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Leaving A House To The Kids

Faith And Finance / Rob West
The Truth Network Radio
January 24, 2025 3:00 am

Leaving A House To The Kids

Faith And Finance / Rob West

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January 24, 2025 3:00 am

Proverbs 13:22 tells us, “A good man leaves an inheritance to his children's children…” But while the Bible emphasizes the importance of leaving an inheritance, it doesn’t provide a step-by-step guide. That’s where careful planning and biblical wisdom come into play. 

Here are some principles to help you make wise decisions about your estate—particularly when it comes to real estate—and avoid unintended conflicts among your heirs.

The Common Approach: Equal Division

One of the most common phrases in wills is, “My estate will be divided equally among my children.” This approach seems fair and straightforward, especially when the estate consists entirely of financial assets. However, complications arise when property, such as a home or vacation property, is included.

When real estate is left to multiple heirs, they face tough decisions:

  • Joint ownership: Should they retain the property together, splitting the responsibilities and costs?
  • Sell and split proceeds: Should they sell the property and divide the cash?
  • Buy out: Should one or more heirs buy out the others to take full ownership?

These decisions can quickly lead to financial and emotional challenges without clear guidance.

The Hidden Challenges of Inheriting Property

Leaving property to multiple heirs often creates unexpected burdens, both financial and emotional.

Properties come with ongoing expenses, including:

  • Maintenance costs
  • Property taxes
  • Insurance premiums
  • Homeowners association fees

Who makes decisions about upkeep? How are expenses divided? And what happens if one heir can’t—or won’t—pay their share? These issues can turn a blessing into a burden.

Emotions can also complicate property decisions, especially when tied to childhood memories. Disagreements over minor details—like paint colors or furniture placement—can spiral into larger conflicts. Long-buried resentments may resurface, particularly if one sibling is named executor and perceived as having undue authority.

Practical Solutions to Prevent Conflict

To avoid these challenges, consider these strategies:

Treat Property Like Any Other Asset

Many estate experts recommend stipulating in your will that all property is to be sold, with proceeds divided among heirs. This approach provides clarity and avoids forcing heirs into joint ownership.

Allow for Flexibility

Some heirs may wish to “buy out” the others to retain the property. By structuring your will thoughtfully, you can provide this option while ensuring a fair division of the estate.

Consider Unique Needs

Ron Blue, author of Splitting Heirs, suggests that “if you love your children equally, you will treat them uniquely.” Equal division may not always be the wisest choice. Consider factors like financial need and money management skills when planning your estate.

The key to preventing conflict lies in communication. Discuss your estate plans openly with your family so they understand your decisions and the reasoning behind them. This transparency eliminates surprises and fosters unity among your heirs.

Seek Professional Guidance

Creating or updating a will is a critical step that requires professional expertise. Work with an estate attorney who shares your Christian worldview to ensure your wishes align with biblical values. Certified Kingdom Advisors are an excellent resource; visit FaithFi.com to find one near you.

By planning thoughtfully and communicating clearly, you can leave your children and grandchildren not only a financial inheritance but also a legacy of love and wisdom. Proverbs 13:22 reminds us of the importance of stewardship—not just in what we leave behind but in how we prepare to pass it on.

On Today’s Program, Rob Answers Listener Questions:
  • I'm 77, and my husband is 81. The only thing that we have of any value is property. We live on about an acre and a half, and we're in a trailer. We would like to gift this property to our grandson, who is 26. We would like to know the best way to gift it without him being hit with too much of a financial penalty.
  • I'm trying to figure out how capital gains are calculated when I withdraw money from my 401(k), especially since my company stock has appreciated significantly over the years.
  • My daughter's credit score is 625, and she's committed to repairing it. My credit score is over 800, and I've heard you talk about making someone an authorized user on a credit card to help with their score. How does that work, and how would it affect our credit scores?
  • I'm completely lost when it comes to finances. However, I want to set my family up for financial success, so I would like to know if you could point me to a resource that can help me learn what I need to know about finances.
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Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.

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Now let's dive into the podcast. Proverbs 13 22 reads, a good man leaves an inheritance to his children's children, but it doesn't say how to do it. Hi, I'm Rob West. Often when parents make out a will, they simply divide their assets equally among their children, including property. But maybe that's asking for trouble. I'll talk about that first today, and 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, one of the most common sentences included in a will is this, my estate will be divided equally among my children. That's fairly easy to do when the estate consists entirely of financial accounts that can quickly be converted to cash for distribution to heirs. It's quite another thing when the estate contains property as most do.

It immediately forces your heirs, usually your children, to make a difficult decision. Do they continue to hold the property in joint ownership? Or do they sell it and divide the proceeds? A third option exists if one or more heirs are willing to buy out the others. Ideally, the heirs will all agree on a fair and equitable settlement. That usually means selling the home and splitting the proceeds. Or the heirs could decide to divide up other assets so that one or more heirs is able to hold onto the property. But far too often, heirs have trouble reaching that kind of agreement. Deciding as a group what to do with property becomes a complicated business. There are serious financial and emotional considerations. Financially, what you think is a blessing may actually become a burden when you factor in maintenance costs, taxes, insurance, homeowners' association fees, and other expenses.

Who makes decisions about maintenance and hires contractors to perform needed work? Will the heirs divide those expenses equally? What happens if one heir doesn't pay his or her share? Sometimes, depending on location, the property becomes something like a timeshare for the various heirs and their families.

But then, who determines the schedule for using the place? Emotionally, inheriting real estate may cause heirs to make unwise decisions based on feelings rather than wise money management. In many cases, the family home becomes a money pit that fosters arguments among surviving children who can't even agree on minor things like what color to paint the living room. Children often have different ideas about what to do with inherited property based on their experiences growing up. Resentments that were hidden for years may boil up to the surface when mom and dad aren't around anymore. That's often made worse when one sibling is made executor of the estate.

That person is then in a position to lord it over the others. Or the opposite can happen with the executor heir taking grief from siblings who all demand different things. Handling the estate becomes a nightmare for them as siblings squabble. So, as a side note, consider appointing an outside executor or personal representative for your estate. To avoid these potential problems with leaving a house in joint ownership to your heirs, many experts suggest you handle it like any other asset in your will. Simply stipulate in your will that upon your death, all property will be sold and that the proceeds then are to be divided among your heirs. When you do that, some heirs may decide to take the proceeds of that sale as a part of their share in the estate. Others may want to buy out the others if they want to take on full ownership of the home or vacation property. By the way, you don't always have to divide the proceeds equally among your heirs. In his book Splitting Heirs, financial teacher and author Ron Blue says that if you love your children equally, you will treat them uniquely in your will. Some may have greater needs than others. Some may not be able to handle money as well as others. In those cases, dividing things equally may not be best for your heirs.

But the key to making any of this work is transparency. You should discuss your wishes with your family so that no one is surprised after you go home to the Lord. Everyone needs to understand not only your decisions, but why you made them. By having serious discussions about your estate ahead of time, you can eliminate the potential for infighting and resentment later, especially if you make it known that all real property is to be sold upon your death. That's one less thing your heirs can squabble about. If you need help drawing up a will or changing one, it's important to work with an estate attorney who shares your Christian worldview. You can do that by finding a certified kingdom advisor. Just go to faithfi.com and click on Find a Professional. That's faithfi.com and click Find a Professional.

Well, I hope those suggestions will help you avoid conflict among your heirs and give you peace of mind. Alright, your calls are next. 800-525-7000. This is Faith and Finance.

We'll be right back. Imagine having biblical financial wisdom delivered to your inbox every week, helping you integrate your faith and financial decisions for the glory of God at faithfi.com. You can join a community of over 70,000 people who are already receiving our weekly wisdom email filled with articles, videos, podcasts, and exclusive offers on resources that will deepen your understanding of biblical stewardship. Start your journey today by creating your Faithfi account at faithfi.com. Just click Sign Up. Healthcare is complicated.

It doesn't have to be. If you don't love how your health insurance works, maybe it's time to leave traditional health insurance behind. Take charge of your healthcare with Christian Healthcare Ministries. CHM offers you flexibility. Enroll anytime.

Choose your own provider and select the program that fits your needs and budget. CHM is the original faith-based way of taking care of your medical bill costs. Learn more at chministries.org slash faithfi. Hey, thanks for joining us today on Faith and Finance. You ready to talk God's money?

I sure am. Let's talk about how we can be faithful stewards together, managing the resources God has entrusted to us for his glory. That's what we do each day on this program. Our hope, my prayer is that we'd be theologically sound, that we'd be wise and expert, empathetic and understanding. We're all in a journey. We've made mistakes, but we want to be a faithful steward moving forward. We want to be wise in how we handle God's money and we want to lay everything at the foot of the cross, knowing it all belongs to him.

We want to surrender to his purposes. See, God is our ultimate treasure, but money a tool to accomplish God's purposes. And when we do that, well, it actually our money journey can draw us into a more intimate relationship with him. It's a really tangible expression of our faith every day as we manage God's money.

Because think about it, it's one of the most visible demonstrations of where you've placed your trust and what you value. Remember, Jesus said where your treasure is there, your heart will be also our heart follows our money. I've got a son at the University of Georgia. My heart is at the University of Georgia because my money goes to the University of Georgia. You get the idea. Well, imagine when we give generously, right?

Our heart follows our money to our local church or to a ministry solving one of the world's great problems in the name of Jesus. Well, that's the opportunity we have, but we want to help you make those daily practical decisions that you have in your financial life. So give us a call with your questions today. The calls are already coming in, but we've got room for a few more at this point. 800-525-7000. That's 800-525-7000. You can call right now.

Let's begin in Pennsylvania today. Hi, Glenda. Go right ahead.

Hi, Rob. Thank you so much for taking my call. Yes, ma'am. Happy to. I enjoy your program very much. Thank you.

I appreciate that. I wanted to ask my husband and I, I'm 77 and my husband is 81 and about the only thing that we have of any value is property. We have about an acre and a half that we live on and we're in a trailer and we would like to gift this property to our grandson who's 26. Okay. And we would like to know what's the best way to gift it without his being hit with too much financial penalty.

I see. Yeah, it's great Glenda and I'm delighted to hear you're thinking about that. You know, what I would say before we talk about the mechanics of transferring that property in a tax efficient manner, I would just say, think about the idea of, you know, the what's paramount is the spiritual capital that you transfer. And so be intentional about sharing your faith story with him as a part of that legacy that you're leaving, I would say the next most important piece of capital, if you will, that you can leave to your grandson is the character capital after spiritual.

You know, I encourage folks like you and your husband to think about the character of your family, what makes your family who they are, what are some of those key values that you want to leave? It could be as simple as work diligently, live simply and give generously. But you know, whatever those character capital traits are that are important to you and your husband, make them a part of your family story and then and then share those. And then the financial capital comes last, in my view, and that's what we're talking about here with this piece of property. But it's the idea that your values really are the fire, if you will, that you want to keep in that fireplace that are a part of what makes your grandson who he is, but the money is going to be an accelerant. So whatever those values are, you know, dropping a couple hundred thousand dollars or more in his lap is going to accelerate that life trajectory that he's on. And so we just want to make sure he's prepared for that. And that's why we asked this question, is the next steward not only chosen, but prepared, because we realize that, you know, that money is going to accelerate his life in whatever direction he's going.

So you just want to be thoughtful about that. Now, when it comes to how you mechanically will transfer this property, it's fairly simple. As long as he inherits it, and you don't gift it to him prior to your death, then he will get based on the current tax law, what's called a step up in basis, which just simply means he will for tax purposes, the cost basis for him when he sells the property will be the property value as of the date of death. For you or your husband, whoever dies last. And that means that if he turns around and sells it right away, there is no capital gain, because the cost basis for the property would step up to the date of death, and then he turned around and sell it for the same market value.

And so there is no gain there. And so he gets 100% of that property, you know, so long as all the other obligations of your estate have been taken care of any debts or things like that that need to be covered. Does that make sense, though? Yes. And I do want you to know that my husband and I are both in love with the Lord, and so is our grandson. I love that.

That's great. And he wants to live here. He loves to garden and he's a beautiful, he has a beautiful, faithful heart.

He loves to garden and he would just be happy as could be here. Okay. Yeah.

So go ahead. Property is not in the way. As I said, we live in a trailer and we know that the value is not in that. It's just it's in the land, but he wants to not sell it. He wants to make it his home. Okay, got it.

Yeah, very good. So the only tax would be from the state of Pennsylvania. And you're not going to get around that. There is no inheritance tax at a federal level. So you know, the only thing that would need to be paid would be from the estate. Because it's a modest estate, there's not going to be any estate taxes, it would just be any outstanding obligations, any debts that needed to be paid. But apart from that, he'll be able to receive this with no federal inheritance tax. And in terms of how you'd go about getting that property to him, you could use a simple will, where you would leave the property to him in the will. And then he would enjoy the step up in basis. And then he could keep the property and live in it if he wants to, you could also put it in a trust, and then it would pass outside of probate. But there really is no difference with regard to the taxation. The only difference would just be, you know, whether or not, you know, he receives that through the probate process with the courts, which just takes a little bit of time, maybe a month or two, and a little bit of expense.

Or if he receives it outside of probate, which would be where the trust comes in. But it sounds like you're a wonderful grandmother. This will be a blessing to him. Thanks for calling. Well, folks, we're just getting started here today.

We've got room for a lot more questions, although many are coming in now. The question or excuse me, the number is 800-525-7000. Again, that's 800-525-7000. By the way, here at Faith and Finance, we want to not only give you a godly counsel on this program each day, but we want to help you find a community of godly folks who can come alongside you because we realize that part of your stewardship journey is seeking that wise counsel along the way that can come in many forms. If you're in credit card debt, reaching out to our friends at Christian Credit Counselors. If you need help with, you know, making sure you have offset the cost of healthcare, and you can do that in a way that's affordable, Christian Healthcare Ministries can be a great resource. If you're looking for a professional advisor, think financial planning, investment management, estate planning, and you want somebody who shares your values, who's met high standards and character and competency, they've had a pastoral reference and a client reference and a regulatory review. Well, that's the Certified Kingdom Advisor designation. It's our go-to here for godly professionals that can serve you.

You can find a CKA in your area when you go to faithfi.com and click find a professional. I hope that's helpful for you. We're going to take a quick break, come back with more questions just around the corner. Again, a few lines remaining open, 800-525-7000.

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Additional funds distributed by Timothy Partners LTD and ETFs distributed by Foresight Fund Services LLC. Hey, great to have you with us today on Faith and Finance. We're taking your calls and questions. 800-525-7000. That's 800-525-7000. All right, back to the phones we go. Jeff in Oklahoma has been waiting patiently. Go ahead, sir. Yes, Rob. How are you doing? First I want to say, Lord bless you and your ministry.

You're a great inspiration to us that listen to you. My question was, I tried researching it myself and I was trying to figure out how they figure the capital gains when you pull money out of your 401k. And it was real, I got lost in the weeds on that. But because the reason I say that because God has kind of blessed me in my stupidity, so to speak, when I started in 401k as a younger man, I didn't know how to invest this. So I just put it all in company stock, invested it within the 401k with my company stock. And then at that time it was trading at, you know, 20 something dollars a share for the whole time I was there. Well, now it's over 12 hundred dollars a share.

And I still have it in there. And I was wondering how they figure the capital gains when you go to pull it out since you put it in at such a varying rate over the years. Yeah, wow.

Incredible. Well, so it is in a 401k, right? This is not a employee stock ownership program or anything like that. It's a true 401k.

Okay. So if it's inside a 401k, there are no capital gains. It's actually pretty simple. So what happens is the money goes in pre-tax and so you exclude the amount that you're deferring through your salary into the 401k from your taxable income. It grows tax deferred, so no capital gains along the way. And when you pull it out, there are no capital gains. You simply add your withdrawal amount to your taxable income in the year of the withdrawal. And so whatever you pull out, so the idea would be, you know, during your working years, you're saving and getting the deduction for the contributions. And then at some point, as God redirects you to whatever he has next for you in that retirement season of life, where perhaps you're no longer working for pay, then you replace the income you were getting from your employer with systematic withdrawals from your 401k and the IRS is just going to ask that you pay income tax on that withdrawal in the year that you take it out.

But there's never any capital gains for a 401k. Wow. Okay. Okay. That's awesome.

Okay. So you're in great shape. What have you put away, Jeff, in that 401k? Right now I have about almost $600,000 in that account. Incredible. Yeah. And Lord willing, I still have about 10 more years worth of work, but with a different company, I'm putting in that 401k also. Awesome.

Yeah, that's great. Well, see, here's the thing is that Social Security was never intended to cover more than 35 to 40% of your pre-retirement income. Most people live on about 80% of their pre-retirement income. So the idea that you would build up this 401k, which maybe in a decade, it's, you know, three quarters of a million dollars, maybe even pushing a million, depending on how the market does. Then all of a sudden, if at that point you turn that into a systematic withdrawal of, let's say, 4% a year, that would allow you to pull out perhaps 40,000 a year from that, you know, million dollar close to it, 401k.

Never see that principle dip below that, you know, balance you have at retirement over time and, you know, use that to supplement your Social Security so you can maintain your lifestyle and pursue whatever God has for you in that next season. Oh, yes. You can't out-give God.

I mean, there's no way you could do it. Exactly. He truly blessed me.

Awesome. Well, listen, Jeff, the Lord's giving you some wisdom there, and I think, you know, the key for you right now is to make sure you're properly diversified, despite what happened with you being highly concentrated in that company stock that did exceedingly well. I wouldn't recommend that going forward because in the same way that you had a single stock run up quite a bit, if you had the same thing happen on the downside, you could lose quite a bit, which is why Ecclesiastes encourages us to diversify and not put all our eggs in one basket. Are you in a much broader investment strategy now?

I need to spread that one out. I have a different form through my company I'm with now that I have it diversified, but yeah, I need to get it's with key world price and I'll need to get with one of their I have free counseling with them that I could get to and I'll need to get with them to how to diversify it out. Got it. Yeah, I think that would be along the same lines. Yeah, that do you highly being highly concentrated in company stock is a bit more risky than you want to be. You probably don't want more than 10% in any one company, especially where you're working.

So you'd want the rest of it kind of spread out in a good broad diversified portfolio. But yeah, I agree the folks at T row price should be able to help you do that. Well, listen, all the best to you, Jeff. Thanks for being on the program today, sir.

God bless you. All right, we're almost out of time today. A few thoughts. First, let's tackle a couple of emails.

We don't get to these as often as we should. And they come into us regularly at askrob at faithfi.com. This one from Vanessa, my daughter's credit score is 625. And she's committed to repairing it. My credit score is over 800. And I've heard you talk about making someone an authorized user on a credit card to help with their score. Can you elaborate on how that works? And how it might affect both of our credit scores?

I sure can, Vanessa. And basically, if you designate your daughter as an authorized user, the issuer will report your activity to the credit bureaus under your name and hers. And so here's why people do that. Even if you don't give her the card, and most people don't, she will then get the benefit of your entire credit history with that account, including the length of time it's been opened. So if this is an account that's been open for a decade, that's going to come over to hers as well, the credit limit, and the payment history. And that can improve her score while having no impact on yours. Now, keep in mind, first, she doesn't have to use the card to get this benefit. So there's no reason to give her access to the account. Second, the negative history passes with the positive.

So let's just play this out. Let's say that you were to miss a payment, you're on vacation, you forget, you're on vacation. You forget, you have an auto payment set up and it fails, something like that. Your late payment is going to pass right over to her as well.

So just keep that in mind. This is not for everyone, but it is something you certainly can consider. Thanks for writing to us. Ashley writes this, Hey, Rob, unfortunately, I'm completely lost when it comes to all things financial. However, I want to set my family up for financial success later on. I was wondering if you could point me to a resource that could help me learn what I need to learn about finances.

I'd be happy to. Two of our all time favorites, Ashley, are one, a quicker read called Your Money Counts by Howard Dayton. Howard's a good friend, a mentor and the former host of this program. It's a fabulous kind of tome, if you will, on biblical finance. And then second, a little bit of a thicker read, but still very practical and very well written. It's a classic Master Your Money by Ron Blue. Either of those, Your Money Counts or Master Your Money would be a great beginning point for you. And then you can progress from there. There's some great books that you could move on to, like Redeeming Money from our friend Paul David Tripp or Money Possessions in Eternity, a little thicker by Randy Alcorn.

But I think Your Money Counts and Master Your Money would be great beginning points. Thanks for writing to us. By the way, folks, if you have a question, send it along.

Ask Rob at faithbuy.com. Let me say thanks to my team today. I certainly couldn't do this without them. I'm incredibly grateful for my good friend Jim Henry's providing research today. Devin Patrick, our producer and handling all of our call screening today.

Dr. Robert Youngblood. For those gentlemen and the entire team here at Faith Buy, thanks for being a part of the broadcast today. May the Lord bless you and we'll see you next time. Bye bye. Faith and Finance is provided by Faith Buy and listeners like you.
Whisper: medium.en / 2025-01-24 04:14:30 / 2025-01-24 04:24:53 / 10

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