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Author: iamdb Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: advice for elderly widow Date: 6/28/2004 12:50 PM
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tbear2,

My mother is 91, and when dad died their portfolio was comprised of funds that seemed more aimed to serve the needs to their broker. I moved all the money to Vanguard, and we sold her property in Orange County she she could live near us in Santa Barbara.

I assume you have power of attoney for financial and health matters. How you allocate the money in your mother's protfolio depends on at least a couple of considerations:
(1) The value of your mother's portfolio relative to her needs.
(2) The beneficiaries of her estate.


First Consideration

I decided to establish a substantial cash reserve in money market and short-term bond funds, and in a CD ladder, and to invest the remainder without regard to age. I keep at least 10 years of her annual income need in fixed income securities; I invest the remainder in Vanguard's total stock market and total international stock market index funds. In my mother's case, this results in approximately a 40/60 (fixed income securities/equities) split.

If your mother's doesn't need an income that results in a high tax rate, why keep so much money in muni bond funds? Instead, try to protect the estate from the effects of inflation while providing the saftey of a cash reserve.


Second Consideration

I'm the only beneficiary of my parent's trust, so I need only consult my mother before any change in asset mix. I ask a business-savvy cousin and her accountant to look over my shoulder. so I feel I'm exercisng my fiduciary duty. If there are other beneficiaries, you need to consult them so they don't feel left out of decisions. If there is rancor in making decisions, you may want to seek out a good fee-for-service (not piece of the action) financial planner who can be seen as neutral by the diverse interests. Your mother has to feel comfortable with what you are doing, but you may need to educate her. I show my mother a monthly Excel spreadsheet that includes the value of each of her holdings, any gain or loss, a pie chart of her asset allocation, and the number of years income in fixed income securities.

db
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