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He has maxed out life insurance (no more premiums), has TIAA investments. He wants all his money to be "available" and in the same place. Would stipulate tax withholding before cashing in.

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Cashing in his life insurance could be a taxable event if there is any gain. The death benefit proceeds of a life policy are tax free.

His investments are most likely earning a higher rate of return than a savings account, which have been earning zilch for decades. And the owner of an investment can usually request distributions at anytime, so availability is usually not an issue.

Unless he needs a butt-ton of cash really quickly, this doesn't sounds like a good idea.
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It's his money, so I think he should do as he chooses.

However--to avoid paying weird penalties, etc., it wouldn't be a bad idea to get him to a financial planner and set it up through someone you trust.

Are you his POA? If so, you should sit in on all 'planning' sessions.

Every state has their own regulations surrounding this kind of thing. You don't want to pay more in taxes, etc., than is absolutely necessary.
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olddude Aug 2023
Just because he can do it doesn't make it a good idea. He is going to get hit with a ton of tax consequences. The life policy is paid up - it isn't costing him a dime. And some/most of his investments may get a step up in basis when he dies, which will greatly reduce the taxation of the investments. Not to mention the hassle factor. And for what? Just so he can stick it under his mattress?

Any financial planner who advises that this is a proper path of action should have their license revoked.
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Talk to an elder care attorney with dad about the ramifications of doing that and potential tax liabilities too.
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Missymiss Aug 2023
Talk to a financial planner about the ramifications
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Depending on the amount of his life insurance policy, he will get practically nothing by cashing it in. And I agree, he is getting far more interest on his money in investments than he will get from a savings acct. Like said, he maybe able to draw from his investments. And there will be taxes. We cashed in bonds a few years back because they were over 30 yrs old to invest them. The interest we made was 60k and we paid 13k if that to the IRS.

Unless an elder lawyer knows the tax laws, I don't think he can help. Maybe a Tax CPA can tell Dad why this would not be a good idea. I would at least have a professional talk to him first. Also, one of the signs of cognitive decline is the person worrys about their money.
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Basically, Dad would like to lose money in exchange for liquid assets that could easily be spent. Anyone new been sniffing around Dad recently?
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BarbBrooklyn Aug 2023
Bingo!
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Let me give a separate comment on the tax liabilities: my uncle kept telling my father that the hospital costs would run hundreds of thousands of dollars. This was based on my aunt's illness and their insurance. My father cashed in a lot of his investments based on this info.
My father's insurance paid for more of the costs, and his final illness was much shorter than my aunt's. After he was gone, my mother was stuck with a $10K tax bill because he'd cashed in so many things.
Consider it a second opinion.
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Hopiegirl Aug 2023
Why was your mom stuck with the bill? Was she POA and was responsible or? I just wondered because I have known other financial issues get dropped on the children’s lap which I do not think is right at all.
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No. Your question makes this seem like it's a bit out of place for him. He's made it this long and all of a sudden wants to make a change where all his assets could be accessed and drained pretty quickly? All it could take would be one convincing scammer and *bam*.
Something seems off.
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verystressedout Aug 2023
“He's made it this long and all of a sudden wants to make a change where all his assets could be accessed and drained pretty quickly?”

I think it’s not dad, but OP who wants to do it. I think OP wants access to the assets.
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What's Dad actually worried about?
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verystressedout Aug 2023
I don’t think it’s dad who wants to do this. I think OP wants to do it, and wants to know the consequences. I think OP wants access to the assets.
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My dad is in the process of doing the same thing. He was part of a huge group notified by his life insurance company that a third party vendor was responsible for a security breach. He no longer trusts the insurance company to keep his information or money safe and is closing the account and putting it in to another bank. He won't listen to me but has agreed to call his tax guy for potential issues before he does this. He is convinced that he doesn't have much time left at 91 and that this will "make it easier" for me as his POA and executor of the will. For the record I want no access to those funds but now I do have to wonder if someone is trying to bamboozle him. He has always been very private about his finances but he definitely has begun to spend hours every day obsessively going over financial records.
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Beatty Aug 2023
My FH knew a elderly man who had been very private about his finances. In his 90s he started to obsess over his statements. Then began to show anyone, including the cleaning lady, yardmen etc. Definately not good. 😬

Obsessing in private is much safer - but it wouldn't hurt to stay wary of who else could be looking.
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My answer is....it depends.

The prevailing guideline is that as you age, you should be putting your money into more conservative investments to ensure that you have that supply of money and it would not be lost due to economic fluctuation. However, there are quite a few studies that say that if one goes too conservative, then your money will not be able to keep up with the cost of inflation over the long haul.

Also of consideration is, your Dad's current health, what his expenses will be in the future, his other assets (e.g. house), and the amount of money that is up for discussion.

I know nothing about life insurance other than the proceeds are taxed if you paid for it with pre-tax money and not get taxed if you used after tax money. Then when it comes to taxes, the state tax laws also have to be factored in the decision.

So those "normal" considerations aside, the reason why your Dad might be wanting to consolidate is because of simplification. My Mom, at 97, had 5 CDs with varying maturities, and a checking account. She's always prided herself in the fact that she has been "smart" about her money. One day, she got tired of all the accounts and wanted to see just one number. She no longer cared to look at interest rates or rate of return. She just wanted one number and that number was supposed to come from her checking account. This was one of the huge flags to us that she might be dealing with dementia. The banker and I convinced her to allow her CDs to continue. However, she continually grumbled that all those accounts were too much trouble.

At the time, I asked the banker how common my Mom's attitude was amongst older people. He said it was very common for older folks to come in, with their children, close out all the accounts and leave the bank with cash.

Continuing the story one day, she looked at her checking account statement and saw that the account balance was about $13,800. She was ready to terminate ALL her CDs (late penalties and all) just to get the amount to something a lot higher. At the time, that money would last her for at least 4 months. I managed to finally figure out what was going on with her and moved some money from her savings account (not CD) to her checking account...and all became quiet once again. I switched over to paperless statements, moved the money out of her checking account and into a higher yielding instrument at the same bank and have managed all her money since.

I have heard of other stories when the parent will consolidate all the money into a checking account, then immediately start spending it all (because the number is so big), never once thinking about future living expenses.

Now that my Mom is in moderate dementia, she frequently asks how much money she has because she wants to give it all away while the kids can enjoy it. Never mind that all these kids have very good-paying jobs, plus houses, plus fully paid for cars, etc. The irony of her money is that next year, we will have to sell her condo (instead of renting it out) just to pay for her stay in MC. She was hoping to pass on the condo to her grandchildren and doesn't consider the condo as part of her wealth.

So getting back to your situation, fraud and scams aside, there are many factors going into your decision. I can see why your Dad wants to go completely to savings. However, depending upon his life expectancy and expenses, I can see why you might be hesitant to do that. If he has enough money, you could do a CD ladder, or you could do treasury bonds or something similar.

My suggestion would be to talk to a financial planner or banker, who will look at income and expenses and his investments and make a recommendation. The one thing that you should take care of before he dies is to make sure that all the investment accounts are titled properly so that the money doesn't get "locked up" upon his death.
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quesohusker Aug 2023
"Dad" is 101. There is essentially no more future to plan for. The challenge is preventing him from doing something in his remaing months that will cost potentially tens or hundreds of thousands of dollars to his heirs.
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This is a question that can only be answered by an attorney or a CPA. Your dad needs to get the advice of an elder law attorney or a CPA.
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If he does cash it in, make sure it isn't in a checking account. Putting in a savings account would make it slightly harder for him or scammers to get to.

My Mom is 94 and has just about all her money in short-term laddered bonds.

That being said, there are tax implications for cashing out and also probably some of what he wishes to do will not be a financially beneficial move. He needs to talk to a financial advisor or elder law attorney. It doesn't hurt to be liquid at his age, but there are better strategies.
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quesohusker Aug 2023
Scammers are the thing I'm most afraid of for my folks. They were willing to let me move about 99% of their money to a HYSA and a couple of CDs which they do not have access to. I pay their bills and transfer enough money into their checking account to pay the bills and leave about $500 for them to spend however they want. I consider that the the 'scammer insurance deductible". The rest is insulated from scams.
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As a tax attorney and CPA, my gut reaction is, "No No No, it's not a good idea." But I don't know all the facts, so I highly suggest you contact an elder law attorney and/or financial planner. There are potentially significant adverse tax and estate planning impacts that need to be considered.
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Confer with an Elder Law Attorney.
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Who is OP
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newbiewife Aug 2023
OP is "original poster," in this case it's LuckyLindy who started this conversation.
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Agree with others, check with an elder care lawyer and see if they can also encourage Dad to have a POA manage the money. Maybe he needs anti anxiety meds, too. Good luck.
I think the obsessing is probably normal for end of life + some dementia. For example:

After a lifetime of purposely, actively refusing to plan for future old age, my Mom is now obsessing about having enough for future in-home care. She plans to die at home. She realizes now that Dad has passed, that my brothers with full time jobs cannot do the care, and that I will not. I believe we kids were her longtime old age plan, without consulting us of course. I am managing finances and my brothers and their families help with other things, picking her up when she falls, etc.

I won’t dump the entire story on you, just know that you’re not alone.
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Considering how our dollar has devalued and continues to, it might be a good idea to put some of that in silver and/or gold. But, get physical gold ...do not trust some of these places that charge you for storing it. Just buying some coins is a good idea.
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If he doesn’t need the money now, there is a reason he wants to do this. It might be as simple as dementia, or it might be that he doesn’t trust someone. If he was able to accumulate an estate and still have assets at his age, it’s not likely he is so financially unsophisticated that he just wants it all in one place. The tax consequences of a move like this could be disastrous. It will certainly be disadvantageous for his heirs.

Contact a CPA and prepare to pay by the hour. A financial advisor is not going to be interested in spending time on this.
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I thought of something else that may help. Maybe your dad is like me—I’ve never been one to want to fuss over my money on a daily basis. The quarterly consolidated statement my financial advisor emails me is all I want. I don’t think it’s good for people to track so closely that they know every time the market takes a little dip.

My husband’s retirement accounts somehow got set up for the opposite—monthly statements plus the confirmations every time the investment manager buys or sells something. It makes me a little nervous just seeing these in the mail when they come. Not to mention my husband’s reaction any time, God forbid, his account is down in value.

Maybe what he needs is less paper. Most accounts can have paper statements turned off or turned down to a minimal number, like once a year.
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Does he have a financial planner? If so he needs to do a meeting and hopefully have you involved.

the Life Insurance is probably ok to let go, they can advise him on this.

If Dads money is invested there may be tax implications as well as the fact that his money wont continue growing at a higher rate than it will in savings.

my Mom likes to play with her investments, she is about to go private pay at an assisted living. As a level three her payment is $8,250 a month not counting supplies.

you definitely need financial guidance to make sure Dad has as much income coming in as he can just in case
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Contact an elder attorney. They may offer ideas that you haven't thought of. He may want to prepare for applying for medicaid. It is his money and he may have a particular reason he wants to simplify. Maybe he would want to take the cash and gift the money at this time. IRS allows us to give Maximum $16,000 tax free at this time to each person we choose, to as many people as we want to. No gift tax or income tax same as with an insurance policy benefit. So, what is it he is trying to accomplish?
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quesohusker Aug 2023
Max 16K PER YEAR WITHOUT REPORTING it to the IRS. You can give away as much as you want to family and friends but you have to report the gift. It get's subtracted from the lifetime gift maximum of about $13M. There is essentially no such thing as gift tax.
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He may not feel good about where his money is invested when he hears the news and all. Cash always sounds "safe", but with so many banks closing don't know if that is true these days. Mom has all her investments with Edward Jones: word of caution, they are not fiduciary and the company was moving her money within the accounts constantly.... of course that creates charges/fees. Her very nice EJ agent was making more money than Mom was and Mom started actually losing value in her accounts. When I became her financial POA I moved all her funds into the hands of a fiduciary investment broker and she is now living off her interest again. It took a year for Edward Jones to release the money though. Really not happy with them. She trusted this very nice young man and he took advantage of her old age and good nature. So do some homework and talk to your dad about why he feels the need to move the money. He may have a valid reason. Best wishes to you and your dad as you journey together. 101 God bless him:)
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quesohusker Aug 2023
Bank governor here. There hasn't been "so many banks closing". There were a few large banks, but a few banks fail every year. It's just the way things are.
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LuckyLindy: I do not profess to be a financial advisor, but it may not be a good idea to withdraw his investment and retirement monies as they are earning him dividends and/orinterest. There may also be penalties for withdrawal if it's too early. Also, as you've stated, there are tax implications.
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Not really a good idea. There will be a huge tax bill. Better to cash out just what he needs or wants if there is something he wants to buy or do. Otherwise, why generate a huge tax liability all at once? It’s his $, but sounds like a questionable plan if he is trying to keep his investments growing and avoid taxes. He should consult with a trusted financial advisor or tax attorney unless he has made his mind up. I am thinking he doesn’t understand the financial implications? One more thing. Are you absolutely certain that some scammer is not influencing him to do this? I spent my professional career fighting scammers and believe me, they can convince seniors to do crazy things and give up their last dime. Make sure that is not happening. It is surprising to many family members that their LO can be convinced to follow the lead of a scammer and hide it from their family.
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Talk to an elder estate planner and see if everything should be or is in a trust. If it is and he pulls it out, the trust might be unfunded, with ramifications. Has he said why he wants to take this action? Whatever the case, talk to someone who knows what they are doing!
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I just would like to say that he's very old and most likely wants to make sure that he gets what he worked for. There's so many stories about everyones assets getting sucked up by the government/ fraud and it's possible that he doesn't want to leave business unfinished. He might just want to be relieved of any financial burden to himself and the family? (Most likely) There's going to be penalties for this and he's probably willing to pay, he gets the satisfaction of everything being in order before he passes.
Yes, financial advisor but remember that it's his money/ investments and at his age he's been around long enough to know the "ropes". He's probably thinking take what you can get before someone else does.
Anyone who has lived such a long life would be concerned about what would happen to their wealth after they leave.
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Available for whom? What specifically is his availability concerns? If he is having money anxiety, it might be better to meet with a financial planner at his bank to address those concerns. If he is experiencing anxiety of any kind, it might be a good idea to schedule an appointment with his doctor for evaluation and treatment. There are good medications to help him relax and not have obsessive thoughts about anything.
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If he thinks this will make dealing with his estate easier, he's wrong. He'll get a huge tax bill, and you or whoever is his executor/trustee will have to deal with the taxes.

My Charles Schwab account is paying about 4% now on cash, so it isn't a bad place to put money.

Selling and taking the tax hit in order to have cash isn't smart, though.

The only big change we did with my mom's investments was to shift the majority of the remainder of my dad's IRA
into a Roth IRA. The was indeed a massive tax liability, but now that Mom's gone, my brother and I split the IRA and we can let that money grow tax-free for the next 10 years which will more than cover what was lost to taxes before.

He shouldn't do anything without a financial planner's advice.
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We can have no idea of your father's situation. I would contact, with him, an elder law attorney to discuss his assets and the best way to protect them at this time. You can also consider a CPA or a Licensed Fiduciary.
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This is a post from August. OP never responded to replys and has not posted again.
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