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Old 08-16-2016, 08:39 PM   #41
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This might work. The account is at Schwab. I assume I can still set this up. Would buying now be an issue due to the higher share price?
You'd have to check and see if you can buy them through Schwab or not. You could just buy as current investments mature if you prefer... but both funds are mostly bonds and some stocks.

But at the same time, I agree with samclem that annuities are very safe... safer than most investment-grade corporate bonds and most bank debt IMO if issued by a high quality insurer... plus you have state guaranty funds backing them in the unlikely event that an insurer goes into receivership.
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Old 08-16-2016, 08:54 PM   #42
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But at the same time, I agree with samclem that annuities are very safe... safer than most investment-grade corporate bonds and most bank debt IMO if issued by a high quality insurer... plus you have state guaranty funds backing them in the unlikely event that an insurer goes into receivership.
+1

Instead of one large annuity, divide the purchase among several insurers. This might give your mom added reassurance that the failure of one insurer would not wipe out her income.

That said, I thing the Wellesley option is a great idea.
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Old 08-16-2016, 08:58 PM   #43
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You owe it to her and to yourself to show her the figures and explain the situation. If she refuses an annuity (after seeing the bigger check she could get every month, guaranteed by a big company), then at least she can't complain if your investment choices and WR result in cuts to her monthly checks in the future. "Mom, you didn't want the annuity that would have avoided this cut. I told you about the risks."
+1
I still agree with samclem considering your mom's age and I am one that does not like annuities.

Sorry if there is confusion, intl, but your quote below threw me off when you said that initial annuity was in her name.

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The trust was written to give me a good amount of flexibility. The trust also provides funds for all beneficiaries for medical and emergency expenses. Also, the trust allots me a 1% management fee; which I do not take. She had 300k in an annuity in her name, bit she was concerned about the insurance company going belly up, so she paid a 5% cancellation fee and the funds were redeposited into the trust. That is part of the money she wants for her own use w/o any oversight. I just worry, as she gets up in years and medical problems pop up if there will be enough money to cover it a
ll.

And like another said you can check with your state to see what the guaranteed limits are for an annuity. Split it into several to stay under limits.

I get you and she are annuity risk sensitive but honestly the situation you have is one of the best uses for them...if one was EVER going to use them. It is worth getting several quotes from several top notch companies.

You came here asking for investments to generate income for other vehicles you were using that are coming due. There is some good advice here given your Mom's age.

Join the club trying to find yields (without risk). Wellesley is a good choice but again the stock market is rather high at the moment and interest rate increases are around the corner and will affect bonds and bond funds (yes we have been saying that for a while now).

Best of luck to you.
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Old 08-16-2016, 09:04 PM   #44
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So your mother is the executor and you just guide her in investment choices. She owns the trust. Seems like you don't have a leg to stand on unless you declare your mother unfit mentally.

"One of her genius friends scared the bejesus out of her on annuities and that was why she wanted to sell the annuity. She'll not be able to sleep safe if some of the money is in an annuity."

She won't listen to you but will to "genius" friends. You need a lawyer.
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Old 08-16-2016, 09:12 PM   #45
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Sounds like you do not understand trusts. There is no executor. No one "owns" the trust... the trust is an entity onto itself, managed by designated trustees for the benefit of (one or more) beneficiaries.

The OP's Mom is the beneficiary of the trust and the OP is the trustee. As the trustee the OP gets to call the shots... just as his Dad wanted... which is why his Dad named him trustee.

The beneficiary gets what the trust gives her under the terms of the trust.. in most cases it is income from the trust's assets and other distributions at the discretion of the trustee.
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Old 08-16-2016, 09:17 PM   #46
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Sounds like you do not understand trusts. There is no executor. No one "owns" the trust... the trust is an entity onto itself, managed by designated trustees for the benefit of (one or more) beneficiaries.

The OP's Mom is the beneficiary of the trust and the OP is the trustee. As the trustee the OP gets to call the shots... just as his Dad wanted... which is why his Dad named him trustee.

The beneficiary gets what the trust gives her under the terms of the trust.. in most cases it is income from the trust's assets and other distributions at the discretion of the trustee.
You are right. Forgive me if I don't understand trusts. In the first post he did list himself as trustee.
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Old 08-16-2016, 09:25 PM   #47
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No, I think that the OP calls the shots but the mother is just pressuring the OP to give her money from the trust so she can give it to the sister and the OP doesn't think it is prudent for him to do so because the trust is then at greater risk of not being able to provide for the mother in her old age.

While the OP cannot block his mother giving his sister whatever money the mother has, he can block the trust from giving money to the mother if he judges it is imprudent for the trust to do so.... which indirectly blocks mother from giving money to the sister because you can't wring blood from a stone.
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Old 08-16-2016, 10:33 PM   #48
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As much as I am not opposed to annuities do not put a large percentage of the trust in one. With present interest rates that seems like an emotional and not a logical solution when the portfolio is so large. Job one is to get the money to last, you need to stop yourself from worrying how mom feels about what you do and instead do the best you can for her. There is simply not a safe way to generate the income you need without going into the principal.

If I was you I would create a 30 year budget for the trust and determine how it can make 100K per year of inflation indexed payments as safe as possible. My personal solution would be 15% SDOG ETF, 15% Wellsely, 25% annuity, 20% 10 year US treasury OR CD ladder and 20% 5 year US Treasury or CD ladder. I would spend down over time the CD’s as they come due and let the stock components to build hopefully over the future.

In the 30 year projection I would have scenario’s for 2,3,4,5 and 6 percent inflation to see how the portfolio would hold up for each.

Goal is to make it last for your mom and then have the remainder for your sister. All you can do is the best to make money last for your mom, try not to let the emotions of everything else rule your investments that would be bad for the portfolio, your mom and your sister. There is not much more you can do than that and hopefully your family will know you are doing the best your possibly can for them.
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Old 08-17-2016, 06:16 AM   #49
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Instead of one large annuity, divide the purchase among several insurers. This might give your mom added reassurance that the failure of one insurer would not wipe out her income.
That's a very good point. And, if the OP can stand to spread out the solution for a while, it might also be good to spread the annuity purchases over a few years with different issuers to give an opportunity to get better annuity returns (assuming interest rates rise) and will certainly earn more mortality credits and likely higher monthly payments (because Mom is getting older).
Now, I'm normally all in favor of avoiding annuities and looking for better alternatives. But if the objective is to meet Mom's spending requirements for as long as she lives (not to pass on money to Sis or the OP), then an annuity (especially one with inflation protection) on a 74 YO is probably going to do this more effectively than any homebrew AA and withdrawal mechanism. The mortality credits are a huge factor--the insurer can afford to give a much higher monthly check to Mom than the OP can (even with the same underlying investments) because the insurer can safely use the average life expectancy of a large pool of insureds (about 13.5 years for a 74 YO woman) while the OP is forced to always plan withdrawal rates for the (unlikely but possible) situation where Mom lives to be 105 years old, so the money needs to last 30+ years. That gives a very different withdrawal rate. It also has the significant advantage of getting the OP out of the role of "giver of an allowance" and will provide Sis notice that there's no pot of gold when Mom passes away--Mom gets to spend the money while she's alive. The monthly amount will be known and unchanging (except for bump-ups for inflation). There's no need for Mom or Sis to lobby the OP for any special favors, advance payments, etc.
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Old 08-17-2016, 08:21 AM   #50
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I called Vanguard for annuity advice and assistance. So far, the rates are pretty low. I can do better in AA. After fees, it is around 2% before taxes. What the Fed has done to savers rates is unbelievable. I am going to add some Wellsely to the mix and start slowly. The trust was written to have a cash reserve, so I have to keep that in mind as well.


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Old 08-17-2016, 08:41 AM   #51
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I called Vanguard for annuity advice and assistance. So far, the rates are pretty low. I can do better in AA. After fees, it is around 2% before taxes.
Would you mind posting the particulars of their quote? (premium, inflation protection, any "period certain" insurance, rating of the insurer, and the monthly payout?)
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Old 08-17-2016, 08:49 AM   #52
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Would you mind posting the particulars of their quote? (premium, inflation protection, any "period certain" insurance, rating of the insurer, and the monthly payout?)


They are working up a proposal and sending it off. The gentleman just gave me rough number ranges. I can post in detail once I receive the proposal. It is nothing like what Mom had a few years ago with a 6% dividend. I was shocked at how low the range was.
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Old 08-17-2016, 10:36 AM   #53
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.... I was shocked at how low the range was.
Not hugely surprising as the insurer would take your single premium, invest principally in bonds, have to put of some capital for the risk they are taking on and shareholders expect a return on their capital and they have administrative overhead and taxes to cover.
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Old 08-17-2016, 11:30 AM   #54
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Not hugely surprising as the insurer would take your single premium, invest principally in bonds, have to put of some capital for the risk they are taking on and shareholders expect a return on their capital and they have administrative overhead and taxes to cover.
Yes, the insurer has to cover their expenses. The exercise boils down to whether the cost of those expenses is made up for by the advantages (expressed as the size of the monthly check) of the higher payout rate that is made possible by pooling longevity risk.
There are a lot of confusing terms used to describe payouts from annuities ("dividend", "payout rate," etc). Since the OP's primary concern is to take care of his mom as long as she lives, it makes things relatively simple: Which approach offers the highest lifelong, inflation-adjusted, monthly payment to her commensurate with the risks (risks of asset price volatility, longevity risk, default risks, etc).
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Old 08-17-2016, 12:19 PM   #55
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It appears this thread, despite the title, substantially morphed into being about how to thwart Sis from getting an undue share of Mom's trust money as opposed to "Need suggestions for stable income."

With a pension, SS (amount not mentioned yet) and a $2.5MM portfolio, coming up with $100k/yr inflation adjusted income for mom should be a no-brainer. Any pre-occupation with not spending principle is silly. At mom's age, a 4% WR is more than conservative enough even if she lives past 100. There is no need whatsoever to focus on keeping principle intact. In fact, mom's WR will be closer to 3% virtually ensuring eternal sustainability (if the future reflects the past, etc.).

The only tough part should be telling mom there will be no lump sum withdrawal, for whatever reason, and getting her accustomed to receiving $100k/12 every month and living on it.

Poor mom! Only $100k/year!
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Old 08-17-2016, 12:35 PM   #56
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It appears this thread, despite the title, is really about how to thwart Sis from getting an undue share of Mom's trust money as opposed to "Need suggestions for stable income."

With a pension, SS (amount not mentioned yet) and a $2.5MM portfolio, coming up with $100k/yr income for mom should be a no-brainer. Any pre-occupation with not spending principle is silly. At mom's age, a 4% WR is more than conservative enough even if she lives past 100. There is no need whatsoever to focus on keeping principle intact. In fact, mom's WR will be closer to 3% virtually ensuring eternal sustainability (if the future reflects the past, etc.).

The only tough part should telling mom there will be no lump sum withdrawal, for whatever reason, and getting her accustomed to receiving $100k/12 every month and living on it.

Poor mom! Only $100k/year!
I think these are good points. I don't think income is the root issue - it is the outgo. I also would not worry about keeping principal intact at her age.

Could you get mom to sit down with a financial planner (neutral third party) and go over a reasonable budget for her? Is she donating more than she can afford or being scammed or overpaying on some items (other than sis)?

Would mom and sis be willing to go to counseling over the enabling and dependency? I have a friend who is a therapist who has clients in their fifties who are lost financially and emotionally when an enabling parent dies, and it is a really sad situation.
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Old 08-17-2016, 02:09 PM   #57
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It appears this thread, despite the title, substantially morphed into being about how to thwart Sis from getting an undue share of Mom's trust money as opposed to "Need suggestions for stable income."



With a pension, SS (amount not mentioned yet) and a $2.5MM portfolio, coming up with $100k/yr inflation adjusted income for mom should be a no-brainer. Any pre-occupation with not spending principle is silly. At mom's age, a 4% WR is more than conservative enough even if she lives past 100. There is no need whatsoever to focus on keeping principle intact. In fact, mom's WR will be closer to 3% virtually ensuring eternal sustainability (if the future reflects the past, etc.).



The only tough part should be telling mom there will be no lump sum withdrawal, for whatever reason, and getting her accustomed to receiving $100k/12 every month and living on it.



Poor mom! Only $100k/year!

Your wrong, but thanks for your input.
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Old 08-17-2016, 02:13 PM   #58
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I think these are good points. I don't think income is the root issue - it is the outgo. I also would not worry about keeping principal intact at her age.

Could you get mom to sit down with a financial planner (neutral third party) and go over a reasonable budget for her? Is she donating more than she can afford or being scammed or overpaying on some items (other than sis)?

Would mom and sis be willing to go to counseling over the enabling and dependency? I have a friend who is a therapist who has clients in their fifties who are lost financially and emotionally when an enabling parent dies, and it is a really sad situation.


Mom and Dad got fleeced by an advisor for years. I fixed their portfolio after the crash. Seems that got me in this position.
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Old 08-17-2016, 02:20 PM   #59
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It appears this thread, despite the title, substantially morphed into being about how to thwart Sis from getting an undue share of Mom's trust money as opposed to "Need suggestions for stable income."

With a pension, SS (amount not mentioned yet) and a $2.5MM portfolio, coming up with $100k/yr inflation adjusted income for mom should be a no-brainer. Any pre-occupation with not spending principle is silly. At mom's age, a 4% WR is more than conservative enough even if she lives past 100. There is no need whatsoever to focus on keeping principle intact. In fact, mom's WR will be closer to 3% virtually ensuring eternal sustainability (if the future reflects the past, etc.).

The only tough part should be telling mom there will be no lump sum withdrawal, for whatever reason, and getting her accustomed to receiving $100k/12 every month and living on it.

Poor mom! Only $100k/year!
Yes that was the tile of the thread but in the OP's first post, he talked about the problems with Sis and later, the resentments, etc.

I agree with your analysis. At her age it should be close to a no brainer...unless of course the OP wants to have the bulk of the principle or a significant portion in tact at her death. I can certainly understand if that is the case and the OP does have to manage it for "the interests" of remainder beneficiaries as well-which includes SIS. If I were listed as a remainder beneficiary, I'd want as much left as possible while still taking care of Mom in the manner she is used to or expected.

That is why I either said something about the OP's goals or asked what his goals were. The advice given is different if he wants to have a million plus or more for remainder beneficiaries.

And I think he said he needed to get 4%. 4% of 2.5 million = $100,000 so it is likely a good portion of the trust will/may be in tact at her death. The Op obviously knows the value of money and is doing a good job taking care of mom while preserving principle.
Those would be my goals as well. It's just tough to find safe 4% anything these days.
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Old 08-17-2016, 02:26 PM   #60
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That is the point of using the 4% withdrawal limit (trinity study that we all use) and stepping aside. You limit what your mother can spend and you also don't have the enmity of your mother and sister. The fortune remains largely intact.
All of this is questionable, and most easily demonstrated is that "all of us use the Trinity Study". We don't.A look at posts on WR will demonstrate many different non-Trinity approaches. Possibly the most prominent are the various examples of a constant percentage of one's annually updated invested assets sum.

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