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Rainy Day Umbrella Insurance

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
November 11, 2020 7:03 am

Rainy Day Umbrella Insurance

MoneyWise / Rob West and Steve Moore

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November 11, 2020 7:03 am

Do you know if you need an umbrella insurance policy? If not, it might be a good idea to find out. Many homeowners fail to take advantage of this coverage that protects their assets from catastrophic lawsuits. On the next MoneyWise Live, hosts Rob West and Steve Moore have the info you need on this overlooked form of insurance. Rainy-day umbrella insurance on the next MoneyWise Live at 4pm Eastern/3pm Central on Moody Radio. 

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They say when it rains, it pours. Now that's fine if the lawn needs watering, but not so much if someone sues you.

Could you use an umbrella? Insurance policy. You know, many homeowners fail to take advantage of coverage that protects their assets from catastrophic lawsuits. Today, financial planner and teacher Rob West has the info you need on this often overlooked form of insurance. Then it's your calls on anything financial at 800-525-7000.

I'm Steve Moore. Rainy day umbrella insurance. That's next on MoneyWise Live. Well Rob, we often hear the words million dollar associated with umbrella insurance policies. Now is this something that everyone needs and just what is an umbrella policy? Yeah Steve, as the term implies, an umbrella policy gives you extra liability coverage for you and your family beyond what you have with your homeowners and auto insurance policies.

And does everyone need it? Well maybe not, but more people than you might expect. If you've been working hard to build up assets in your retirement fund and the equity in your home and so forth, it's possible you could reach the million dollar mark someday even if you're not there yet or perhaps anywhere close. And a civil judgment could be against future earnings, so that's something to consider as well. But aren't those assets protected from lawsuits?

Well it's a great question. A lot of folks might think they are, but there are limitations. In many states your home is protected from lawsuits and creditors, but not all. For example New Jersey and Pennsylvania have no homestead protection. Also most employer sponsored retirement plans like a 401k have immunity from lawsuits and creditors under the Employee Retirement Income Security Act, what's known as ERISA, but non ERISA plans like a traditional or Roth IRA don't have the same level of protection. So those are both reasons to consider an umbrella policy. All right, so if you don't have a million dollar policy, that doesn't preclude people from suing you for a million dollars. They could get it in one of several ways. That's right, yeah. All right, all right.

How exactly does one of these umbrella policies work? Well let me give you an example. So say it's your turn to carpool the kids soccer practice run. They're excited and making a racket in the back of your minivan and you get distracted. You don't notice that traffic has stopped at a red light ahead and you rear in the car in front of you. Well that in my example here causes a chain reaction. The two cars in front slam into the cars in front of them and several of the drivers and passengers complain of whiplash.

Well you can see where this is going. You have half a million dollars worth of coverage with your auto insurance policy, but that runs out quickly as first the repair bills reach $50,000 each. Then medical bills add up to $500,000 and to top it off, one of the passengers who was in the car ahead of you is now suing for emotional trauma from the accident. So you're on the hook for the $50,000. Your auto insurance won't cover, plus any judgment coming from the lawsuit and you probably don't have that much in your emergency fund. However, with an umbrella policy, its coverage kicks in and pays off not only the $50,000 you're short, but any judgment plus attorney and court fees up to a million dollars in the case of this million dollar coverage.

Wow, okay. Yeah and this scenario is quite plausible I think and probably happens somewhere every day. Yes and that example didn't take into account worse things that can happen like a permanent physical damage or even death. The cost in that case could easily force someone into bankruptcy after their assets are exhausted.

Let me give you a few more examples of where that's actually happened. In Florida, a teenager drove an ATV, that's an all-terrain vehicle, onto a neighbor's property and had a terrible accident that tragically took his life. You'd think the homeowner wouldn't be liable since the teen was unsupervised and on the property without permission, but the court didn't see it that way and awarded the grieving parents $20 million. In another case, Steve, a toddler suffered a spinal cord injury in a traffic accident. The family sued the driver and was awarded $29 million and finally in California, the driver who caused a multi-car accident and left a 21-year-old in a coma for a month was sued and the court awarded the injured person about $50 million.

So, these catastrophic judgments do happen. Well, I would imagine that a policy that covers these kinds of judgments must be awfully expensive. Well, you would think that would be the case, but actually umbrella policies are quite reasonable. For up to $1 million in coverage, you're probably paying $150 to $300 a year. You might even find it cheaper if you have an independent insurance agent shop around and there's no deductible with an umbrella insurance policy.

You'd pay, obviously, the deductible from your homeowners or auto insurance, but the umbrella policy kicks in and pays all the rest. Wow, okay. We'll come back and chat some more about this. You're listening to MoneyWise Live. Many people are experiencing financial challenges such as credit card debt, downsizing, dead-end jobs, and depleted savings. In fact, more than half of all divorces are the result of financial pressures at home, but there's hope. In Your Money Counts, biblical financial expert Howard Dayton shows that the Bible is a veritable blueprint for managing your finances and you'll discover the profound impact it has on your relationship with God.

Your Money Counts is available when you click the store button at MoneyWiseLive.org. If you have money in a retirement account or just a general investing account, you know the stock market can sometimes be like a rollercoaster. But it is possible to enjoy both profit and peace of mind in investing no matter what's happening in the market. You can see a short video webinar on that topic at SoundMindInvesting.org. Since 1990, Sound Mind Investing has sought to offer financial wisdom for living well.

SoundMindInvesting.org. You and I have access to more information than anybody in history. And that's exponentially truer today than it was when Billy Graham first said it in 1993.

We have access to more and more information at faster and faster rates. People look at our world with all the crime and all the headlines screaming at us about the killings and we see the moral depravity on so much about entertainment. What caused it? Jesus said, the heart. He said, but those things which proceed out of the mouth come forth from the heart and they defile a person. It's called sin and we're all guilty. But God is willing to forgive you of all your sins if you surrender your life to his son, Jesus Christ. We can tell you more at FindPeaceWithGod.net.

That's FindPeaceWithGod.net and it's from the Billy Graham Evangelistic Association. Do you feel like your hands are tied with debt, preventing you from serving God? If you have credit card debt, Christian credit counselors can help. Through our debt management program we can get you out of credit card debt about 80% faster while honoring your debt in full. For more information on how Christian credit counselors can help, visit Christiancreditcounselors.org.

That's Christiancreditcounselors.org or call 800-557-1985, 800-557-1985. I hope you're having a great day. We are. That's MoneyWise Live.

He's Rob West. I'm Steve Moore and we would love to chat with you today. Anything financial that you're wondering about?

Any situation you may be having a difficulty with? Well, give us a call. Let's talk about it and of course we'll see what the Bible has to say about it as well. In fact, that's where we start. Our phone number... You know, Rob, I was thinking rather than giving the regular number today, wouldn't it be fun if I just gave my cell number?

I'm all in favor of that. In fact, I'll do that right now. Here it is.

It's 6... No, don't do that. All right, here's the real number, the real number, 800-525-7000. There's a person there, a real person who wants to talk with you, so call right now, 800-525-7000. Do you remember the day you actually did give your cell phone number by mistake?

I did. People listening that day, you know, had the benefit of being able to get Steve Moore's cell number. Yeah, you know, three people called me, but they all wanted me to come to an Amway meeting and I told them that I'd already signed up for Amway and so I have nothing against Amway, but I just wasn't... I didn't have room on my calendar that month, but we have room for you today.

800-525-7000, so give us a call and let's chat. Going back for just a second to our umbrella insurance policy, you pointed out, Rob, that they're not really that expensive and, you know, I'm not quite sure why it is they're not that expensive. We're talking about a million dollars this year that they might have to pay out, so why wouldn't they be charging you up for that?

Well, keep in mind, it's for a catastrophic event, which for the most folks, they don't ever have to use a policy like that, but it's when you have to use it, even though it's very rare, but when you have to use it and you don't have it, that's when you will of course be disappointed that you didn't take the opportunity to put an umbrella policy in place. So if you're in a position where you need something like this, again, very cost effective and I think just one way we can be a good steward of God's money. Yeah, okay, there you have it. 800-525-7000. Now there's another way you can talk to Rob with a question that you might have and that's to send us a brief email. That address is questions at moneywise.org, questions at moneywise.org. And Rob, here's one from Janet.

She says, Hello, Rob and Steve. I've been supporting a student in Uganda monthly for several years. I had a baby recently and now I'm staying home with him and no longer working. My husband's income provides, but the money is tight. I'm wondering if the $36 sponsorship should be continued or canceled, even though I really hate to do it.

Yeah. Well, Janet, I so appreciate that question. You know, I think when it comes to our giving decisions and opportunities, clearly we should be givers, right? We should be taking a portion of what God entrusts to us and redirecting it into God's kingdom.

I think beginning with our local church and then beyond that to those in our communities and even to the other uttermost parts of the world, as we reflect God's heart through our giving by giving to those that are really in a need situation, whether it's the ministry of God's justice or the ministry of God's mercy to someone like you're talking about, who's living in poverty in a third world country. I mean, these are incredible opportunities for us to take a portion of what we've been entrusted and redirect them that way. So I would just say, look for an opportunity to continue what is obviously already on your heart. Perhaps there's another place you could cut back. And I would say really dial into that spending plan. You know, it's going to really come down to taking a hard look at what is my income and what are my expenses?

What's going out? Not only the things I get a bill for, but the discretionary spending that kind of slips through my fingers if I'm not careful. Tracking that for 60 days and then with intentionality, making decisions to cut back in one or more areas I think will allow you to free up that $36 a month to continue that sponsorship. If you haven't downloaded our app, that could help you do just that. Just go to the app store you use, type in MoneyWise, Biblical Finance, and you'll see it there. That's going to help you put it all in one place, develop a plan, and then track the flow of money using our digital envelope system. I think that could be a great help to you.

Okay. And again, if you have a brief question you'd like to hear Rob answer on the air, the address is questions at moneywise.org. Let's go to our phones, 800-525-7000, Wesley Chapel, Florida.

And Joel, what's your question today for Rob? Yes, I'm trying to, the question I have is where would I find out more information about umbrella insurance? Currently, I have Geico insurance for my auto policy, but is there a secondary source that I would call to find out about the umbrella insurance?

Yeah. What I would look for would be an independent insurance agent, Joel, who can really help you shop around and find the right policy for you. There are a number of them out there. You could connect with a certified kingdom advisor there in Florida in the insurance space. If there's not one, you could connect with any CKA and ask for a referral to an independent insurance agent. And just about any one of them could help you shop for an umbrella policy that fits your situation in terms of the coverage and also what fits into your budget, which is really critical.

So to find a CKA there in Wesley Chapel, I would go to our website moneywiselive.org, click find a CKA. And then again, if you can't find one in the insurance area, specifically in your area, just ask for a referral. Sir, we appreciate your call today. Thank you very much.

Chicago, you're next. And Sally, what's on your mind? Hi. Hi, Sally. Yes.

Yes. I am calling to find out a little bit more about the Million Dollar Umbrella. One of the questions that I have is when you mentioned earlier that a $1 million umbrella provides some lawyers or somebody that's going to help you as well as million dollar coverage for your property. But then you mentioned also that there were people that were awarded $50 million or $60 million. How does Million Dollar Umbrella work in cases like that?

Yeah, it's a great question, Sally. Here's what I would say. First of all, what you have to recognize is we're just using a million dollars as kind of a starting point. You certainly could get more coverage than that. And as I mentioned, it's very cost effective to add much more coverage. I think the second thing is, keep in mind, one of the benefits to having an umbrella policy like this is that the company will pay for your representation in court. So by having an attorney that's paid for out of a policy like this representing you is perhaps going to help keep that number down. And at the end of the day, the award is only as good as your ability to pay it. And if your resources and assets are exhausted, then nobody's going to get paid anyway, despite the number that's attached to that award. So often representation, legal counsel could help to settle for an amount equal to the liability coverage that's available through the umbrella policy, which they know they can get paid on and anything beyond that your assets would be exhausted and they're probably not going to collect anything anyway.

So I think it's all about having competent legal counsel behind you and having a policy like this that could at least provide some financial assistance, whether that's a liability or medical or property, whatever that might be. We appreciate that, Sally. Thank you very much. You're listening to MoneyWise Live with Rob West. Jordan, we know you're out there. Also Phyllis and also George. And they all are calling from the state of Florida. So you're all lined up and we're heading your way. So please stick around.

Don't go anywhere. Again, our phone number, 800-525-7000. If you have a financial question of any kind, any sort today for Rob West, 800-525-7000.

And with that, we'll be right back. Many people adopt an attitude toward marriage and finances that it'll all work out somehow, but sadly it often doesn't. Financial woes can devastate a marriage, but there is a better way. God's way. Money and Marriage God's Way by Howard Dayton will help you discover God's approach to growing your finances, strengthening your relationship with your mate and cultivating godly joy.

Money and Marriage God's Way is available when you click the store button at moneywiselive.org. People's 4-12 says, for the word of God is quick and powerful and sharper than any two edged sword. Here's Beth Moore with a quick word.

All right, number five is this. In order to follow God's direction, we need to be able to test and examine a situation or decision. Listen to Shriner's commentary, his definition of approve.

That which is approved after a process of testing and examining. It means to discern the will of God. What it's saying to us is this, God's will is not always obvious.

Sometimes it is. It is not God's will for you to sleep with somebody you're not married to. I promise you that. I promise you that. I promise you it's not God's will for you to be all wrecked up in an addiction.

I promise you that. I promise you it's not God's will for you to marry an unbeliever. But there are a whole lot of other things that are real great us, real specific things we need to know about relationships and circumstances and situations, job changes, moves, all sorts of things. We need to know the will of God. We need to know the will of God.

And so it's not just what's obvious. We got to take some time, if not time, depth of insight, discernment to test that thing and to examine that thing. And so there are a couple of things with that in mind. Now there are some things we can do that about in advance. There are other things that it's not until we are walking it out some that we go, uh-uh, this ain't the will of God. And what I'm suggesting to you is we need to leave ourselves a little leeway for that when we can.

Bullet point one, therefore we may end up starting some things we don't continue. You've been listening to A Quick Word with Beth Moore. The study of Galatians is now available as an online experience.

Sign up today at Bethmoor.org or join Beth in January 2021 for the release of the printed workbook edition. Would you like your life to be infused with joy? Would you like to interject an eternal dimension into even the most ordinary day? Author Randy Alcorn says you can when you discover the Treasure Principle. In a concise, power-packed style, this newly revised and updated book offers a six-step plan to finding the immediate pleasure and eternal rewards of the Treasure Principle.

And once you discover it, life will never look the same. The Treasure Principle is available when you click the store button at MoneyWiseLive.org. Helping you find God's financial plan for your life, using His words as our jumping off point, you're listening to MoneyWise Live 800-525-7000. We have some open lines available at 800-525-7000.

Down to Florida. Jordan, thanks for holding. Sir, what's in your mind? Thank you. I'd like to know how can I just stop electronic calls? They call me constantly. Yes.

Three times, four times. Yeah. They keep telling me that the social security, my social security is used fraudulent way.

They call me about this, about the social security, about the Medicare. Yes. Jordan, it's a great question. I understand your frustration with this.

We all face it. A couple of thoughts. One would be you can register at the Do Not Call list. Now, that's going to have some impact. That's not going to completely resolve what you're talking about. But if you if you use the Internet, you can go to DoNotCall.gov and you can register your name. That will stop a lot of the unwanted sales calls. That's obviously not going to stop anything related to somebody who's trying to scam you. And so what you're describing with somebody calling, saying your Social Security was involved in a crime or used fraudulently and they're trying to collect your information, that's obviously someone who's involved in a scam.

Those are known scams. You obviously don't ever want to give your personal information over the telephone. The IRS will never call you without first contacting you by mail. And if anybody tells you they need your information, I would hang up the phone. Obviously, those folks are not going to abide by the Do Not Call registry.

That's going to continue. One of the other things you can do and there's a big trend in this right now where folks are moving away from home phones and moving to cell phones or mobile phones as their primary phone number, primarily because the modern smartphones these days will identify those spam calls and telemarketer calls and you don't ever have to take them. You know, I get calls at least a couple of times a day that come up on my phone and say spam call or telemarketer and I just immediately decline it. And, you know, I think we're seeing advances there and some of that technology is available at home as well. So you may want to contact your phone carrier, even your home phone carrier, and just say what is available that might alert me to spam or telemarketing phone calls so that I can avoid them all together.

And I think you'll find some benefit between those two options. And what is the number, Rob, for those who just want to place a Do Not Call on their phone line? Is there a number you'd call for that?

There is, yeah. You can either go to DoNotCall.gov, which is the easiest way, or if you've got a pen, you could jot this number down, 888-382-1222. That's 888-382-1222 and that's where you will register your phone number on the Do Not Call registry. Alright, good. Jordan, we wish you the best. This is a problem that lots and lots, millions of people have all the time in spite of these numbers, but I'm told that these numbers in the Do Not Call list, DoNotCall.gov, do work.

So it might be worth a try if you've never done that. Thank you very much. We'll stay in the state of Florida and fill us. What's your question for Rob? Thank you for taking my call. I just love your program.

I listen all the time. I am going to be a custodian for my grandson. He has received an inheritance. I've been told by the lawyer that I have to open a custodial account and then that check that he's receiving will be placed in that account. And after that, it's up to me as to what to do with it. My main question is where would be the best way to invest this for him for college? He's 13 years old. Yes.

Very good, Phyllis. Are there any specifications as to whether or not this money has to become his property at the age of majority or was it paid to you for his benefit? Is there a trustee involved?

What are the some of the stipulations around this inheritance given that he's a minor? It's coming to me to manage for him. Okay.

All right. Well, you've got a couple of options. I mean, and I would go back to the attorney for some counsel here or perhaps connect with a certified kingdom advisor there in Florida because you want to get this right in terms of how the account is titled because there are implications to the type of account you put it in and then how it's invested given the time horizon. You know, if this is specifically for college and he's five years out from college, obviously that's going to really dictate a lot of the investments that are used because you're not going to want to be overly aggressive to make sure this money is available when he needs it. And as opposed to being in stocks and let's say a couple of years down the road from now, we're in a recession. The market is down and this portfolio has lost value and now you're having to sell these stocks at a loss.

We certainly don't want you to be in that situation. So there's a couple of options. One is you could do what's called a custodial five twenty nine plan. Five twenty nine is our preferred college savings vehicle. Reason being that as the money grows, it will be tax free. Think of it as a Roth IRA. As long as the proceeds are used for qualified educational expenses. And obviously your grandson can be named as the beneficiary of this custodial five twenty nine. Or you can just open a straight custodial account, what's called a UTMA or a UGMA, Uniform Transfers to Minor Act, Uniform Gift to Minors Act.

The idea there is that that money can then be invested. But the key thing with the custodial account is that it becomes the child's property at the age of majority, which could be 18 in your state. I'm not sure what it is in Florida, but he would have the opportunity to use that money however he chooses at that point. If you want to go buy a sports car, in effect, he could. So I think you just want to make sure you understand the implications of that, both with the five twenty nine and the custodial five twenty nine and the custodial account that ultimately the child would be in control of those funds. And for some children, that's fine. For others that perhaps lack the maturity and to handle a sizable amount of money, that could be problematic.

So check that out and see if you can get a little bit more information. If not, you'd need to open a trust where a trustee could be overseeing the disbursement of those funds for very specific purposes for the benefit of the child. Phyllis, we wish you the best with that as you manage that money for your son. God bless him as well.

We hope between the two of you, you find a great school for him. Thanks. You're listening to MoneyWise Live. We'll be right back after this. How should we as Christians think about investing? What if we could invest our money in a way that aligns with what we believe? At Eventide, we believe it is possible to love God and love our neighbor in the very practice of investing. We design investments for performance and a better world so you can invest for the future with a sense of wholeness and purpose. We call this investing that makes the world rejoice.

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Interested? Learn more by calling 800-791-6225 or online at chministries.org. Hi, my name is Hal Hudson, a biblical studies major at the Moody Bible Institute. As we remember our nation's veterans, the Moody Radio Verse of the Week is found in Deuteronomy 31.6. Be strong and courageous. Do not fear or be in dread of them, for it is the Lord your God who goes with you.

He will not leave you or forsake you. That's Deuteronomy 31.6, the Moody Radio Verse of the Week. During a pandemic, spiritual lull, or midlife crisis, you may be asking, what now? I'm Drew Dick, host of Moody Publishers Reading for a Change podcast. In his new book, What Now?, Moody Bible Institute President Mark Jobe will help you move into your next season. Learn how to break free of stagnation, re-envision your life story, and step out in faith.

Don't let fear, confusion, or unknowns keep you from moving into God's call. Get your copy of What Now? at moodypublishers.com.

That's moodypublishers.com. Do you know if you have enough? Enough money? Enough house? Do you know how much is enough? If not, Ron Blue can help with his book, Master Your Money, a step-by-step plan for experiencing financial contentment. Learn how to save, invest, and give wisely, how to create a long-term financial plan, and how to get out of debt.

You'll find it all in Master Your Money by Ron Blue, available when you click the store button at MoneyWise Live. With SRN News, I'm John Scott. Georgia election officials have announced an audit of presidential election results.

Secretary of State Brad Raffensperger says his office wants the process to begin by the end of the week. Earlier today, President Trump visiting the tomb of the unknown soldier at Arlington National Cemetery to take part in the annual presidential rite. Mr. Trump honored veterans in a ceremony that was held during a steady rain.

Ada remains a tropical storm as it prepares to skirt past the heavily populated Tampa Bay region in Florida, crash ashore in the coming hours somewhere to the north along the Gulf of Mexico coast. An early rally today on Wall Street lost some steam by the closing bell, leaving major indexes mixed. The Dow dropped 23 points. The NASDAQ gained 232.

The S&P 500 picked up 27. This is SRN News. It's MoneyWise Live. We're talking money. We're talking finances, pennies, dollars, whatever's in your wallet.

If we can help you with it, we'll certainly try 800-525-7000. Does anyone carry a wallet? You don't carry bills in a wallet, I bet, Rob. No, I do. I do carry a few bills. Not many, but I do. Do you really? Primarily because my kids are always asking, you know, we're at a basketball game and get something at the concession stand and gotcha.

You know, I got to have a few dollars. Yeah. Yeah.

Gotcha. Yeah. I was raised that way.

My father said, don't ever leave the house without a few bucks in your pocket. Yeah. So to this day, I always, I think that way, you know?

Yeah. Cause he probably didn't think about Apple Pay and you know, all those things. No, that was, he was born in the twenties, so I don't think he was thinking of that. If he was, I wish he would have told me I could have bought stock and really made a killing.

That would have been great. For Lauderdale, hello Bill. Forgive us for fiddling around here when you're waiting for us, but how can we help you, sir?

That's all right. Thank you guys for taking my call. I've got a early payoff mortgage question. I've got right at $74,000 left to pay off of which $1,551 of that is principal and $247 is interest. And then a eight 93 is escrow. And I have the very good possibility blessing of getting a $50,000 gift by the end of the year.

And I just wondered, you know, how do they calculate early payoff with that $50,000? Do you think cover it or come very close? What are your thoughts? Yeah. So let me make sure I understand your question, Bill. So you said the balance on the mortgage today is $74,000? Correct.

Okay. So obviously if you put $50,000 against it tomorrow, you'd still owe $24,000. So you'd have a balance left.

Obviously, because you're a little bit further into the term of this mortgage, as you said, if I understood you correctly, you know, of your roughly $1,800 a month payment before escrow, $1,550 is going to principal and about $247 is going to interest in the current month. Is that right? Correct.

Okay. So obviously you're far enough in. You've been at this a while with this mortgage. So you've kind of tipped the scales where later in the term of the mortgage and the vast majority is going to principal, less to interest, which is why you don't want to refinance at a period like this unless you keep the term equal to where you're at. But I like the idea, assuming you have other priorities in place, you're living on a balanced budget, you're giving systematically, you've got an emergency fund in place outside of this $50,000 of three to six months expenses, you're putting money away for the long term and a retirement account, I would recommend 10 to 15%. And if this is over and above that, then accelerating this payoff, I think is a great idea. It's going to give you a lot of peace of mind. It's going to save you obviously the interest that you have left.

And the easiest way to calculate that is just to ask the mortgage company to run an amortization schedule to tell you how much interest will you be paying from now until payoff. And obviously, the quicker you can pay off this $74,000, you know, you'll avoid a lot of that. But the 50 is not going to do it because you've got to get to where you can, you know, fully satisfy the mortgage. Does that make sense?

Or am I missing something? No, unfortunately, that makes sense. What I was hoping is that, you know, if I say, I have that 50 grand, and I want to pay on it, and they say, Okay, well, you know, we would pull out the property taxes, we'd pull out the property insurance, because you're quote, unquote, paying it off, and you're going to be starting to pay that monthly on your own.

I was actually hoping that the payoff would be around the 50 grand. I got it. I hear what you're saying.

Well, a couple of things there. Number one is you're not going to find unless the payment is in arrears. And you know, you've missed several payments, and you've got a financial hardship, they're not going to be settling with you at a reduced amount, like you might see with a credit card that's unsecured, because they've got collateral and plenty of it that they can use to get their full payment.

So that's not going to happen. But this idea that you may have some extra money in escrow that would be refunded to you is legitimate. But keep in mind, if they're doing their job, and what you have in that escrow account is equal to what's going to need to be paid at some point, you know, in the next year to both property taxes and homeowners insurance is actually what's needed. And you've not been saving for that separately. That money, even though it would be refunded to you would only be available temporarily, because you'd need to continue to build that up in your own savings account.

So you had the money to pay those bills when they come due. So I don't think you're going to have any extra there. So unfortunately, your balance is really going to be very close to that 24,000.

But that's okay. Just stay at it. And as you said, you're chipping away at that principle at a good clip here each month that you make that mortgage payment, and that 50,000 will get you a long way in that direction.

Yeah, Bill, great question. We wish you the best as you go forward there. Thank you very much. So if you're wondering today about maybe you're giving or you're housing or you're investing or understanding what the Bible says and teaches about various money principles, financial principles, give us a call today anything fair game 800-525-7000. Three lines open call now 800-525-7000. Alan in Washington State, sir, what's your situation there? Hi, thanks for taking my call.

Yeah, I'm calling about kind of an awkward situation. We have a number of children that we assisted in a variety of ways for their college funding. One of my sons graduated, we supported him with a series of loans that came to about $35,000. He went into Christian ministry immediately after college. And so we kind of put the repayment of those monies on hold.

He then subsequently became married. His wife does not see or support the fact that those monies probably need to be repaid. And over time, the emphasis or the need for the discussion about the repayment of those monies has kind of gone unresolved. What are the elephant in the room in our family?

And I'm curious to know now what your counsel would be, what the biblical recommendations are. Do we just let this go? Do we just move on financially? It is a significant impact for my wife and I. And it now is running into five or six years. He indicates intermittently, he understands that that's there and needs to be resolved, but nothing ever comes of it.

Any suggestions? Yeah, Alan, man, I know this is a difficult situation for you and your wife. And the last thing we'd want is for this to place a strain on the relationship because that should be preeminent. And yet, you know, it can be very appropriate for you to want your son to do the right thing based on what the intention was and what the expectations were that were set out at the very beginning of this. I'm assuming that you have cosigned for this loan. Is that right? You're legally responsible?

Yes. And actually, we have subsequently paid it off. Ah, OK. So there's no longer a balance, but obviously you were the ones who paid it. And was it clear to him when this was taken out that this was even though you were helping him by putting your name on it, he was expected to pay it back and he understood that?

Yes, no formal contract, but that was clearly understood and the precedent was set with other siblings. Gotcha. All right. I want to unpack this further right around the corner. This is a really important conversation and we'll be right back.

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Here's the number, 800-525-7000. We're speaking with Alan. He and his wife loaned all their children some money for college.

Their youngest child has not yet paid the money back, even though it's been four or five years. And that's kind of where we stand, Ron. Well, yeah. And Alan, you've obviously paid this in full. But as you said, although nothing written formally, there was a clear expectation at the outset that this was something you were doing. But the expectation was each child would pay back the loan in full.

Obviously, your son is not doing that, has demonstrated his, at least until this point, not willing to do it and is being supported by his wife in that. This is why the Bible is so clear on this, Alan, that we shouldn't put up security for debts. Proverbs 22, 26 and 27 is very plain on this. And, you know, what we find is the Federal Trade Commission backs up what God's Word teaches in the principle. And that is that 50 percent of the time when we sign on behalf of someone else, we have to pay it in full if it's going to get paid at all. And there are repercussions if it doesn't. And so, you know, we understand all of that. I think the difficulty here is obviously it's your son and your daughter-in-law.

And so I would first and foremost, and I'm sure this is not a new idea to you, but I would be really taking this before the Lord and praying, James 1-5, Lord, give me wisdom to know how to handle this situation. I think secondly, we always want to try to prioritize the relationship, realizing there could be real collateral damage relationally, depending on how this is handled. And then thirdly, I think, you know, having an open and frank conversation in love. Have you all, Alan, ever taken the time, perhaps you and your wife sitting with him and his wife to say, you know, we just need to put this in front of you and make sure we're on the same page. There was a clear expectation on the front end. We have since paid this off.

There's not been any attempt to pay it back. We want to work with you. But we also want to make it clear that this was and continues to be the expectation. And with love, talk that through. Has that conversation taken place?

It has. That's why this is both protracted and progressively awkward, is that in all the other aspects of my son's, of this man's life, he is consistent and has integrity and follows through. So we're kind of stumped, because yes, we have had that frank conversation, there's been at least a verbal acknowledgement, a willingness, even a tender heartedness about boy, we got to get this done. But it just continues not to happen.

Probably once a year, we have had that conversation. Okay, well, and at least there's a receptivity to that. It's not a response like, well, this is your expect, you know, this is what you're supposed to do as my parents. And therefore, we don't feel like this is an obligation.

Perhaps it's more about just the lack of priority and financial resources. So I think perhaps the next step is to say, son, we'd like to involve a third party in this, you know, not anybody formally, but we'd like to connect you with somebody, not us, who can help you work with your budget, perhaps one of our MoneyWise coaches, Alan, that would be happy to be involved here at no cost. And the key would be to say, Listen, we're not expecting you to do this overnight, even in the next year. But we need there to be a good faith payment toward this that's put into the budget that fits with your overall spending plan. And that's systematic and that we can count on so we can see that you're at least making a good faith effort to begin to pay this back as you're able. And, you know, we'd like to bring in in perhaps that somebody from your church or one of our coaches, but somebody who can kind of walk alongside them to perhaps see how they could fit this into their budget, get on a spending plan, which will obviously reap further benefits for them financially, down the road. I think that may be the next step because right now they're seeing this huge balance. And probably, you know, if there's a lack of maturity there, especially financial maturity, they're probably saying, Well, we're never going to be able to pay this back.

And so they're just continuing to kick the can down the road. But if they see how $100 a month or $150 a month could be put into the budget and an automatic payment goes out, at least you all would know they're making a good faith effort. But at the end of the day, I think relationship is priority. And that's where you and your wife are going to have to decide at some point, if they're just not willing to do it, if you're going to forgive it, in order to preserve the relationship, or whether this is something you really want to continue to press into over time. And that way, Alan, when you involve a third financial party, the argument doesn't become, do I really have to pay this back?

Or what does the Bible say? Or, you know, we're confused, you know, you're our parents, why do we have to pay you money, you know, the argument becomes or the issue becomes finances, we want to help you so that you can pay us back as you promised, as opposed to we've changed our minds and just don't want to pay you back. So we wish you the best with that. And if we can help you, Rob, what do you think what would be the best way for Alan and his wife to contact one of our coaches for a situation like this?

Yeah, if you want to email us, Alan at info at money wise.org. I'll have my team connect you with our coaches directly. So we can get one of the coaches that would just be really uniquely skilled in this area who could provide some help and assistance again, just send an email reference this conversation, send that to info at money wise.org. And we'll make a personal connection to our coaching team. Thank you, Alan. We wish you the best. George in Florida, sir, what's on your mind?

How are you doing? Excellent program. I need some advice and see what ways we can go about a sale of land in a land trust was done and would receive around $100,000 in that transaction. And I'm the trustee, my sons are the beneficiaries of it. Now, I've been in the ministry and I have had a 501c3 before and I closed that several years ago.

It was a Bible distribution type of ministry. Now, with that amount in mind, we have two or three options. One of them obviously is to pay off, still have a mortgage of $80,000 with some substantial equity on the house. Either that or refinance it, which I have a 5.35%. So might be towards my best interest just to pay it off with part of the money. The second option is to create another ministerial entity.

And that's what I was trying to find out your advice also. What kind of entity we can create. First of all, the funds were transacted this year. So we're trying to find out the best way not to pay too much taxes out of it.

Actually, I don't know if you know, but the land trust doesn't have any social securities attached to it until the distribution is performed for the beneficiaries or the land trust decides to pay the tax. So those are the two areas. Ministerial wise, what would you recommend if there's a ministerial fund that we can create? I know there are some restrictions for that after, maybe we can use it after five years on one of the ministerial funds.

So what can you advise on that? Well, you know, there's obviously a lot of moving parts here and these get very complex. The key would be the timing on when this is done and then the structure in which you use for the charitable intent, if that's what you want to try to do with this fund or these proceeds.

And obviously that's tremendous. I love that idea. I want you to connect with my friends at the National Christian Foundation, George. This is where they have real expertise in helping you give wisely and perhaps could advise you on, depending on where you're at in this transaction, how you can minimize the tax liability and maximize the opportunity to use this for charitable purposes. At least you'd have that information going into this decision.

So then you could decide how, in fact, you want it to be used again. NCF giving dot com. Or you could connect with a local NCF office.

They have them all over the country. Certainly there's several of them there in Florida where they could advise you on the best, again, structure to put these proceeds and then to be used for charitable purposes. Once you have that information, then I think you can decide how you want to proceed. But you could save a lot in taxes by using the strategies that they'll share with you about. Thank you, George. And great recommendation, Rob. I think they'll be able to help George greatly on this. Down to South Florida. Steve, your next banker.

What advice do you have for us today? When you pay down a loan, stipulate that it's for principal reduction only so they don't take multiple payments and just make multiple interest and principal reductions as well. If you stipulate it's principal reduction only. And I've heard this question come up with you a couple of times, and I'm not sure that your listeners understood that the pay down should be principal only.

Yeah, it's a good point. So here, what Steve's talking about is, you know, you have extra money you want to send over and above the scheduled monthly payment. What you don't want them to do is to put it on the back end or apply it to next month's payment or something like that. You want it to go right to principal reduction, depending on how that payment is made, whether that's through a slip that you might have with a physical check where you need to note it on the little slip that you're sending in with your check, or if it's online, usually there's a place for you to indicate that you want principal reduction.

But if you have a question and it's not clear, call your mortgage servicer, tell them what you're trying to do, and they'll help you make sure that that extra amount is applied directly to principal because Steve is exactly right. That is the objective. Steve, we're really glad you called today. Thank you very, very much for that.

Thank you for your kind comments. And Rob, with that, I think we're going to have to put a bow on it. You want to tell our friends about the new MoneyWise app, certainly the best digital version of the old fashioned approach to saving and record keeping, what we used to call the envelope system. But this is kind of high tech and nice. Well, it is, you know, Larry Burkett taught us about the envelope system way back in the late 70s. And it's the most effective system for managing your money month to month that I've ever seen. We wanted to create the modern version of it. I couldn't find one that did everything I wanted. So our team of developers and they're incredible. It took eight months to build what I think is the best digital envelope system out there.

Just search for MoneyWise Biblical Finance in your app store today. All right. Thanks so much, Rob. Thanks to our team, Amy, Gabby, Deb and Jim. And thanks for listening. Join us again tomorrow.
Whisper: medium.en / 2024-01-28 11:40:10 / 2024-01-28 12:01:01 / 21

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