What should my mother do with the income she received from selling her home?

My 90-year-old widowed mother recently sold her house and moved in with my sister. My sister suddenly passed away and I am in charge of finding a new place for my mother to live, as well as helping her manage her estate. She has $200,000 in the bank from the house sale, plus she receives Social Security and a small veteran's pension. She is looking to rent or buy a condo. Assisted living is a cost-prohibitive option and she's not ready for a nursing home. What is the best mix for investing the $200,000 from selling her home? Is it better to buy or rent at her age? What about an annuity? Should she move the money out of her name?

Estate Planning, Social Security
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3 weeks ago

Stewart, Dan

Dallas, TX
100% of people found this answer helpful

Do NOT do an annuity as they are expensive and she is too old to do for the "accumulation" (growth) phase anyway. If you "annuitize" it now for a "lifetime income" then when she passes, there is nothing left. You gave away an asset for an income stream. Annuities are usually great for the insurance agent and not very good for the client in my opinion. There are too many other ways to make money and even replicate annuity strategies without the exhorbinate fees. In this low interest rate environment, annuitization wouldn't be a good deal anyway.

At her age I would probably be looking at renting and investing the difference rather than locking in virtually all of her assets into a single condo. You need to interview a few different money managers. I would look for fee based only managers who do NOT work on commissions. Appropriate strategies would depend upon her goals, her knowlege, what she wants to do with the money when she is gone, etc.. But any strategy you chose should have some type of defensive sell discipline to limit the downside.

With regard to "moving money out of her name," if you are talking about to qualify for medicaid nursing home, there is a 5 year lookback of assets given away as well as an income test in order to qualify. This is complicated and tricky so I hate to try to give you advice in this forum so it is not done incorrectly. If you are talking about conventional estate planning, she is way under the estate exemption and will pay no estate tax. If you are talking about avoiding probate & therefore a living trust/will, it really depends upon the state you live in as to whether probate is a big deal. But a living trust/will really won't hurt anything and simply avoids probate, it does not provide asset protection or tax benefits. She should definitely have durable health powers & wishes in place regardless if she doesn't already have.

Hope this helps and best of luck, Dan Stewart CFA

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