Retirement payout options and other estate planning Qs

[simpsongal]

PDQ for financial details:

My mom turns 70 next month, my dad passed unexpectedly in August at age 68.  She is completely overwhelmed with financial and other decisions (it's not her forte).  I'm trying to simplify things for her, and handle priorities one step at a time.

Annuity/401K election - balance is around $650K: Anyone have experience with this? I'm assisting my mom, I think we're going to do the easiest election right now, but it's clear we can change it later.  It appears to be similar to a 401K. It's not an annuity contract or anything like that.  She's not required to start taking requirement minimum distributions (RMD) yet.  But she's close to that requirement, and she's so overwhelmed with all this, I think it probably makes sense to just start collecting.  I'm planning to sign her up for the life expectancy payout.  It's not a fixed contract like a traditional annuity, the plan just estimates her life expectancy (which google says is ~87.6 yrs old) and sends her monthly checks, less the tax we elect to withhold (which I'm estimating based on her projected new income).  I think they'll adjust the amounts annually depending on her ROI and maybe her age (unsure if they recalculate her life expectancy with each year that passes).

We also need to elect beneficiaries on the annuity.  It can be her estate, though I tend to think electing my brothers and I would be easier b/c the annuity wouldn't go through probate.  Thoughts?

I also have to elect where to keep the money - was thinking of the Vanguard 2025 retirement fund.  It's got some risk, but not too much (and my mom does have some other assets and income).

I suspect she'll have more money than she needs for living expenses.  So I plan on advising her to just put the extra in savings for the first year or so.  Dad's supplemental health insurance lasts 1 yr from his death, so we'll probably have to buy a supplemental plan for her come August.

I think she needs a year to get her finances in order (she needs to sell a house or two, sign up for her pension, etc.).  Eventually, I need to look at her will with her, get a power of attorney, a medical power of attorney, and a list of accounts and assets from her (she's too overwhelmed for all this now....likely 2022).

I appreciate any other advice or insights.  My folks have had a CPA do their taxes for years, so she should get help from him sorting out all the tax issues from 2020 and in 2021 thereafter.  

[formerlyak]

I don't know the answers to your specific questions, but from helping my MIL go through this recently after my FIL passed, I'd suggest putting a sum of money into an account she can easily access. My MIL made several small changes to the house right after he passed - partly because she "always wanted to" but I think it was in part cathartic for her to change some things that really reminded her of my FIL.

Also, one of the biggest hassles for her was things like credit cards and financial accounts that were in either his name or both their names. We are like 18 months out and I think we just finished transferring info on the last one. But, I'd start a list of all the joint accounts and his accounts to see what housekeeping needs to be done on those.

[puppylove64]

IRAs and 401k that have a direct beneficiary listed, do not go through probate and do not have to be used to pay the deceased’s final bills. The money goes directly to the beneficiary in usually a simple manner. I make sure my kids are on all of mine as a second round after dh, so they have immediate funds available should something happen to us.

[Poppy]

Yeah, I mean I think an estate attorney would be best to advise on beneficiaries.

I have a variable annuity and my beneficiaries are my family members. The estate attorney did not advise me to assign the trust. But not sure if that was state/situation specific.

(I'm sorry for your loss.)

[ssmjlm]

Just for the sake of simplicity if something happens, I would recommend having you or a sibling on your mom's main checking account. At this way you have an account that is getting some income that you could pay the basic bills from while sorting out other bigger things.

[Wallflower]

Jan 7, 2021 14:06:10 GMT -5 ssmjlm said:

Just for the sake of simplicity if something happens, I would recommend having you or a sibling on your mom's main checking account. At this way you have an account that is getting some income that you could pay the basic bills from while sorting out other bigger things.

Ditto this. It will be especially helpful as she gets older and you step in to help some and setting it up while she's doing other stuff might be easiest.

Also, at some point (not in the midst of everything else), consider getting a credit card and adding you or your brother (or both) as authorized users. We've done this and it allows us to purchase things for Mom and she doesn't have to fuss with paying us back. (Mom is very particular that we not spend our money on her. I go to the grocery or pharmacy and get stuff for her, "Did you use my card?" "Yes, Mom!" But it could just be that my Mom is her own special form of odd.

And I'm really sorry for your loss. I'm sure that you're struggling with your grief even as you try to help your Mom and that can't be easy.