Money Talk: Is it better to spread your wealth between two financial advisors?

Dear Liz: My parents left me with financial accounts at two companies. My instinct is to combine them to deal with one less company. Is there a downside to doing this?

Answer: You should first determine whether any of the inherited accounts is a retirement account because those come with special rules. You can’t simply merge an individual retirement account with a taxable brokerage account, for example. And you’ll want to consult a tax pro to understand how to properly title and take distributions from any inherited retirement account.

If the accounts are regular taxable accounts, then consolidating can have many advantages. Your accounts will be easier to monitor, asset allocation strategies will be simpler to execute and your account expenses could drop, particularly if you use the lower-cost company. Some brokerages offer deposit bonuses, and a higher combined balance also may entitle you to additional perks.

The primary downsides to consolidation involve risk mitigation. Brokerage failures are rare, but they do happen, and some investors opt to use more than one brokerage if their account balances exceed coverage by the Securities Investor Protection Corp.

SIPC provides coverage of up to $500,000, including $250,000 for cash, if cash or securities are missing from an account when a brokerage fails. Similar accounts are combined for SIPC purposes, so multiple IRA accounts at one brokerage will be considered one account. However, the $500,000 limit applies to each category of account. So someone with an individual account, a joint account, an IRA and a Roth would have a total of $2 million in SIPC coverage.

Having accounts at different companies also can help you retain access to at least some of your money if one of your accounts is hacked.

Minimizing your taxes is fine — to a point

Dear Liz: In reading your columns, one can get the impression that reducing tax liability is the primary objective for many financial advisors. I disagree with this. Paying a fair share of taxes is a responsibility to society and the less fortunate, especially for wealthy people. Why are so many financial “professionals” so obsessed with paying less in taxes?

Answer: Tax planning is an essential part of comprehensive financial planning. No one is under an obligation to pay the maximum tax possible. Those who specialize in tax avoidance love to quote a judge named Learned Hand, who wrote in 1934: “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

Where advisors — and taxpayers — get into trouble is when they prioritize tax avoidance over all other concerns. That’s how you get advisors doing tax loss harvesting on a financial account to reduce capital gains for an older couple in the 0% capital gains bracket (an example of this behavior from a recent column).

A little known, and restrictive, benefit for vets and their spouses

Dear Liz: Some time ago you referenced an “aid and attendance benefit” for veterans and their spouses. We have a 94-year-old bedridden widowed mom who has a permanent catheter and is tube-fed each day. I had never heard about this benefit and can’t seem to find a contact anywhere within the Department of Veterans Affairs who can help. Who can I contact?

Answer: The aid and attendance benefit isn’t well known, perhaps because the rules for who can get it are restrictive and complex.

You can find a summary of the benefit on the Veterans Affairs website. The benefit is actually a supplement to veterans’ pensions. To get a pension, the veteran must have served during wartime and meet income and asset restrictions. To get the aid and attendance benefit, the vet must have a medical need for assistance or supervision. Surviving spouses may be eligible if they were married to the veteran at the time of their death. There are numerous other rules and the application can be tough to navigate. For help, consider contacting the National Veterans Foundation, a nonprofit that helps vets and their families. Its Lifeline for Vets toll-free helpline is (888) 777-4443.

Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.