As my Dad’s dementia continues to get worse, I’m finding it necessary to manage more of his personal affairs. I’m trying to make some decisions regarding his finances and I could use some advice on how to handle things for him. Here is a summary of his situation:
His total net worth is about $225K, all held at Fidelity. $120K in cash, $5K in index funds, $34K in Franklin Income Class A (FKINX), and $65K in Exxon stock. The Franklin fund is a balanced fund with about 2/3 stock 1/3 bonds. It had a front load of 4.25%, presumably because he bought it from a greedy broker many years ago. It looks like I could sell it with only a small brokerage transaction fee, but it's probably not a bad fund at this point given that the up front fee is now a sunk cost.
He purchased the Exxon stock many years ago. I need to research the exact cost basis, but I’m assuming it will be about $32K in capital gains on the sale of $62.5K in stock. Intuitively, I know it makes no sense for him to have such a high concentration of his wealth in one individual stock. However, if I sell the stock now, he would have to pay 15% CG tax, or about $4,800. There is no state tax where he resides. If I were to sell the Exxon stock, I would put some of it back into index funds, likely by dollar cost averaging the purchases.
However, if I leave the stock in place, I have the potential to inherit it at the stepped up basis and avoid the CG taxes completely. So I’m trying to balance the risk of being so heavily concentrated in one stock, the CG taxes associated with selling, and the benefit of the stepped up basis if I were to leave it alone and eventually inherit it.
While his dementia is worsening, his physical condition is OK, so it’s possible he could live for many years this way. He needs about $1,000 per month on top of his social security and pension to cover his bills, so he is not using that much of his savings at this point.
Can I get some feedback on whether it makes sense to sell the Exxon stock and reinvest it in low cost index funds or just leave it alone and wait until I inherit it at the stepped up basis.
Thanks!