Escape the World's Money Trap with Sharon Epps

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Psalm 25, 15, and 17. Hi, I'm Rob West. Do you feel trapped by your finances? Do you find yourself giving into worldly pressure? Is there a way out of the world's money trap?

Well, there is. And Sharon Epps joins us today to talk about it. Then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial journey. Well, it's always great when Sharon Epps joins us in the studio.

She's president of Kingdom Advisors. And Sharon, great to have you back with us. I'm so glad to be here. Sharon, you've been putting a lot of thought recently into how we can be trapped with our finances. And what's really interesting is that it's not really determined by how much money we make, is it?

It's really not. It might surprise you to know that we can feel trapped whether we're struggling, stable, or even if we have a surplus. If you're living beyond your means, you'll be trapped in the fear of the unexpected. But if you're living right at your means, you may be worrying about the future. And if you're living beneath your means, believe it or not, you can still worry that you might not ever have enough. In fact, this weekend, I was talking with an older relative in my family, and she was concerned she didn't have enough.

And I literally did a calculation, and she has enough reserves for 48 additional years of life, which would take her to about 120. I'm sure that was reassuring to you. Hopefully it was. Yeah. And so in John 17, Jesus says, I pray for them. I'm not praying for the world, but for those you've given me, for they are yours.

I'm coming to you now. But I say these things while I'm still in the world, so that they may have the full measure of my joy within them. My prayer is not that you take them out of the world, but you protect them from the evil one. They're not of the world, even as I'm not of it.

Yeah, that's a powerful passage. So we're in the world, not of the world. Sharon, why don't you connect that to what that means with our finances? Well, it doesn't mean that we stop going to the store, that we live off the land. But God's Word does tell us how to escape the world's money trap.

That's what we're talking about. The things we were just talking about with three life-changing concepts. And we like to call it God's economy versus man's economy.

So the first one is lordship. We need to surrender to the fact that He owns it all. We've quoted this scripture a lot. Psalm 24, the earth is the Lord's and everything in it, the world and all who live in it. The second concept is stewardship. And that is we want to use God's resources to fulfill His purposes.

Genesis 2 15 says, The Lord God took the man and put him in the Garden of Eden to work and care for it. And then finally, the third concept is generosity. Sharing releases the world's grip on us. Let's think about the Macedonians that we find in 2 Corinthians 8. In fact, verse 2 says, Out of the most severe trials, their overflowing joy and extreme poverty welled up in rich generosity.

Oh, that's so good. I love how we can simplify God's economy into lordship, stewardship, and generosity. Now, of course, the next question is, how do we apply this practically, these spiritual concepts, in our practical financial lives? Well, there's really three very practical ways that I've found to escape that world's money trap. First of all, is to transfer ownership to God. Our friend and mentor Howard Dayton actually created a deed where you list all the things that you have and sign it over to the Lord just as a practical exercise to say, God, this is yours in the first place. I'm giving it back to you. Second thing is to create financial margin so that you're able to fulfill God's purposes.

Without margin, we are really trapped. And then the third thing is to grow in giving and in sharing. Let's talk about that for a moment. For folks listening today wondering, how do I be more generous?

What does that look like? Well, first of all, we need to realize that money is a tool. We talk about that a lot here on Faithfi. It's a good servant, but a terrible master. And as you know, Jesus says, we can't serve two masters. It can have power over us unless we use giving to break the power of money. And it's the only area where God says we need to test him to know that he will provide.

I like to say money is powerful, but generosity is more powerful. Oh, that's so good. Well, Sharon, you've given us such great practical wisdom, but rooted in God's Word. And we know that when we look to Scripture, we'll get wisdom that's always right, it's always relevant, and it will never change.

We're going to have to leave it there. Thanks for stopping by today. It's my pleasure. That's Sharon Epps, President of Kingdom Advisors and a frequent contributor here at Faith in Finance. Your calls are next. The number to call is 800-525-7000.

That's 800-525-7000. I'm Rob West, and this is Faith in Finance, biblical wisdom for your financial journey. Before investing, they're distributed by Four Side Funds Distributors LLC, which is not an advisory affiliate, a registered investment advisor, nor do they provide investment advice. As the leading advocate for the Christian financial industry, Kingdom Advisors serves the public by promoting the integration of a biblical worldview across every aspect of the financial services industry. And we serve a growing network of thousands of Christian financial professionals, equipping and empowering them to carry biblical financial wisdom to their clients, peers, and community. For more information, visit kingdomadvisors.com. That's kingdomadvisors.com. Hey, thanks for joining us today on Faith in Finance.

I'm Rob West. Here's the program where we try to help you understand that God owns it all, you're a steward, and that God's Word is the very best textbook going for all facets of life, but that includes your money management, more than 2,300 verses on money and possessions. The big themes in Scripture, I think, really speak to this idea that not only are there practical issues of how we manage money, but also that money can compete with the Lord for first position in our lives. You know, the world would tell us we can find fulfillment and enjoyment. Our longing for abundance can be found in money in the things of this world.

We just know that's simply not true. And so we want to help you make God your ultimate treasure and then answer those practical questions you have each day in light of Scripture. And let's do that right now. Let's head to Iowa. Ray, thanks for your patience.

How can we help? Yeah, hi. I was just calling. I just recently turned 62, and I'm probably thinking about working for another five years, for about 67. I could get at least, you know. And anyways, I'm currently living over here in an apartment in Iowa with my wife.

She's a little bit younger than I am. But anyways, we have a current home in another state, and we're thinking about selling that. You know, it's probably worth like probably like 1.1 right now, but we're thinking about selling that and then paying off the remaining balance, which is probably close to about 300, 350. And we just wanted to see if we could leave some of that money to my three kids. And also whatever's left over, we could have it to be able to, you know, buy maybe like a retirement home over here, because the properties are a little bit less expensive than it is in California. But would the money that I feel if we were to leave the kids, our kids, our children, would it be taxed, you know?

Well, so let's talk about these different kind of pieces of this equation. So the first question is, you know, the taxes due on the sale. Was this your primary residence? If you go back from today, five years, did you live in this home as your primary residence for any two of those five years?

No, we've been renting the house since 2018. Okay. All right. Yeah, yeah.

And we've we've recently came back, you know, to the US in 2023 in July. Yeah. So okay. And what did you buy it for? You said it's worth about 1.1 million today.

What do you realize? Do you remember what you paid for it? Yeah, yeah, yeah, we paid about 750 for it.

Yeah. So the difference would be capital gain. So you'd have somewhere around 350,000, you know, maybe in capital gain, that you'd have to pay, and that would come down to your income. And depending on what your income is, it would either be 0%, 15%, or 20% capital gain that you'd have to pay. And that would be done in the year of the sale, because you've owned it for more than a year, it would be a long term capital gain, which again, is either 0%, 15% or 20%.

Now, you take that money and you do whatever you want with it. Let's say some of it goes into savings, some of it goes into another home, you know, it exists in various forms, those assets, and then at your death, based on your will, you would leave whatever's left in your estate after any debts are paid, or expenses from probate to your kids that is not taxable unless you have an estate worth more than $13 million. And your kids wouldn't pay tax on whatever they receive, whether it's a home or a stock portfolio or cash, because there's no inheritance tax. So in terms of taxes, you're going to pay capital gains on the sale because you've got some appreciation. And that's not your primary residence.

It's a it's a rental property. And then after that's paid, it goes into your estate, you can use it however you want. But then at your death, there is no tax paid unless you have a pretty significant estate in size. Oh, I see.

I see. Yeah, you know, because I was I was speaking with one of my colleagues and, you know, it sounds like our remaining balance is like, let's say 350,000. And we would just pay that like, if we could sell it for like, let's say a million, I would still, I mean, I wouldn't get let's say, like 700 or 650, you know, for for myself and for my wife, or would I get taxed on that, you know? No, no, it's not income. So you just have capital gains, which doesn't have any bearing on the mortgage that you have. So you sell it, and you realize a gain. And the gain is determined by your selling price, minus your original purchase price. And the difference is your gain that has nothing to do with whether or not you have a loan on that property. And then that gain is taxed at either zero 15, or 20%, depending on the taxable income that you earn in the year of the sale. So for 2024, the capital gains rates are if you're married filing jointly, and you have taxable income, between 94,583,000 for the year 2024, then you're in the 15% capital gains rate.

So the gain that you had selling price minus original purchase price would be taxed at 15%. Does that make sense? Yeah, yeah, it does. Okay, very good. Thanks for your call today, Ray. God bless you, my friend. Let's go to Holland, Michigan.

Hi, Carol, how can I help? Yes, just double checking. Thank you for taking on call. What is your opinion of a reverse mortgage and has had a good financial decision? You know, it can be I mean, I like the idea that we would get out of debt and stay there. I mean, there's clear warnings in Scripture around the use of debt. Borrowing is certainly not a sin. I like to borrow only for appreciating assets that would certainly include your home, but you've got to do it in moderation, make sure that it fits into your budget. And so this idea that we would get out of debt and be completely unencumbered, I think is a great thing.

And a lot of people who have that are enjoying that peace of mind and that flexibility of being able to respond to the leading of the Holy Spirit without any encumbrances, and it keeps their lifestyle really low. Now, when we get to that season of life, we have to look at the best way to fund our lifestyle expenses. And depending on how much we've saved through retirement accounts, depending upon, you know, what's available through social security or a pension, many folks that I talked to will say, you know what, I'm ill-prepared for this season of life. I'm living on social security alone. For whatever reason, we don't have any other assets. Our budget is very tight.

We're just not able to do anything. But we're sitting on a pretty significant asset in our home. And so there can be a case to be made for, well, you could convert that equity in your home to an income stream for life. And it's non-recourse debt, which I like a lot. And that just simply means that you can never owe more than the home is worth. So at your death, even if they paid you out because you live to 130, and they ended up paying you more than your home was worth, the government's going to cover the balance. And so your home will satisfy the debt, whatever it grows to. Does that make sense? It does sort of. I'm not nearly as well versed in financing as you are. But as long as it's something that isn't against godly principles, I really feel good about it then.

And that's what I really was looking for. Yeah, I don't think it is as long as you pray through it. And again, you know, it's not that borrowing is ever a sin. The question is just, is it going to deny God an opportunity to work?

Are we presuming upon the future? And in the case of a reverse mortgage, your home will always satisfy the loan. So you'll always have collateral.

You'll never be responsible for anything beyond your home. And if it provides some needed income during this season of life, it can be a great tool. All right, folks, we're just getting started here. Let me mention, we've got some lines open today, we're ready to take your calls, whatever you're thinking about in your financial life today, we'd like to help you look at those questions and decisions you're making through the lens of Scripture, ultimately, making God your ultimate treasure, but helping you make those practical daily decisions in light of God's Word.

So whether it's your spending plan that's out of control, or debt you're trying to repay, or some giving you're wanting to do and you want to do it wisely, or, you know, maybe it's saving or investing for the future, whatever it is, call right now, 800-525-7000. This is Faith and Finance, and we'll be right back. We are grateful for support from the Eventide Center for Faith and Investing.

ECFI is an educational initiative of Eventide Asset Management that seeks to help Christians understand and practice biblically faithful investing. They do this through their podcast and online journal featuring articles from industry thought leaders and their course called Discover God's Story for Investing. More information is available at faithandinvesting.com.

That's faithandinvesting.com. Great to have you with us today on Faith and Finance. By the way, here as we head toward the end of our fiscal year at Faith V, which happens to be June the 30th, this is a really important time for us to hear from you as a listener supported ministry.

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Again, that's faithfi.com, click Give. All right, let's head back to the phones. By the way, we've got some lines open here in our final segment, 800-525-7000. You can call right now. Let's go to Ohio. Hi, Doug. How can I help? Thanks for taking my call.

I have a question for you. I'm the oldest four siblings, and my father passed away like at 15. My mom is going to be 100 in a couple of weeks, but they have a home right now that she's not living in, has been for about eight months, and I believe everything is in a trust fund.

Will there be a capital gains that would have to be paid on that when it was sold because the house was built by my parents in 1967? Yeah. Are you talking about when it's sold while she's still alive or following her death? Both.

Okay. So if she owns the home and she sells it, then regardless of whether it's in a trust or not, the capital gains would be determined based on the original cost basis, and that would be subtracted from the selling price. And then you'd further subtract any improvements that were made to the property, not maintenance, but improvements that enhance the value plus any transaction costs. Now, there is a homestead exclusion where if it's your primary residence, and she's filing as a single person, her tax status, she could exclude 250,000 in gains from the sale price for capital gains purposes, so long as she's lived there two out of the last five years.

So you take the date of the sale, and you go back five years. And if she lived there as her primary residence for two of those five previous years, then she'd be able to exclude either 250,000 as a single filer or up to 500,000 if she's married filing jointly. After her death, whatever's in the estate, the estate does not pay any capital gains tax. There are estate taxes, but those don't kick in until you get above $13 million for the estate's assets. So if it's below 13 million, then whatever's in the estate would satisfy any outstanding debts or obligations. And then all of the assets would be liquidated or transferred in their current form to the heirs, the estate would pay no tax, and there's no inheritance tax. So no one would pay tax on what they inherited.

And then from that point forward, any assets that appreciate based on the market value of the date of death, capital gains would have to be paid as those assets grow from the date of death forward. Does all that make sense? Yeah, the only question I have is back at the beginning of your answer on the homestead. Is that something that she needs to have on file now? Or is that something that comes in when she would sell it?

Yeah. And I may have confused you with the word homestead because homestead is something a homestead exemption is something you do file with the county for a reduction in your property taxes. What we're talking about is the capital gains tax exclusion for homeowners.

And that's completely different. You don't have to file for it whatsoever. It's just available to every taxpayer, so long as you meet the requirement that you've lived there from the date of sale back five years, two out of those five years, and then you get either the $250,000 or $500,000 in exclusion, and that's automatic. It requires no filing or you don't have to request it in advance, anything like that. Okay, thank you very much for your answer. And speaking of the homestead, maybe we should get her to file for that exemption to reduce her real estate tax.

Absolutely. Yeah, if you would want to look into that, basically, she would go into the county office there and fill out the homestead exemption application with the county tax officials. And you've got to do it by a certain date to get credit for, you know, the coming year.

But yeah, if she hasn't done that, that would absolutely be potentially helpful for her in reducing her property taxes. Okay, well, thank you very much for your help. All right, thanks for your call today. We appreciate you being on the program. Let's go to Louisiana. Hi, Tom, go ahead.

Hey, Rob, appreciate your ministry. I'm the oldest of four siblings. And both my folks have passed away. There's about $160,000 in an IRA portfolio, another 60,000 in various stocks, and all that's in the trust. My sister is a trustee. So we want to liquidate that or some of us want to liquidate it.

I'm 68 and don't want to take that tax hit until I retire in two years. Yeah, and we split up that distribution four ways and pay individual taxes on it or how's the taxes work on that? Yeah. So was the IRA was the trust listed as the beneficiary of the IRA? Yes. Okay. Mom took that and started taking RMDs on it before she passed three years ago.

And now we'll need to start taking RMDs again this year, I believe. Yeah, yeah, got it. Yeah. And so each person is going to be responsible for, you know, their portion. So the trustee will handle the distribution of those assets according to the trust documents. And then each person is going to be responsible for any taxes incurred as a result of, in this case, distributions from an IRA. So that's pre tax money, it's going to have to come out based on a schedule that is determined based on whether it's a spouse or a non spouse, and in this case, non spouse, and the rules have changed on that recently. So I think the key is to work with your CPA to make sure that you know, the money is coming out in the appropriate fashion that's consistent with what the IRS is going to require for each person, and then that the taxes are paid accordingly.

If it's not in an IRA, we're just talking about assets outside of retirement account coming out of a trust, there's not going to be any taxes or shouldn't be because the you know, the capital gains would be stepped up in terms of the cost basis as of the date of death, but ultimately, it's going to be up to the trustee in this case, your sister to distribute all of that, according to the trust docs, and then just make sure you have trusted counsel in terms of a wise CPA that can help you navigate everything with regard to the IRS and then each person will handle their own tax liability individually. So unfortunately, I'm out of time, Tom, but appreciate your question. Thanks for your kind remarks about the program, sir. Folks, thanks for being along with us today. Grateful for my team, Taylor, Robert, Devin, and the rest of the team here at FaithFi. May the Lord bless you and we'll see you tomorrow. Bye-bye. Faith and Finance is provided by FaithFi and listeners like you.