Seeking Advice to Help Recently Widowed BIL

[Huston55]

BACKGROUND: My sister recently died and I'm trying to help my BIL arrange his affairs (finances, health care, etc.).

SITUATION: My BIL is very unsophisticated financially (My sister managed their finances) and has done virtually none of the things he/they should have (will, solid financial/investment plan, etc.) and, many of the things they should not have (bought annuities, hopped in/out of investments, etc.). Fortunately, they were decent savers.

DETAILS:
- BIL is 60 yo, physically disabled (so unable to work), very financially risk averse and has a 28 yo son who's employed and (mostly) on his own

- ~$400-$600k invested/investable assets, depending on life insurance payouts (see details below)

- $80k (cash)

- $336K (tax deferred accounts)
-- $60k (sister's 403b/401a)
-- $240k (IRA currently in Allstate/Equitable indexed variable deferred annuity which is out of the surrender period)
-- $30k (IRA IRA currently in Allstate/Equitable indexed variable deferred annuity which is out of the surrender period
-- $6K (IRA in MMF)

- ~$200k (estimated life insurance payouts)

- ~$25k/yr SS (on my sister's account) beginning @ 67yo in 2029

- $TBD VA disability (he's currently applying, is a combat Vet and will likely get some amount of VA Service Connected Disability pay.)

- Expenses (still trying to get a more accurate estimate): $30-$40k/yr

GOING FORWARD: I want to help him through this period to get him on a firm footing and am willing to periodically give advice after that but, I prefer for him have a trusted financial advisor in the long term. My initial thoughts on a plan forward are below but, the situation is fluid (as he seems to find new files, accounts and details as we go). I'd very much like to hear E-R.org community suggestions, cautions, etc. The more specific, the better.

1. Use the $80 cash in the short term (find decent MMF and/or CDs for much of it)
2. Put the $200k taxable (from life insurance) into 30/70 AA using low/no cost MFs or ETFs
3. Put the tax deferred accounts into a single fund for simplicity (Wellesley or Target fund like VTTVX

 

[harllee]

If it were me I would recommend a good local financial advisor to help BIL (preferably one that charges by the hourly) and let the financial advisor advise him. I would avoid giving him any financial advice. I avoid giving family any financial advice because what ever I tell them is either ignored or turns out "wrong."

 

[ERD50]

Condolences.

If it were me I would recommend a good local financial advisor to help BIL (preferably one that charges by the hourly) and let the financial advisor advise him. I would avoid giving him any financial advice. I avoid giving family any financial advice because what ever I tell them is either ignored or turns out "wrong."

I think that totally depends on how accepting the BIL is to the help.

When my wife's Uncle passed, I helped out her Aunt in any way I could. She asked me about some financial matters, and I was very careful to not tread in too far. But the Aunt was pretty much an open book, and open to help.

I didn't really need to go too far, they had an account with an FA (Wells-Fargo?), and though their investments aren't what I'd choose, their home was paid for so fairly low expenses, they had SS and looked like plenty enough to get by. The FA actually confirmed to me that they weren't making any regular large withdrawals. Changing investments would have involved capital gains, I just didn't see much point in it.

FWIW, the 1,2,3 plan in the OP sounds fine to me. If an FA makes sense for BIL, just so you aren't "on the hook" for the long term, I'd think one of those 0.3% per year basic ones from Fidelity or other big houses would suffice.

edit/add: I also meant to say, I never put any of this in the form of "advice". I will show people what they can do and why, and the independent sources that will show them the same thing I'm telling them, and then it's up to them to decide. It's "information" I'm providing, not "advice".

-ERD50

 

[njhowie]

Condolences about your sister.

I like your plan and ideas. It is commendable, and something you can do that would be of value to your sister in helping BIL out at this time.

 

[ivinsfan]

Sorry for your loss I don't see any mention of SS survivors benefit for your BIL. I'd spend a little time reading up on that so you could walk him through it.

 

[OldShooter]

In addition to what you are doing, go here: https://aging.ca.gov/Programs_and_Services/ There are almost certainly resources available to him that have not yet popped up on your radar.

 

[Huston55]

Sorry for your loss I don't see any mention of SS survivors benefit for your BIL. I'd spend a little time reading up on that so you could walk him through it.

Thx. He can file @ 60 yo (this August) as a survivor but, I'm hoping he can defer until FRA to get a larger benefit.

 

[ivinsfan]

Thx. He can file @ 60 yo (this August) as a survivor but, I'm hoping he can defer until FRA to get a larger benefit.

You have to balance that against 7 year of no payments, that's a hard call. Will his disability shorten his life. What percent of his annual expenses would the reduced benefit cover?

 

[MBAustin]

Huston55, I admire you for wanting to do what you can to help out your BIL when you are also grieving the loss of your sister. I think the idea of getting either a low cost or hourly-only FA for a more permanent solution makes a lot of sense, especially with BIL's disability situation. But helping in the short term and helping him find the FA is a wonderful initiative on your part.

 

[Aerides]

My condolences.

Just a couple of immediate thoughts - he might consider early SS at 62 vs. waiting, especially if he already has a disability, if his overall health is not awesome. You might know it makes more sense financially to wait, but focusing on dollars and sense only isn't always the right way to go (as you know, from our 18457 threads on when to take SS).

Figure out the VA disability payment before doing anything else as that's a big question now.

I'd not be in a rush to invest the $200k from the insurance, just keep that in cash/CD's for the next few months. Someone who is risk averse, and having just lost his wife, isn't going to want to see that drop 10-20% as it could well do over the next 6-12 months.

Wait for him to come along a bit before any big moves, and lead from behind, don't drag him there.

 

[38Chevy454]

Sorry for your sister's passing away, that is tough enough to deal with. Offering to help BIL is a nice gesture and shows you care about his life going forward.

Lot of sound advice already. I think your basic plan is fine (little on conservative side, but seems BIL is probably risk averse), the key is to determine the VA disability; why has this not been pursued earlier if combat related? Can't change that fact, but knowing if he will get some for that will help with what you need to supplement out of savings. I agree that the SS as survivor now may be an acceptable trade-off vs waiting 7 years. Especially if his life expectancy may not make the increase pay out on the break even line at some future date.

As we all say here, knowing the budget and expenses is critical to really set up a good financial plan. I also agree to word it as information and not as direct advice. Having an hourly fee only FA is a good way to pass it on; maybe you can attend the first one or two mtgs with BIL and then step back?

 

[ivinsfan]

My condolences.

Just a couple of immediate thoughts - he might consider early SS at 62 vs. waiting, especially if he already has a disability, if his overall health is not awesome. You might know it makes more sense financially to wait, but focusing on dollars and sense only isn't always the right way to go (as you know, from our 18457 threads on when to take SS).

Figure out the VA disability payment before doing anything else as that's a big question now.

I'd not be in a rush to invest the $200k from the insurance, just keep that in cash/CD's for the next few months. Someone who is risk averse, and having just lost his wife, isn't going to want to see that drop 10-20% as it could well do over the next 6-12 months.

Wait for him to come along a bit before any big moves, and lead from behind, don't drag him there.

The good thing about VA is that disability when approved is usually back paid from the day of application.

 

[nwsteve]

As part of your process of "getting your arms around" your BIL's situation, I encourage you to find their last couple of years for Fed Tax returns. These may help you find some other assets as well as get a sense if you have all the income sources captured.
When my FIL recently passed, I got the task of filing 2021 as well trying to reconcile some open IRS issues related his sole proprietorship. In the process, we discovered an IRA Annuity, two stock issues and a couple of bank accounts that did not have beneficiaries.

 

[Bamaman]

What about regular Social Security disability if he's unable to walk? You can get both SSD and VA disability at the same time. And regular SSD will pay retroactive too.

My wife was on SSD and received Medicare 2 years after she was deemed disabled. At 65 years old, her disability moved over to being regular social security at the same $ amount.

I agree that he should see a fee paid CFP. He needs completely objective advice. It's too much responsibility for a relative.

 

[Huston55]

You have to balance that against 7 year of no payments, that's a hard call. Will his disability shorten his life. What percent of his annual expenses would the reduced benefit cover?

Good point but, his disability is a crushed hand, which shouldn't shorten his life expectancy. However, perhaps I should have a "family" (father, brothers) longevity discussion with him.

 

[Huston55]

My condolences.

Just a couple of immediate thoughts - he might consider early SS at 62 vs. waiting, especially if he already has a disability, if his overall health is not awesome. You might know it makes more sense financially to wait, but focusing on dollars and sense only isn't always the right way to go (as you know, from our 18457 threads on when to take SS).

Figure out the VA disability payment before doing anything else as that's a big question now.

I'd not be in a rush to invest the $200k from the insurance, just keep that in cash/CD's for the next few months. Someone who is risk averse, and having just lost his wife, isn't going to want to see that drop 10-20% as it could well do over the next 6-12 months.

Wait for him to come along a bit before any big moves, and lead from behind, don't drag him there.

Yep, any VA income will figure into the expenses/income calculations.

Good point on the 'short term' management of the ~$200k from insurance.

"Lead from behind." I like that!

 

[Huston55]

As part of your process of "getting your arms around" your BIL's situation, I encourage you to find their last couple of years for Fed Tax returns. These may help you find some other assets as well as get a sense if you have all the income sources captured.
When my FIL recently passed, I got the task of filing 2021 as well trying to reconcile some open IRS issues related his sole proprietorship. In the process, we discovered an IRA Annuity, two stock issues and a couple of bank accounts that did not have beneficiaries.

Excellent idea on reviewing tax returns. I hadn't thought of that.

 

[travelover]

Agree with the hourly FA recommendation. If you recommend any investments that can go down - and they will, eventually - you are the "bad guy who lost BIL's money".

 

[N02L84ER]

Has he run his information thru Open Social Security? I would do that to determine his best SS claiming strategy.

 

[Huston55]

Has he run his information thru Open Social Security? I would do that to determine his best SS claiming strategy.

Not yet. He's spoken to his local SS office, and I plan to run Open SS for him once we have a handle on his expenses. I want to wait until then so we can have a more complete conversation about whether he "needs" SS now or later to meet expenses.

 

[TheWizard]

Importantly, try to keep the BIL from deciding on his own to go with Edward Jones or a similar shark outfit...

 

[RetMD21]

Importantly, try to keep the BIL from deciding on his own to go with Edward Jones or a similar shark outfit...

If OP is willing it wouldn't be a terrible idea to plan upfront to be involved with the FA appointments. When the time comes the FA's advice about the annuities could be compared to that of the salesperson. A 1035 exchange might be in order

 

[ivinsfan]

Has your BIL tried looking for any work at all? I'm sorry he was injured yet disabled is probably not the word to describe him. For example Home Depot is very proactive about hiring vet with physical issues.


If your BIL is going live 100% on assets for 7 years that really cuts into his nest egg at the fairly young age of 67.


A word about VA disability. Payouts start at around 150 bucks a month and can go higher. It's not a gravy train. At 60 your BIL is too young to be a Nam vet. Why does this matter? Because of Agent Orange many health issues are considered presumptive for Nam vets, the claims are rubber stamps. This isn't true for other service times.



On a practical note what does your BIL do for health care? Was he on your DS work policy, and ACA plan or the VA. Helping him figure out health costs would be more valuable then worrying about an FA at this point. For example if you are enrolled in the VA system you cannot claim an ACA subsidy. Health is a big expense for older Americans.


To be blunt if he doesn't take SS and lives on the nest egg for 7 years at say 35K he's taken almost a quarter million dollars from his nest egg and at 67 might be light on money.

 

[pacergal]

My condolences on the loss of your sister and BIL wife.

What you are doing is a tremendous help for him. I would encourage him to read some of the investment books often listed in this forum and over on Bogleheads. Let him start learning and exploring himself, along with your help.
A fee only FA is a good idea also.

However, as much as you want to get going, allow for time to grieve. Now is not the time to be making big financial decisions. There does not seem to be a big urgency per your intro, unless I missed something.

His VA disability will also come into play in his finances. How far along is he in this process?
Is he also collecting SSDA payments or applied?

Blessings to you as you assist your BIL in this.

 

[bmcgonig]

Sorry about your sister Mark.

I’m almost in 100% agreement with your suggestions. The “almost” part is where I would consider man even more conservative approach.

I would build a CD or MYGA or corporate bond ladder ( see Freedoms posts) for 7 years using the 280 from his cash and life insurance. This should cover his expenses until SS. In truth your suggestion of Wellseley should do the same or even better but there’s lots of short term risk there.

I would put around 150-200 into a deferred SPIA that pays out when he’s 67. That, according to immediateAnnuities.com should pay about 1000-1400/mo. So about 37-42k/yr when SS included. That should come very close to covering his expenses. There’s no inflation coverage in this but the rest of the investments should should cover that.

Invest the rest (136-186) in a combo of Wellesley and Wellington: 50/50 overall. Or something like that. That should cover his inflation that isn’t covered by the DPIA.

This approach has the benefit of a lot less handholding for you and less chance that he will interfere to his detriment in the future (oh look..I can make 18% on Celsius crypto exchange!) where of course you will again have to step in to help. Plus in the short-medium term you don’t have to really worry about his finances. You probably don’t really want to be in a situation where you have to explain to him that “he’s down another 10 to 15% but it will come back”. The risk is that inflation eats into the DPIA and his expenses.


Does he own his house?