How can mom protect the proceeds from the sale of her home?


Q: My mother, 70, is receiving $50,000 from the sale of her home. Can she protect this money to retire on, since its all she has?

A: There should be no tax consequence from selling her home, so all of the money can be put to work for your mom's retirement. Assuming she is not currently receiving Medicaid benefits, she can do with the funds as she pleases.

If your mom is thinking about getting professional financial advice on how to invest the money, beware. There are thousands of "investment professionals" who would love to get a hold of her money.

Today, one type of investment is paying finance consultants high commission, and therefore, they're trying to get seniors to buy it, because it means more money in their pocket. It is called an "Equity-Indexed Annuity."

Do not let her purchase one of these annuities! I won't bore you with the complicated details of the annuity, but suffice it to say that state after state has received thousands of complaints from consumers about these products.

My suggestion is that you "ladder" CD's at the bank. The concept is this: Take the $50,000 and divide it into 5, $10,000 pieces. Take $10,000 and buy a 1-year or 2-year CD. Take the next $10,000 and purchase a 3 year CD. Take the next $10,000 and purchase a 4-year CD, etc.

This strategy will keep your mom's money as safe as possible, while providing a higher yield than just purchasing a short-term CD with all of the funds. Your mom will have "fresh" money each year from an expiring CD to purchase a new CD at the then-current rate. (Rates will most likely be going higher over the next few years - we can't stay at zero forever, can we?). In addition, your mom will have liquidity, meaning that in the event she needs money some will always be available with very little penalty.

Ralph S. Robbins, is a Certified Financial Planner, specializing in investment strategies, estate planning and public benefit eligibility for seniors. Read his full biography

Ralph S. Robbins, CFP©, is a licensed Certified Financial Planning Practitioner and an Accredited VA Claims Agent specializing in Eldercare Financial Planning. He works everyday helping families in crisis find creative ways to fund long-term care expenses and deal with family financial issues.

Ralph S. Robbins, CFP

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Ralph is right. $50,000 sounds like a lot of money. But it's easy to fritter away. If your mother is secretive about her money and doesn't want you to know where it is, enlist a friend she respects to help her though this.
My parents were very secretive. I had no idea how much they had or where it was. But my mom was extremely organized. It only took a few months to settle their estate. My husband was not organized. He also came from a Depression Era background. He not only spread his money in several "nests" (i.e. accounts) his had the nests on several different "farms" (institutions). It took me five years to find them all.
Good luck. Trust me, it's worth the effort.