Monday, January 25, 2016

Wallet Woes

Given the title of this blog, you’d think I’d write more often about my actual wallet. I’ve been using the same one for most if not all of the time I’ve been writing this blog. In this post from almost 10 years ago, I talked about my wallet and what was in it. The contents today would be almost identical, except for the Blockbuster video card!

For those who don’t click through the link, my daily carry wallet is a small nylon zippered card size pouch that I bought at Muji many years ago. It has a flap pocket on the outside secured with a Velcro tab— I keep my Metrocard in there as it’s easy to slide it out when I ride the subway. The zippered part has a little mesh divider to keep my coins separate from my cards and cash. I always have 2-3 credit cards, drivers license, gym card and a few other cards in there, as well as cash. The cash has to be folded in half, which isn’t ideal but I usually don't mind. I also stuff receipts in there, so the wallet can get a bit crowded sometimes and I regularly clean it out and reorganize it.

This wallet system has really worked for me— it’s lightweight, very pocketable, and unobtrusive. I’ve gotten so used to it, I rarely have trouble digging around to find anything even though it is small and a bit cramped. And the wallet has been surprisingly durable given that I am using it so much.
But nothing lasts forever— the velcro tab on the outside hasn’t really worked for a while, but now, more importantly, the zipper is tearing. In anticipation of this day, I”ve been checking Muji on a regular basis to see if they sell anything like this anymore but they don’t. And now that I’ve been more desperately looking for a replacement, I’m discovering that one one else really has anything like it either! Everything I've seen is too big, too small, lacks pockets, has too many pockets, etc. So I’ve been trying to open up my mind to the idea of using a different kind of wallet.

I’m trying to remember the other wallets I used earlier in my life. The earliest one I remember is one of those Velcro-closure wallets with contrasting trim, made out of the same sort of woven synthetic fabric as many backpacks. That would have been what I used in junior high, and maybe into high school. Sometime in high school I was given a full size women’s wallet, in a faux leather grey and black pattern, made by Liz Claiborne. I think I used that into my college years.
After college, I had a period where I used a pocket size Filofax to carry my cards and bills, and just put coins in my pocket, which was one of the reasons I always hated shopping for clothes, as many women’s pants don’t have pockets!
At some point, I started preferring a small pouch style wallet, starting with a little card size one made of some kind of Guatemalan or Mexican textile, which I probably received as a gift. It was cute and colorful, and I still have it somewhere. Because that wallet was so small, I supplemented it with a leather card holder from Coach to store things like insurance cards, business cards, and backup credit cards that I don’t use as often. The Mexican textile pouch was replaced with the Muji pouch.

I’ve experimented a little with other wallets. When one of my grandfathers died, I was given a wallet he’d owned— a pretty typical fold-over men’s wallet. I tried using that briefly but never really liked it that much. I also tried to used a different style of Filofax that had a full zipper around it and more pockets, as the idea of combining a notebook and wallet into one always seemed appealing, but in practice I found it too bulky.
The other wallet I currently own and use on occasion is a Bellroy passport wallet. Bellroy advertises a lot online, and I was sucked in enough by it to purchase their Travel Wallet. It’s actually a brilliant wallet— I love how it can hold boarding passes, all sorts of currencies, a passport, an extra SIM card (even though I haven’t had a use for that in years), and even comes with a mini pen. But I only use this wallet for international travel— if I'm not bringing my passport with me, the wallet just seems too big to carry all the time. Despite the size, I did try to carry it as an everyday wallet for a few days, mainly because I just loved it so much I wanted to touch it more often! The leather is really nice, and I wanted to break it in more. But the problem was that it had no space for coins. Most of my pants do have pockets at the moment, but I really don’t want to walk around with change jingling in them. And I don’t want to have to use a separate change purse. I use my coins as much as possible each day and don’t accumulate them but I still need someplace to put them.

In searching around online for a new wallet, of course those Bellroy ads starting popping up again so I took a peek at their website… and lo and behold they have a new wallet that is designed to hold coins: the appropriately named Coin Fold. After much deliberation, I ended up ordering one. It holds flat bills, cards, a SIM card should I ever have a spare again, and there’s a clever little coin pocket. I’ve been mentally enacting how I would use this wallet in my day to day habits. I think it will hold what I need it to hold, but will it be awkward to use? Will there be enough space for the coins? Will I be able to pluck them out efficiently when I’m trying to pay with exact change and there are 10 grumpy people in line behind me at the deli where I get lunch? As of this writing, that remains to be seen…  and I know I’ll have to adjust to one feature this wallet is missing, which is that there is no separate external pocket where I can stash my Metrocard. Will I be able to whip out my Metrocard fast enough without fumbling in front of the turnstile?

It’s funny how nothing is ever perfect in life. If you say you want A, B, C, and D, you’ll only find things that have A, B, and C, or A, B, and D, or B, C, and D… plus E, which you never cared about before, but now you are swimming in doubt because maybe E is better than A anyway, or is it??? I have probably looked at a hundred wallets, and all I really want is the one I have, even though I’m lusting over this new thing because it’s made of pretty leather.

Don't think it hasn’t occurred to me that I could repair the zipper on the Muji wallet… but it pains me to think how much a tailor would probably charge me to replace that 3 inch zipper— less than a new wallet for $100, probably, but I’m sure the price vs. value would still annoy me, and I’d be hearing my mother’s voice in my ear, saying “see, I told you you should have learned more about sewing!” Though if I presented her with my Muji wallet and a 3-inch replacement zipper and asked her to fix it, she’d probably be totally annoyed, as she often was when I was a kid and would ask her to sew together fantasy wallets and notebook covers of my own design. Some things just aren’t fun to sew, even if you love sewing.

So we’ll see if this creature of habit can form a new habit with a new wallet… which will still be an open wallet, of course!

Tuesday, January 12, 2016


So, how crazy is it that the Powerball jackpot is $1.3 billion? Sometimes it seems like all anyone is talking about, though David Bowie's unfortunate death has managed to change the subject this week, at least among most of my friends on social media...
Anyway, for all that I try to be a creature of logic when it comes to finances, I had my little moment of madness last weekend when I decided to drop $10 on Powerball, when the jackpot was "only" $900 million. I of course knew I wouldn't win, but it's hard not to fantasize about these things, and while the odds of winning are incredibly tiny, even incredibly tiny odds are better than the absolute certainty of not winning if you don't enter. And since my lottery spending pattern is to spend about $10 every few years when the whim strikes me, I don't feel like I'm throwing away too much money.
It's funny to read some of these articles that try to tell you the best times to play the lottery-- actually, I should say "try to read," as I feel my brain getting numb pretty quickly. I guess the ideas fall into various categories-- since the winning numbers themselves are totally random, the best you can hope for is to strategize about not having to share the prize, or doing some sort of analysis of the cost/benefit of buying a ticket at different jackpot levels. No matter what, you are working with odds of winning that comparable to odds of being hit by lightning while standing on your head while serving as the first democratically elected president of the United Kingdom.
What struck me after I read the back of my Powerball ticket more closely is how relatively worthless the secondary prizes are for getting a few of the numbers right. After the jackpot, it drops to $1,000,000 (5 numbers right), and then $50,000 (4 numbers plus the powerball number), and then $100 (if you get 4 numbers, or 3 numbers plus the powerball number right). $1 million would be amazing and pretty life changing for most people, even if it's only about half that by the time you take out taxes, and even less if you take it all in cash up front. But I'm not sure it would be enough to make me feel comfortable quitting my job and changing careers. $50,000 definitely wouldn't be enough.

The other thing that interests me about lottery fever is how people talk about what they'd do with the money. at this huge a jackpot level, most people can't even get their heads around it. But they usually seem to start with thoughts of giving a lot of money to friends and family, which is nice. It makes you wonder about people who are billionaires already-- there are plenty of extremely expensive luxuries they can spend their riches on, and lots of charitable ventures, but even they must struggle to put a dent in it sometimes. I can only hope I someday have the problem of figuring that out myself!

If you've bought a ticket, good luck!

Wednesday, November 04, 2015

How to Teach Kids to Save When Interest Rates are Low

I was thinking about how I started learning to save money when I was a kid. At some point, my parents opened a savings account in my name, and I had a nice little bank book. No ATMs back then-- you had to bring your bank book to the teller, who would record your transactions in it. When I got money as a gift, or from my first babysitting jobs, some of it went into that savings account. 

I understood how savings accounts worked: you put money in the bank and the bank paid you interest. I was a kid in the late 1970s/ early 1980s when interest rates were high-- as far as I can remember, my savings account earned about 8%, and knowing that I could be paid 8 cents a year for every dollar in my account was actually meaningful to me-- I was earning money just for letting it sit there!

8% savings account interest seems outlandish today, and I wondered if my memory was correct. I think I am right-- the prime rate back then was between 10% and 21.5%! Today it is only 3.25%, where it has been since 2008. The average interest rate on a savings account today is only a fraction of a percentage point.  You might see a teaser rate of 1% or so, touted as if it's the best thing ever, but it will only be for a limited time, and only for opening a new account. 

So how do you get a kid to see the value of saving if you have to tell them that they will only get a fraction of a penny for every dollar they put away? You could try to teach them about investing in the stock market instead, and I do believe there is value in that, but it is a lot more complicated, and involves so much more risk. 

I would love to hear from readers with kids abut how they've handled this with their own families!

Monday, October 05, 2015

Smartphone Plans and Paying Full Price for an Unlocked iPhone 6S

For a long time, my cell phone bill hasn't been a major part of my personal finance decision making. I've had an iPhone 4S for almost 4 years, on the minimum AT&T phone/data plan, with my contract long over. I was paying something like $0.10 per text message, because I texted so rarely that it seemed like a better deal than the $4.99 a month it would have cost me for unlimited messages. So I thought I was doing the right thing, financially speaking. 

The problem is that the world of smartphone billing plans has totally changed in the last year or two. Suddenly everyone is acknowledging the true costs behind those contract plans, and there are new options that un-hide the hidden costs that were formerly buried. Because my 2-year contract was long over but I was still paying the same price, I was actually over-paying for my phone. 
Several months ago, I dug into the AT&T website and discovered that I was able to easily switch my plan to one where I got more data, and unlimited text messages, and my monthly bill decreased by about $30! I felt very foolish for not having discovered this sooner, but I then continued on my merry way with my little iPhone 4S.

As you might have heard some whispered rumors about, if you talk to an exclusive set of people who are super-in-the-know, Apple just released the iPhone 6S and 6S Plus. (I know, you are totally shocked because you hadn't heard this news ANYWHERE!) I was disappointed when the iPhone 5 and 5S came out, and even more disappointed when the iPhone 6 came out because I don't like their more elongated/larger shapes. I've always liked small phones. But I am finding that small screens are a little harder on my eyes, and my iPhone 4S is starting to feel quite sluggish and losing its battery life, so I decided that the release of the 6S was my time to buy a new phone.

At first, I still had financial virtue as my main goal, and I figured I would just buy an iPhone 6 after its price dropped. But the more I thought about the 6S, the more I leaned towards getting the most current model, for some of its new features. But I'm really not sure how I'll cope with that larger size. There have been some rumors saying that the iPhone 7 release in 2016 might go back to offering a smaller size, so I decided to look at ways of buying a new phone that would allow me to upgrade a year from now. It's not a smart financial choice to buy a new expensive phone every year, but I use my phone a lot, so there is value in having one I enjoy using.

I'm happy with AT&T, so I looked at their plans first. The AT&T Next plans allow you to spread the cost of the phone over different time periods, with trade-in and upgrade allowed partway through. If I wanted a new phone in a year, I'd choose the AT&Next 20 plan. What surprised me is that all of AT&T's Next plans work out to be cheaper than signing up for a 2 year contract-- not because of the phone pricing itself, but because they give you a "discount" on your phone service if you're on the Next plan-- aka they charge you more for phone service if you are on a contract. It's weird-- I would think they would want to lock people in and get that $300 upfront payment for the device instead of spreading it all out. 

Then I looked at Apple's newly announced Upgrade Program-- it's actually a hair cheaper than AT&T's comparable plan, you get to trade in for a new phone after a year, and they throw in Apple Care so you have some extra coverage if you damage your phone. I take good care of my phone and have never had a cracked or broken screen, but I did worry a bit that I might be fumbling with the larger 6S size, so perhaps there would be more value than usual to an insurance plan. BUT... it actually doesn't save you that much money on a cracked screen. You still have to pay $99-- without Apple Care it's $149.

I also started thinking about how all these new variations of phone purchase plans serve another psychological purpose-- they just want you to get used to the idea that paying $750 for an iPhone is normal and necessary, and that you WILL pay that much, one way or another. That is almost as much as Apple's entry-level laptop computers cost! Back when I bought my first cellphone around 1999-2000, I would never have dreamed of paying the full $600 or $700 my (admittedly high-end) phone would have cost. When that phone was stolen, I bought another unlocked used one on eBay rather than cough up for a new one while I was still under contract. Back then, there was no option to pay less in service charges of course... and the idea of an additional data plan was nowhere on my radar either. It's just a different world now, and we are all so used to doing so much with our phones, it's become a whole different calculation of cost vs. value.

So I looked into paying full price for an unlocked iPhone, and sure enough, it works out to be the cheapest option. Obviously, I am very lucky to be in the position to be able to afford to pay the full cost up front without having to spread it out or pay interest on a credit card balance-- that's not an option for everyone. Here's why it works-- all the other upgrade plans are based on you trading in your old phone, which has value. If you get to keep your old phone, and can pass it on to another family member or friend, or sell it, it significantly changes the net cost of ownership. The remaining cost of the phone that AT&T absorbs after you trade it in is most likely a lot less than you'd get if you sold it, and far less that your friend or family member would pay for a new phone.

I made a spreadsheet for myself to figure all this out:

And after seeing the numbers on my spreadsheet, I ran down to the Apple store! I am now the mostly happy owner of a shiny new iPhone 6S, paid for in full. It's a pleasure to use and I do like the larger screen, but it still feels awkwardly large and slippery and one-handed use is nowhere near as easy as with a smaller phone. We'll see if I want to keep it or move on to whatever the next thing is a year from now!

Wednesday, August 26, 2015

Yowza, the Stock Market!

Normally I'm a very hands-off investor. I go for long periods without paying much attention while my various holdings drift up and down in value-- hopefully, mostly up! But in the last year or so, I've been putting more cash into the market, and paying a bit more attention. This is largely because I've had more cash to invest-- my own savings and the proceeds from selling my condo, and more recently, my mother's trusts.
I continue to mostly invest in a mix mutual funds, some just index funds and some with other mixes of assets-- nothing really sector-specialized, just some bond funds and others that are supposed to maximize dividend income. Then I have a few stocks that I've bought a few shares of here and there.

The last couple of days have been one of those times where I can't really sit by and ignore what's going on. I've been checking the S&P 500 multiple times throughout the day. As mentioned in the posts about my mom, I now have to worry that she'll think I'm mis-managing her money if the markets go down, and they've gone down a LOT in the past few days! I can handle seeing my own net worth plunge by $60,000 or more in the space of a few days, but that's nothing compared to dealing with my mother! :)
For my own investments, I'm trying to be strategic and cool-headed, so as Monday's big plunge was happening, I moved $25,000 into my E*Trade account so I'd be ready to act if it seemed like I could take advantage of buying low. At the end of the day, I thought things were down enough that it made sense to do some bargain-hunting, so I invested all the $25k. Tuesday morning, the markets opened higher and I was feeling like a genius! But as the day progressed on Tuesday, I began to wish that I'd waited another day as the markets ended up closing down even further. Oh well! Maybe not so genius after all...

I still try to keep an eye on the long term. I didn't sell off anything after the 2008 crash and my investments mostly recovered. I've had some things do very well in the last few years. But it's a bit depressing to see those gains wiped out again, and I do wonder what's in store for the next few years. A lot of people are saying stocks are generally over-valued, and I'm pretty exposed to that through a lot of my mutual funds. But interestingly, my individual stock picks don't seem particularly over-valued, at least not after Tuesday's close. I have shares in Ford, Bristol-Myers Squibb, Kroger, Xerox and KKR. The P/E ratios on these are mostly pretty reasonable-- all under 15 except Kroger at 18 and BMY at 54! BMY is up 113% from when I bought it in 2011, so I'm thinking I may sell it now. Kroger is up 197% from when I bought it so it's tempting to sell that one too. Whenever I've bought individual stocks, I've tried to find things that had a low P/E ratio and projected earnings that would suggest the price could rise-- that approach has worked well for me. Xerox was bought based on advice from a friend, the one time I've ever acted on that sort of stock tip-- that approach definitely did not work for me! Xerox has been down pretty much ever since.
I also like it when stocks pay dividends-- I figured out that I've reinvested almost $30,000 worth of dividends on my main E*Trade portfolio over the years. KKR is something I just purchased this week because the P/E ratio was very low and dividend quite high. I've never invested in a private equity company, or any sort of financial services company-- my other stock picking rule having been that I choose companies whose businesses seem more tangible and familiar to me. My most detailed knowledge of KKR has been from reading Barbarians at the Gate-- a fascinating book which I highly recommend, though it's not exactly flattering to KKR. So this pick goes a little against my grain but these private equity guys always seem to be raking it in like bandits, and I'm willing to try to ride along a bit!

Here's the current holdings in my main E*Trade portfolio if you want to follow along... this doesn't include a smaller Roth IRA portfolio or my 401K.

Symbol Qty
BMY 30  
BRLIX 3,082.075  
BRSIX 605.537  
BVEFX 277.961  
F 300  
ICENX 875.547  
KKR 200  
KR 200  
NOSIX 383.203  
PFODX 602.65  
PGNDX 674.272  
POMIX 427.673  
PONDX 1,000.777  
PRGTX 361.533  
RYTRX 326.781  
SFLNX 2,268.278  
SFSNX 601.965  
TINRX 604.23  
TRVLX 137.817  
VDIGX 437.085  
VEIEX 396.939  
VNYTX 787.866  
VWELX 1,155.685  
VWINX 1,129.674  
XRX 75  

Monday, August 24, 2015

More on Being a Trustee

Ok, so we left off with the big package of legal documents arriving for me to sign.
First, there was the irrevocable trust document. This spelled out that my mother was putting $350,000 in this trust and waiving all rights and title to the principal forever. It names me as trustee, and talks about various ways I’m allowed to make decisions about investing the money. It says I have to distribute net income quarterly to my mother, and provide a full accounting of the trust’s transactions annually. There’s also a lot of stuff about how a the trustee can be changed later if necessary, and what happens if I die, etc. It names my sister and me as the beneficiaries and that the principal will be paid to us equally after my mother’s death.
Then there’s the revocable trust. This money still belongs to my mother during her lifetime, but I am the trustee managing it. My sister and I are the beneficiaries after she dies. This trust is just to simplify things and avoid probate when my mother dies. But it’s also a very good thing to have a trustee in control so that my mother can’t just spend all the money without consulting someone else. This may become awkward in the future if my mother wants to spend money and I don’t think she should.
The final documents in the package were my mother’s last will and testament, and a durable power of attorney authorizing me to act as her agent. The will will cover any property of hers that is not held in the name of the revocable trust. If those assets are less than $25,000, then it goes through a “simple probate” process that is easier than for a larger estate. So we’re supposed to keep my mother’s assets under her own name at less than $25,000 but of course she had last minute cold feet about putting the full amount she’d intended into the revocable trust, so she actually has more like $40,000 in her own account— or at least she did when this all happened. Who knows how much of it she’s spent by now! I keep reminding her that the revocable trust funds can be paid out to her any time but she still doesn’t want to transfer her extra cash. I asked a couple of times then decided to let it go for a while as she seemed to be starting to think I was being morbid about it!
The final item in the package was two checks from my mother’s account, one for $350,000 made out to the irrevocable trust (“The [Madame X’s Mom] Irrevocable Trust of 2015”) and one for $100,000 made out to the revocable trust “The [Madame X’s Mom] Trust of 2015.”

The irrevocable trust has its own tax ID number, which the lawyer also sent to me a few days later. Once I had that, I went to the bank to set up checking accounts for each trust. It took about an hour and a half to do all the set-up paperwork at the bank— they had to fax the documents to their legal department to make sure everything was in order, in addition to all the usual account paperwork.  But once that irrevocable trust check was deposited, it started the clock ticking for Medicaid’s 5-year look-back period, in the event that my mother ever needs to apply for it.

After the checks cleared and I’d received new checkbooks in the name of each trust, I opened a Vanguard account for each trust. I picked a variety of mutual funds, including some that have the goal of maximizing dividend income. I did put some of the money in funds that seek growth and have higher levels of risk, but I steered away from the riskiest ones, and also put some money into lower-risk bond funds. I do want to make the principal grow, but I also want to make sure the investments generate some income for my mom. I am a little worried about how the first few months will go— it’s unfortunate that the stock market has taken some plunges exactly after I invested this money, so my returns are somewhat negative so far. I personally am a pretty calm investor— I always try to look at the long term and not panic during down times, but I’m worried about how this will appear to my mom and anyone else whom she might tell. If I say “ok, mom, I took $450,000 of your money and invested it, and all I have to show is a $5,000 loss after 6 months,” she may just think I don’t know what I’m doing, regardless of whether I point out that the entire market is down, and that any other financial advisor would have been likely to have similar results. I am kind of wishing I’d weighted the portfolio even more towards the bond funds vs. the others, given that the stock market was at historic highs when I was putting all this money in. Perhaps that is what a professional advisor would have counseled… but perhaps not, and I have to keep reminding myself, and my mom if necessary, that we’re still ahead by a percentage point or two just by not having to pay someone else’s fees to manage the money.

There will be more to talk about in the coming months, as I figure out whether and when to distribute income to my mother, how to deal with tax issues for the trust, and other questions. I’ll keep you posted!

Monday, July 20, 2015

My Mother's Estate Planning: In Madame X She Trusts!

This past week, I've had to learn a few things about trusts. I'm now officially a trustee!

The whole trust issue first came up after my dad had surgery for brain cancer. We'd managed to get him to a lawyer to quickly draw up a will for the first time on an emergency basis just before his surgery. A couple of months later, he and my mom went back to a lawyer to revise the estate planning, along with my sister, and me on a conference call. The lawyer advised them to put most of their assets in a revocable trust and he drew up some documents to that effect. What I later found out, though, was that they had never actually retitled any of their accounts in the name of the trust, so it was essentially a useless exercise.

For those who don't understand what I mean, here's an version of an explanation I found online somewhere that helped me explain it. Think of a trust as an empty box. Your lawyer draws up documents that create that box. But then you have to put things in the box-- by transferring the deed to your house, or by changing the name on your bank accounts, or opening new bank accounts in the name of the trust and transferring money into those accounts.

After my dad died, my mother went back to the lawyer, and I think they set up another trust, this time just in her name. And again, no assets were ever put in the trust! I was kind of hands-off about my mother's dwindling finances at that point, as I just found it too upsetting.

So the latest trip back to the lawyer was after my mother sold her house. She had proceeds from the sale of a little over $500,000, from which some capital gains would be due, since they'd originally bought it for something like $25,000. (This calculation of capital gains exemptions on real estate would be an interesting thing to delve into in another post someday!)

At this point, that money is all my mother has. She has spent all the other money that my father left. But she had gotten it into her head that my father intended for my sister and me to inherit the house, or at least some of the money from its sale. I personally never heard him say anything of the kind-- he always seemed quite aware that he'd barely be able to stay afloat while living in that house, yet he didn't want to move, and somehow I don't think he ever really thought of us as a family where inheritances would be a very relevant issue! And knowing my mother's financial habits, I certainly didn't expect there would ever be much left to inherit once she was gone.

My sister, however, seemed to think an inheritance would be a rather nice thing to have, and I can't really blame her. She thought our dad would have liked to leave something to his grandchildren. And more pressingly, she and her husband always seem to have a little more debt than they'd like. I know they paid off some credit card debt when they refinanced their house. But somehow they still have two mortgages. And then they bought a boat! They want their kids to have a really fun family life that would be very different from how my sister and I grew up, under a cloud of worry that we couldn't afford to do anything. Unfortunately, she and her husband sometimes seem to be under a cloud of worry about debt! My sister does some occasional part-time work but is has mostly been a stay at home mom for years, so they're living on one income.

So my mom decides she wants to give us about $350,000 out of the house proceeds, to be split evenly. Her lawyer said the best way to do that was to put it in an irrevocable trust so she'd have the income from it while she's alive and the principal would go to us after her death. This idea worried me, because if my mother needed to go into a nursing home, there would be a 5-year lookback period before she could qualify for medicare, and my sister and I would have to come up with whatever her income didn't cover. I personally could afford to do that if I had to, especially if I knew I'd be reimbursed for $175,000 of expenses after my mother died. But my sister would not be able to afford it.

So I thought my mom should just keep her money to pay for her own needs, although I did worry that she would just spend it all on ridiculous things-- she seems to be one of these people who see money as a hot potato to be gotten rid of when you have it! If my mom frittered away all her cash, then I'd be stuck paying for her nursing home anyway. It's not that I don't want to care for my mother, but it makes me incredibly angry that I shouldn't have to-- if my mom and dad had both made wiser financial decisions years ago, they could have lived very comfortably and taken care of all their needs without endangering my own ability to fund my retirement. If I end up being broke when I'm older, it will be my niece and nephew feeling guilty and burdened about taking care of me, and I don't want to lay that on them.

My sister's idea for protecting my mom's money was that she should just give it to us as a gift, with the understanding that it would be there for her if she needed it. I was willing to go with that except that I thought it would look really dodgy, as if we were taking advantage of our mother. And again, I could afford to just invest that money and not use it. My sister was thinking she'd use it to pay off their second mortgage, "to help them get on a more stable footing," and that if my mother needed her money, they'd just take out a home equity loan to give it back to her. I value my relationship with my sister-- I don't want to be judgmental with her, knowing that kids are a big expense I don't have, but I thought that whole plan was a REALLY BAD IDEA!

Here's the plan that we ended up with: the lawyer drafted an irrevocable trust with a provision that the principal could be used in the case of a dire medical emergency. $350,000 went into that trust. For the rest of my mother's cash, he set up a revocable trust, and a will to cover whatever isn't in that trust. She's supposed to keep her non-trust assets below $25,000 so it's covered by simple probate, and avoids some of the usual probate process. (Or something like that, I may not be getting the terminology right here.)

The thing with trusts is that you have to have a trustee. That person or institution his responsible for carrying out the terms of the trust and has the fiduciary duty to manage the assets appropriately. My mother's first lawyer insisted that this duty had to be carried out by a financial institution and brought someone in from a local bank to offer her services. I did not like this idea. I did not see why we should have a bank investing our money when it seemed perfectly reasonable to just do it myself with some low cost mutual funds. I did some research online and became even more convinced that the fees a trust company would charge didn't make sense for the amount of money we'd be investing. I also felt that money should be invested in a relatively conservative way to preserve capital, so we'd be trading potentially lower returns in a good year for lesser losses in a bad year-- this meant losing 1-2% in fees really didn't make sense. My mom's first lawyer retired and another partner took over. Maybe he was less old-fashioned about whether a girl could capably handle such things, but he agreed that I could handle being the trustee myself. So a big packet of legal documents arrived for me to sign: the irrevocable trust with my mom as the grantor, me as the trustee and my sister and me as benfeciaries; the revocable trust with my mom as grantor and me as trustee and my sister and me as beneficiaries; and a power of attorney allowing me to act on my mother's behalf.

This is getting to be a long post so I'll follow up soon with a part 2 detailing what else I've learned about my new duties as a trustee... stay tuned!

Her income monthly from Social Security and my father's pension is about $3000.