#FinancialAdvice #SettlementManagement #InvestingForBeginners
🤔 Helping your mother-in-law (MIL) navigate a life-changing settlement can be daunting, especially when it comes to managing a large sum of money. But fear not, with the right guidance and a solid financial plan, you can ensure that your MIL’s settlement is managed wisely and provides her with long-term financial security.
Here are some steps and tips to consider when helping your MIL not blow her life-changing settlement:
Understanding the Settlement:
Before diving into the specifics of managing the settlement, it’s important to have a clear understanding of the terms and conditions of the settlement. This includes knowing whether the settlement is a lump sum or structured payments, any tax implications, and any specific guidelines for managing the funds.
Consulting a Financial Advisor:
Given the size of the settlement and the potential long-term impact on your MIL’s financial future, seeking the advice of a professional financial advisor is highly recommended. A financial advisor can help assess your MIL’s financial situation, identify her goals and needs, and provide tailored guidance on how to best manage and invest the settlement for maximum growth and security.
Creating a Trust:
Depending on the specifics of the settlement and your MIL’s overall financial situation, creating a trust may be a viable option. A trust can provide added protection for the settlement funds, ensure they are used for your MIL’s benefit according to her wishes, and potentially offer tax advantages. Consulting with a legal professional who specializes in trusts can help navigate the complexities of this option.
Developing an Investment Strategy:
Once the settlement funds are ready to be invested, it’s important to develop a sound investment strategy that aligns with your MIL’s financial goals and risk tolerance. This may involve creating a diversified portfolio of stocks, bonds, and other investment vehicles that offer growth potential while mitigating risk.
Estate Planning and Tax Management:
In addition to investing the settlement funds, it’s crucial to address estate planning and tax management. This includes reviewing and updating your MIL’s estate plan, ensuring beneficiaries are designated, and exploring tax-efficient strategies to minimize the impact of taxes on the settlement funds.
Protecting Against Financial Exploitation:
Given your concern about your wife’s sisters potentially taking advantage of your MIL’s settlement, it’s essential to put safeguards in place to protect her from financial exploitation. This may involve setting up a system for managing and distributing the funds, establishing clear boundaries and guidelines for financial assistance, and potentially seeking legal protections if necessary.
In conclusion, managing a life-changing settlement requires careful planning, thoughtful investment, and a proactive approach to protecting the funds. By consulting with financial and legal professionals, creating a strategic investment plan, and implementing safeguards against financial exploitation, you can help your MIL navigate this significant financial event with confidence and security.
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She is basically retired now. [A Vanguard Target Date Fund for someone who is retired is basically 30% equities, 10% TIPS, 60% other bonds.](https://institutional.vanguard.com/investment/strategies/tdf-glide-path.html) which is probably a reasonable allocation. If she has other assets, being more aggressive is probably a good idea. Withdrawing approximately $45k/year would be a conservative amount.
Her family needs to understand that this pile of cash has to last her the rest of her life and that she had to retire earlier than planned.
If she has assets like this you should not feel bad about charging her a reasonable rent to live in your home.
My personal advice is to reach out to a reputable financial advisor. Set up a trust, purchase a series of stable dividend paying stocks, and have her live on that. At 1.5 million, she could potentially receive around 80k gross in dividends per year. Take into consideration, she’d have to hold back money to pay dividend tax. I’m not familiar with the American tax code but in ireland. This is what you need to do, even with DWT, you’d still need to contribute about another 10% in taxes. So discuss at length or see if liquidating investments at regular intervals for capital gains is a better option.
Hope things work out for you and your wife’s sister aren’t too much of a pay!
With that much money, she should hire a financial advisor. Someone posted recently that Vanguard only charges 0.3% so I would look into that if I were you.
A trust that pays out at regular intervals not only take the family and friends mooches out of the equation, it protects from scammers as well. In addition, there may be family relationship advantages down the road if you have the trust and your finances separate. If I was in your shoes, I would go with a lawyer that specializes in retirement and trust. We have one in our area at the $400 per hour mark. There is a fee based personal financial advisor at around the $350 per hour mark, but you are going to eventually have to hire a lawyer if you set up a trust. These type of people don’t seem to be common in less populous areas.
What is her risk for requiring at home care? Some indexed annuities pay extra for home or facility care.
Have you looked into a structured settlement for her. Its tax free and they allocate monthly payment to her. It will increase over the years. i would ask her attorney to look into to this or the insurance company.
Will your MIL say no to her kids when they inevitably ask for money? If not, setting up a trust may be the way to go.
Your MIL is that rare scenario where an income annuity would probably be a good bet, provided this injury didn’t shorten her life expectancy.
It’s not optimal, but a straight fixed income annuity will give her a lifetime income that her kids/family can’t mooch from her (the principal), that she can’t invest in some scam, and can’t otherwise blow this windfall. Just a monthly payment for life.
**Ideally** she’d get professional help, and get a better return than an income annuity can offer, but most people who get windfalls find a way to blow it all quickly.
So what is kinda be forgotten here is what else does she have to bring to the table as far as retirement? If she has 30 years of nursing under her belt, she definitely has soc sec and some retirement savings.
She is going to be okay, but you definitely need to consult with a financial advisor to make sure the settlement is handled in the most tax efficient manor
High yield savings and high yield CD’s, its interest from cd’ deposited into the savings, leave 100k in saving and let the interest go to her checking that is her everyday use.
Without actually looking at her entire financial picture, it would be impossible to recommend any one direction to go, but what I can say is be very mindful of her short, mid term, and long term goals, as well as her risk tolerance.
Pay a financial advisor and go along…do it the right way.
get every thing in writing and have a lawyer go over it. her decision to sock the money away and make you financial power of attorney, sibilings aggreement to this, any rental agreement or salary for financial advise. **all of it** needs to be in writing and notarized. then stick strictly to it. other wise those same siblings could come after you for elder abuse in a couple years.
Just wanted to say that if your mother-in-law DID want to continue working, there are triage nurse or telehealth nurse jobs that are work-from-home on the phone, that she could do part-time. I have a buddy that does this, she is 64. It’s been great for her! She also had work-related injuries that prevent her from being a floor nurse again.
My opinion is get her to a FA asap and get her set up in a retirement investment situation. If she agrees I would set it up so that you or your designated trustee would have to sign off on any large disbursements. She cannot be trusted to protect herself from the inevitable crisises that your family will create to try and get into that money. As it is they will have monthly emergencies trying to get spending money out of her.
My family went through this with my grandmother and her second husbands family. They pretty much drove my grandmother and her husband into bankruptcy, got them hooked on Oxycontin, and used prescription refill to control them and leverage cash out of their checks every month until the husband died.
If possible, separate housing and some sort of gatekeeper to keep the family from being at grams all the time is the goal. They’ll ruin her life.
You want to put it where she can’t get at it, or at least most of it. This means a trust.
If you want to DIY, a fixed annuity for a decent hunk of it would be a good choice.
I strongly recommend that you connect her with a lawyer that is focused on the elderly. You could probably get a trust set up. Make sure the lawyer knows the situation with the children/mooches, and they can work in her best interest.
Then the drama (including post death) is not “your fault” – it’s what your MIL wanted, and established with her lawyer.
Surprised to not have already seen this advice. The financial advisor needs to be a fiduciary. Many so-called financial advisors are actually commission driven salesmen.
> Boglehead
Vanguard has financial management services that are lower priced than others. They suggest investing strategies (stocks bonds , domestic foreign) for your age and circumstances. Your dedicated manager rebalances quarterly, and meet with you to discuss the likelihood of the plans success for your goals.
Very satisfied with mine.
I work for a plaintiff side law firm and with settlements of this size we always encourage an annuity with a set monthly payout with 1-300k kept in cash in high yield savings or to buy a home. Injury settlements are tax exempt so you want to be very careful to keep the tax exempt status on those funds because if handled improperly the tax liability can outweigh investment gains. Ask the attorney who got the settlement for the info of the person who handles their finances. Also for annuity’s it’s a competitive market so for our clients we send the cash value info to several brokers and they respond with usually 3 plans each and we review each one with the client and a 3rd party to pick which one is the best offer.
You are a good SIL; this is one of the best compliments anyone could give you, be proud of that. I have no real expertise here, but just wanted to give you a compliment also….
You are getting some good tips here that I have seen so far. Save all of them as some of these “life lessons” will come in handy now and further down the line….
Please keep an eye on all financial statements. You would be shocked at the manipulations “family” can pull.