...

Something that would bother me just a bit here is the idea that someday, somebody might say the words that resonate with your mom and talk her into converting the portfolio into something that is safer and has a guaranteed return, because, you know, the market is just not that safe anymore. Perhaps recommend a nice little variable annuity like this one here...

Not sure exactly what might be done. I have seen enough goofiness in relatives as they age. For myself- it probably makes sense at some point to establish the money in a manner that protects me from falling prey to a salesman, while at the same time not turning complete control over to the heirs. Trusted advisers retire or move away, probably some institutional management where you don't have a person with a commission motivating them to churn your account.

[2017ish]

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Originally Posted by ERD50 I missed this before. So it does sound like this will likely become an inheritance and be stepped up in cost basis. I'd still try to diversify, a little at a time might be a minor tax hit, you'd need to run it through a tax program to see. But off hand, LTCG should be no more than 15%, right? -ERD50

Max is 20%, if you are in 39.6% nominal bracket and you also get to pay the 3.8% medicare surtax on net investment income.... http://www.irs.gov/pub/irs-access/f1...accessible.pdf

[mpeirce]

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Originally Posted by 2017ish Max is 20%, if you are in 39.6% nominal bracket and you also get to pay the 3.8% medicare surtax on net investment income.... http://www.irs.gov/pub/irs-access/f1...accessible.pdf

Plus the state taxes, if applicable.

[Texas Proud]

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Originally Posted by Steelart99 The sentimental attachment IS there since that was my Dad's approach. I'm hoping a fiduciary might help her see that she should at least start considering a more diversified portfolio. She does have enough other, non-Apple investments to increase her cash position to where she should be comfortable, albeit even less diversified. So to back up a bit, Mom did not handle any of the investments prior to Dad's passing. She has basically just held course for several years ... and done well with that. Recently, she has been reading "stuff" that has caused her some angst that she believes can be addressed by increasing her cash allocation. Thus my original post; I was not sure what to tell her might be the options for "cash". I've always recommended that she have more diversification, but as I said in my last post, she sees this as their inheritance to us and prefers to maximize that. That is where I hope the fiduciary might be able to show her the volatility/dangers of staying with her allocation as-is. Unfortunately, I live in a different state and simply can't make it to her place to go see the fiduciary next week. Having said that ... maybe I really need to make the trip regardless ...

Just my opinion, but if crap hit the fan and things go so bad (which is what your mom is thinking if she has angst and wants more cash)... Apple is going to take a bigger hit than most... if we are going down the tubes as a society, then people do not need Iphones or Ipads.....

So having a love for Apple and wanting to increase cash because of all the bad that is going to happen just not complement each other....

Just sayin....

[tmeeker]

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Originally Posted by Steelart99 So my 74 year old Mom has been reading a variety of financial reports and has become very concerned that she does not hold much in cash. Her investment portfolio is very, very heavy in stocks with little in bonds and only about 2% in her cash account. She is concerned about the Chinese yuan taking over as the world currency and her investments becoming 'worthless'. I've tried to talk with her about it and her need to discuss her financial holdings with an independent adviser (she will do this). I've also cautioned her about doom and gloom reports especially when associated with some sales pitch. I certainly don't know what to tell her about what the near-term future might hold (broke my darn crystal ball) nor what the outcome of the yuan taking over might be. Any thoughts? All that said, are 'cash' holdings limited to paper money and PMs? Or, are there other equivalents?

If mom wants to go broke, hire a broker - they make sure she will be broke

[Steelart99]

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Originally Posted by mpeirce Plus the state taxes, if applicable.

Yep ... a significant "ouch" factor.

[Steelart99]

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Originally Posted by RunningBum Can you be phone conferenced in? Skype?

A possibility I may have to explore. Thanks for the suggestion.