Question: “I’m a 64-year-old widow with two adult daughters. I have a survivor living trust where all of our assets were moved when my husband died to preserve his state tax exemption when I die. My primary residence was appraised at $4 million when he passed away in 2017. I have $3 million in Cisco stock, $400,000 in cash and $500,000 in miscellaneous tech stocks. I have a traditional IRA valued at about $200,000 with $30,000 currently in a BlackRock managed fund and the rest has been held in cash since 2017, as well as a Roth 401(k) with $500,000 invested in stocks and mutual funds. I hold family partnership interests, consisting of a 20% share in a commercial retail shopping center that distributes $10,000 per month after expenses and a stake in a professional office center generating about $1,500 per month in rental income, though both are variable. I also own farmland, which produces no income but has $6,000 in annual property taxes.
For better or worse, my husband did everything before he died, so I don’t know how to feel comfortable handling my finances. When should I sell assets and when should I buy? How can I maximize what I pass onto my heirs? Do I need to set up charitable donations? I don’t even know when to take retirement distributions. I’d like to have one person I trust who can get me the answers I need for taxes, retirement and Social Security as well as things like long term care. Where does someone like me begin?”
Answer: You have a lot going on and if you’re not financially confident to address this, pros tell us that you likely will want to find a fee-only adviser who has no conflicts of interest. (You can use this free tool from our partner SmartAsset to match you to financial advisers, as well as sites like CFP Board and NAPFA.) And you’ll also likely want a CPA and an estate planning attorney who can all work together as a team to make sure every aspect of your financial life is in order.
Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.
“It sounds like there are substantial assets, however, what you sell and what you don’t will depend on several variables such as cost basis, carrying costs and liquidity needs. It would be wise to work with someone who can evaluate your personal lifestyle expenses and then devise an income strategy,” says Joe Favorito, a certified financial planner at Landmark Wealth Management.
In addition, this planner would need to evaluate what should be held and what is going to be more trouble than it’s worth. “The ultimate goal should be to work towards greater simplification in the most tax-efficient way possible. They can also help you with any future estate planning which is likely a need along with all the other issues you mentioned,” says Favorito.
Given the trust and Cisco shares, it’s important that you tread carefully with selling any securities which may cause tax issues. “The IRA could be earning you more, and you should investigate the partnership and other investments to help determine if they’re in your best interest. While all of this may have worked for your husband, it would be overwhelming for anyone. Your entire portfolio needs a strategic plan to fit with your new lifestyle so you can become more comfortable with your money and understand the results,” says Pamela J. Horack at Pathfinder Planning.
Most pros believe that diversification is key, so it’s certainly worth inquiring with a planner about how much Cisco stock you own and whether that’s putting you in a potential pickle down the road.
Your situation highlights why you can’t just focus on one piece of the puzzle. “You have real estate, concentrated stock holdings, retirement accounts, cash, farmland and partnership income. The first step is not to sell or buy anything until you have a comprehensive financial plan in place,” says certified financial planner Gabriel Shahin at Falcon Wealth Planning. “You really need to look into the tax application of which asset to sell and also look at what goals you’re hoping to achieve. It sounds like you have more than enough money, but at the same time, there are many more questions to be asked. The right move is usually a phased strategy that balances risk reduction with tax efficiency.”
Involving your heirs could help decide how to maximize what to send their way depending on their tax situations. “It is very intergenerational as some of your assets get set up on a cost basis and other assets have serious tax consequences from selling. See which heir is in a higher tax bracket versus a lower one and decide where you give the Roth IRA versus some of the other investments. With a $10 million-plus estate, you are above the current federal estate exemption limits, so protecting your heirs from a large estate tax hit matters,” says Shahin.
Charitable giving can also be a powerful tool if it matches your values, but it should not be driven only by taxes. “Vehicles like donor-advised funds or charitable trusts can reduce taxable estate values while letting you direct how gifts are made. As for retirement distributions, RMDs from your inherited IRA must follow IRS rules, but timing and tax strategy matter,” says Shahin.
To search for planners by areas of expertise, visit the CFP Board’s “Let’s Make a Plan” site, through the National Association of Personal Financial Advisors (NAPFA) or the Garrett Planning Network. Some of these advisers also provide services by the hour or per-project, so you don’t have to commit to a long-term relationship. You can use this free tool from our partner SmartAsset to match you to financial advisers,
It may take a team of pros
It sounds like you need comprehensive financial advice, which focuses on the big picture and your evolving finances, including having a professional dive into your cash flow and budgeting, investment strategies, retirement projections, insurance needs and more. “You [likely] have enough assets to accomplish your goals, you just need to understand how they work and how to use them in a tax smart way,” says certified financial planner Matthew Chancey, author of Tax Alpha Solutions: Effective Tax Management Strategies for High-Net-Worth Investors.
Furthermore, “most CFPs don’t really understand real estate outside of using REITs in their AUM models, which doesn’t sound like what you need. You can’t go to a real estate broker either since they make money by transactions and I’m not sure based on your facts and circumstances that you need to or should transact anything without more discovery questions being asked. You need someone that understands taxes, stocks, actual real estate and private business interests,” says Chancey.
When working with complex estates, certified financial planner Michael DeMassa at Forza Wealth Management says having the right team of independent professionals is essential. “As a fee-only financial planner, we often serve as the lead coordinator, bringing together input from the estate planning attorney and CPA to shape the overall plan. This collective approach helps ensure the advice remains objective and tailored to each client’s needs, rather than a one-size-fits-all solution with a single provider,” says DeMassa.
To find people you trust to work with, you’ll have to do some homework. “I believe in [the saying] trust but verify. To do that, you’ll need to do some research. Any adviser or firm would jump at the chance to have an exclusive relationship with you, which can make you vulnerable. Understand that anyone to whom you give the information you’ve shared here will do everything they can to be your new best friend and win your trust,” says Deborah W. Ellis, certified financial planner at Ellis Wealth Planning.
At the end of the day, you need to look at the whole picture and clarify your goals. “Diversity is important but you have to consider that no matter who is managing all of these investments, the buck stops with you. This means you’ll need to understand what’s going on in commercial real estate, managing farmland, the stock market and tech stocks, retirement accounts, estate planning and taxes. Interview potential advisers, and take a long look at yourself, what you want, what your goals are and what your intentions are for your money, your life, your family and your legacy,” says Ellis. (You can use this free tool from our partner SmartAsset to match you to financial advisers, as well as sites like CFP Board and NAPFA.)
Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.
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