Pay Dirt is Slate’s money advice column. Have a question? Send it to Kristin and Ilyce here. (It’s anonymous!)

Dear Pay Dirt,

This spring we suddenly had to move my in-laws to assisted living. My mother-in-law’s dementia was spiraling, and we discovered my father-in-law also has something similar. They had done a good job covering up what a mess their lives had become the past few years, and now we’re slowly unspooling it.

My husband has power of attorney, both financial and medical. We’re through all the medical hoops, and I’m now looking at their finances. Apparently a few years ago, they took everything out of their annuities/IRAs and dumped it all into a standard checking account (not even a money market). They have about $130,000 in capital. Their house will sell soon, adding another $250,000 or so. My mother-in-law has long-term care insurance that covers $6,000 a month of memory care, and they both get pensions to the tune of $12,000 a month.

Obviously we need to do something more responsible with their money. But I also give my mother-in-law months to live and father-in-law not much more. I don’t see any big expenditures coming up, seeing as they can afford their care with wiggle room and have insurance. But I feel that we should have at least some liquid assets…just in case. What sort of short term investments should we look into diversifying their money into? Can we open a Vanguard account on their behalf? Thank you!

—Not Thinking Clearly

Dear Not Thinking Clearly,

As I was reading your letter, I was worried that after dumping all their investments into a checking account, they’d have lost it to some scam. But no, it’s all there, just when they need it most. That’s good news.

More good news: They are fairly self-sufficient, with $12,000 per month in pension and another $6,000 in memory care for your mother-in-law. That $18,000 per month should pay for most of where they are right now, without putting a huge financial burden on you and your husband.

While a checking account is extremely safe (unless someone steals their checkbook, which many of us leave lying around), it’s not a great investment. After selling their home, your in-laws will  have nearly $400,000 in cash. You’re right: That needs to be invested.

There are several short-term investments you should consider:

• High-yield savings accounts: Currently offering 3-4 percent APY, these are FDIC-insured up to $250,000, so you won’t have to worry about major financial risks or monthly fees. They’re perfect for cash you might need to access at any moment.

• Money market accounts: These offer above-average savings rates and easy access to cash with checking account features. They’re also FDIC-insured, although you may be limited to no more than a handful of free withdrawals per month.

• Short-term CDs: CDs are one of the safest investment options for seniors, allowing a fixed amount to be put away for a fixed time to generate a guaranteed return. Consider three, six and 12-month terms. To get even more flexibility, you could ladder these CDs, meaning you could buy a one-year CD every two months, which might help maximize your return while creating stable access to your money.

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Regarding Vanguard, you can open accounts on their behalf, but heads up: Vanguard doesn’t accept a “regular” POA and requires their own forms, including notarization and two witnesses. You’ll need to complete their Full Agent Authorization form to manage accounts there. It might be too much to accomplish, given the precarious state of your in-laws’ health.

Given their situation, I’d recommend putting $150,000 to $175,000 in high-yield savings (giving you immediate access), $125,000 to$175,000 in laddered CDs, and the remaining funds in a checking account with online access, so your husband can easily pay bills.

This gives you graduated levels of accessibility while earning reasonable returns. Since their monthly care costs are covered and you’re dealing with a short timeline, being conservative with their cash makes sense. Keep good records of all transactions you make on their behalf. This protects everyone and ensures your husband is fulfilling his fiduciary duties properly.
I’m sorry you have to go through this, but I’m so glad for your in-laws that they have you and your husband to help.

—Ilyce

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