DEAR BRUCE: Recently I've been faced with a problem regarding my 69-year-old mother. My mom is in fair health, she works full time, she owns no property, and she has no savings or retirement fund. She has just inherited $100,000 due to her mother's death.
I'm concerned. With her health as it is, I anticipate her retiring and needing some type of assistance within the next three years. How would you suggest this money be used? -- Reader, via email
DEAR READER: You have every reason to be concerned, given that your mother has no retirement money other than the modest inheritance she has just received. She is eligible for Social Security, and perhaps she already collects it. You didn't indicate how much her monthly benefit will be if she's not collecting yet.
The $100,000 is not going to go very far. If your mother is not amenable to a little risk in her investments, she's condemned to returns of 1.5 percent to 2 percent.
If she invests in the market in conservative to moderate dividend-paying stocks, she could anticipate income of $5,000 to $7,000 a year. Without other income, it's unlikely she can survive without eating into her principal, which will be dissipated in seven to 10 years. Until the majority of the $100,000 is used, she will not be eligible for Medicaid.
I wish I had better news.
DEAR BRUCE: I would like to know what a limited liability corporation (LLC) is. What are the advantages and disadvantages of it with respect to taxes, liability and paperwork hassle versus simply working as a single owner of a small business? Do I talk to a lawyer, an accountant or both? -- Bill, via email
DEAR BILL: In the past I have made the same mistake that you have. An LLC is not a limited liability corporation, but rather a limited liability company. It avoids some of the problems with a corporation while still providing some liability protection.
As to whether this or a Subchapter S corporation would be best for you, I urge you to speak with both a lawyer about the legalities and an accountant with regard to the tax consequences. No general answer will be sufficient. You must talk to them and be specific as to your own circumstances. In the absence of this, any answer you receive will likely be flawed.
(Send questions to email@example.com or to Smart Money, P.O. Box 7150, Hudson, FL 34674. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.)
(The Bruce Williams Show can now be heard at www.brucewilliams.com on the Made in America Broadcast Network.)