Q&A: Mom’s 94; one son handles her money, another wants more access to it

Dear Liz: I have two younger brothers, and the youngest was chosen as the executor of our widowed mother’s estate. The problem is that he doesn’t understand financials. Mom is 94. Her entire estate is invested in blue-chip stocks. The portfolio was carefully planned by our uncle and closely tracks the Dow Jones industrial average. With her present holdings, she has enough to live indefinitely in her nursing home.

Her portfolio is up 40% in the last two years, but my brother is worried that the stock market is going to crash. She could give me up to $15,000 a year, but he’s telling her $500 a month for each brother is good. I’m a retired electrical engineer and have managed contracts for the military worth many millions of dollars. Can I challenge my brother’s ability to manage our mother’s finances?

Answer: Sure, if you want to open up an all-out family war at this stage of your life. A better approach might be a collaborative one, in which the three brothers seek outside, expert advice to handle Mom’s affairs.

You might have been terrific at managing military contracts, but that doesn’t give you the background in taxes, estate planning and investment management that’s required in this situation. You may be overestimating how much her portfolio has grown — the Dow is up about 25% in the last two years, not 40% — while underestimating both the risk of a downturn and the effect of larger withdrawals.

Your brother, meanwhile, is understandably concerned about a portfolio that’s 100% invested in stocks. That would be a lot of risk, even if your mom had decades to ride out any downturn (which, obviously, she doesn’t). Remember that the stock market lost roughly half its value a decade ago and lost about 90% during the Great Depression.

If your mom’s portfolio could take such a hit and still produce enough for her to live on, then larger distributions might make sense. Maximizing the annual gift tax exclusion, which allows her to give away $15,000 a person without filing gift tax returns, may be desirable if her estate is worth more than $11 million and could be subject to estate taxes. If she’s not wealthy, though, distributing $45,000 each year to three of you could increase her risk of running out of money.

A fee-only financial planner could analyze that risk and recommend a prudent course of action. The planner also could help arrange the necessary documents that would allow your brother to manage your mom’s financial affairs. Right now, it’s not clear whether those are in place.

Your brother is not yet the executor, because your mother is still alive and executors are in charge of distributing an estate after someone dies. If she wants him to make decisions for her should she become incapacitated, she should give him her power of attorney or name him as the successor trustee of her living trust. Otherwise, he probably would need to go to court to be named conservator.

It may rankle that your mom put him in charge of her estate, rather than you. If he’s trustworthy, though, you should put aside the idea of challenging him for control, especially if your main motivation is to get your inheritance early. Instead, offer to assist him in finding the professional advice he needs to help your mother and work together to make sure her remaining years are as free of family drama as possible.

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