Why You Need an Umbrella Policy

This is Doug Hastings, Vice President of Moody Radio, and we're thankful for support from our listeners and businesses like United Faith Mortgage. Mortgage commercials are rarely exciting, so to make it slightly more interesting, here are my nieces to do it for me. So interest rates continue to drop like my sister's baby teeth. Come on, Uncle Ryan had to say the same thing last year.

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Not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. Filling out the application, the life insurance salesman said to the wife, do you know what you'll get if your husband dies? The wife responded, well, I've been thinking about a poodle. But insurance is no laughing matter, and it's pretty handy at times. So today, Kingdom Advisors President Rob West explains why a certain type of policy could be a real lifesaver for your finances. Then we'll take your calls on anything financial, maybe even poodle related.

800-525-7000, 800-525-7000. I'm Steve Moore, why you may need an umbrella policy next on MoneyWise Live. So Rob, today it's what, umbrellas and poodles, huh? You just can't help yourself, can you, Steve Moore? Well, I can, but it's way more fun this way. Okay. But remember, it is Friday.

All right. So what do we need to know about umbrella policies? Well, it's a great question. And simply it's a type of insurance policy that protects your assets and even your future earnings from catastrophic lawsuits. Steve, think of it as a booster policy that gives you protection beyond what you have with your home and auto policies. And one of the best things about umbrella policies is that they're inexpensive.

Typically you can add, let's say a million dollars of additional coverage for just a few hundred dollars a year. Wow. Okay. Well, that is reasonable, but some folks might be thinking I lead a quiet life.

I mind my own business. I don't have any reason for this kind of crazy million dollar coverage, huh? Yes, but most people have at least one reason to get an umbrella policy. For example, let's say you have a teenage driver.

I happen to have one of those in my house now as of the last few months. And that's pretty typical. The chances of having an accident go up considerably with a teenage driver.

I try to keep my wife not worrying about that too much, but it does happen. And that's why auto insurance premiums are so high. An umbrella policy will pay out above those liability limits if your youthful driver injures someone else or damages their car or other property.

Here's another one. You have a swimming pool. There's always the risk that someone could have a serious head or neck injury diving into a pool or possibly even drowned. That could easily result in a financial liability beyond what your homeowner's policy would pay, but it doesn't even have to be a pool. Simply owning a trampoline puts you at risk for a potential lawsuit.

If a neighbor kid is injured while bouncing up and down, you'd want to have extra coverage for that too. You know, I can see it now. Lawyers making lazy circles in the sky above your house, Rob West. All right. Well, here's one. Yeah, exactly.

I do. Here's one you might not see coming. You get carried away on social media. How could that possibly cost you a million dollars worth of liability?

Yeah, here's how. Harming someone's reputation. Let's say you're not happy with a home remodeling project. You take it out on the contractor on social media.

By the way, we should always be Christ-like. Little disclaimer there. He or she then sues you for loss of business.

Would they win? Who knows? But just fighting the lawsuit would be expensive and no more lawyer jokes, please, Steve. Worse, your homeowner's policy that's designed to cover personal injuries may not cover a judgment against you for harming someone's reputation. Okay, I've never really thought about that. So if you don't have an umbrella policy, choose your words carefully when maybe yelping a specific business or contractor. Always.

And here's another one. Let's say you coach a little league team or some other sport. Do you know what type of coverage the league has in the event a car is damaged by a fly ball? Or worse, a player is injured? Well, an umbrella policy would protect you in most cases.

Also, you want to make sure your regular homeowner's policy doesn't exclude coverage for athletic activities. Actually, some do. Yeah, and you'd know all about this because you do a lot of that kind of thing. I guess that one might fall under the under the no good deed goes unpunished category, but let's hope that never happens to you.

Okay, anything else? Well, here's an obvious one that affects almost 40% of households. You own a dog. The Insurance Information Institute says that dog-related injuries in some years reach, listen to this, $700 million. And some homeowner's policies exclude coverage for certain types of breeds. So if you like the idea of your Rottweiler or Pit Bull keeping your house safe from burglars, well, I would encourage you to have an umbrella policy. You know, not so much with golden retrievers, though.

They're so friendly, they'd probably show the burglar where the silverware is kept, but that's what golden retrievers do. Okay, we'll come back and chat some more. We're going to take your calls, too, on anything. Call right now. We'll answer the phone, I promise. 800-525-7000 to speak with Rob West. 800-525-7000. This is MoneyWise Live. Welcome back to MoneyWise Live, God's wisdom for your money, your finances, your faith. If you'd like to speak to us today about any of those things, we are ready. Hope you are, too. Here's our phone number.

800-525-7000. Rob, any last thing to think about when it comes to umbrella policies? Probably not everyone needs one, but maybe more people need one than really have given a serious thought, huh?

Yeah, and you know, other than the fact that you had my golden retriever pegged, Murphy, he would do exactly what you were describing. There is one more reason, Steve. Well, maybe there's many more, but I'll mention one more to have an umbrella policy, and that would be for folks that have a long commute. Now, the more miles you drive, the more likely you are to have an accident, and your auto insurance premiums are probably higher to begin with, but it's possible you could be hit with damages that go beyond the limits of the policy. Other drivers and passengers, even their families and estates, can sue for current and future medical expenses, pain and suffering, and even lost income, so again, an umbrella policy that costs a few hundred dollars a year is a small price to pay for protecting your assets, so I think it's something to consider. Just give a call to your insurance agent, whoever handles your property and casualty.

Tell them you'd like to price out an umbrella policy, probably starting at a million dollars, maybe going up from there if you have a bigger estate, and I think that added coverage will give you some peace of mind. Do you think, and I'm not being facetious here, do you think you could buy a half million dollar policy substantially cheaper? Yeah, you know, typically policies will start at a million dollars, so for most folks, but it's worth checking. You want to make sure it fits into the budget or it's no good.

Gotcha, okay. Yeah, I wish my, there are lots of things that start at a million dollars. My salary is not one of them, but it's nice to know there's something that starts at a million dollars. Okay, 800-525-7000. Let's take some calls. Tuscaloosa, Alabama. Sally, are you and your loved ones safe from all of the tornado activity and everything yesterday? Yes, thank you so much, and it's really nice to talk with you. We stayed in our safe place for about an hour, and we're really thankful that it didn't hit in Tuscaloosa. Well, God bless you, God bless you, thanks.

How can we help you guys? My husband may need some long-term health care soon where we would have someone come into our home, and someone suggested that we might be interested in a reverse mortgage. Our home is paid for. Yeah, well, it is an option, Diane, where you would convert that equity to an income stream that could be used to supplement other income sources to pay for bills, expenses beyond what you have the ability to cover, and certainly long-term care could be one of those that could dramatically increase the expenses you have on a monthly basis.

It's not my preferred option. I prefer not to fund lifestyle, and I realize medical is not just lifestyle in the sense that it's necessary, but I don't like to fund monthly expenses with debt, which is essentially what you'd be doing. They tend to be expensive, so there's some steep upfront costs that can include lender fees, initial mortgage insurance costs, ongoing mandatory mortgage insurance premiums, closing costs, not to mention the interest rate that's imputed in there as well, and usually those costs are more than a traditional mortgage. It also does create some challenges or maybe complications in terms of you leaving a property to children if that was a desire, who may not have funds to pay off the loan when you and your husband pass, and if they can't refinance, then they'd have to sell it. That may or may not be an issue with relatives living with you.

If you have that along the way, they could conceivably have a challenge at death, at your death if they were still living, because they would obviously need to relocate, and just a few other issues there. So I think the first question is, are there other options in terms of you being able to fund this? Is there other assets that could be liquidated? Is it time to downsize and perhaps generate some cash that way? What other options might you have? Wow.

I'm just not sure. We have a rental house that we don't make a lot of profit on. We use it more for ministry. We thought of selling that house. That's about the only other thing.

Yeah. And that would be another option is to look at whether it's time, if you're not taking much in off that property, to liquidate that, which would free up assets that could be then invested very conservatively to generate an income stream that you could use to fund these expenses and keep your home unencumbered, which just gives you a little bit more flexibility. I realize you said you're using that for ministry.

I love that. And so if that was where the Lord was leading in terms of you being able to maintain that for that purpose, then that's between you and the Lord. I certainly wouldn't challenge you to go against that. But if you felt like you had the freedom to liquidate that property, that sounds like it's probably the most accessible funds that you could get your hands on that could again be handed to a professional to manage appropriately. But as a last resort, a reverse mortgage certainly is an option. And if you have the right amount of equity in the home, certainly you do. If you own it free and clear, you'd be able to convert that to an income stream. So just make sure you get with somebody who can really shop that around if you are going to consider that to get you the very most competitive costs and fees associated with that before you proceed.

But I would use that as a last resort. Sally, we wish you and your husband the very best. Thank you very much for calling in today.

Let's quickly move to Akron, Akron, Ohio. Angel, what's your umbrella insurance policy question today? Yes, thank you. The question is, is the umbrella insurance in addition to your homeowners and auto insurance or does it replace it? No, it's a good question and it's in addition to. So it's a separate policy, Angel, that picks up when your home or auto liability limit is reached. And so the idea is you would exhaust that first and then the umbrella policy kicks in, a separate policy that then takes you to the limit of that particular policy, whatever that is.

It might be a million dollars or more, but certainly separate and in addition to the limits on the existing homeowners and auto. Got it. Thank you so much. Okay, thanks for your call today. Hey again, our phone number is 800-525-7000. If you have something financial you'd like to speak with Rob West about, today's a great day to do it. We have several open lines and we'd love to hear from you. 800-525-7000. Don't go anywhere. We'll be right back after this.

Hey, the next time you're online, you might want to consider moving your mouse over to, well, wherever you have to move it. So you can type in MoneyWiseLive.org. And there you'll find lots of great information about who we are and what we do. Lots of free resources, things you can download to use to help you manage your personal finances. Things like budget templates, that kind of thing.

Also archives of past radio programs and easy and quick ways to find a certified kingdom advisor in your area. And also how to connect with a budget coach. Rob, you mentioned something to me the other day about our budget coaches and how much activity they're receiving from our listeners. And we're blessed to have them, aren't we?

Well, we sure are. These are men and women who are volunteers, but they've been especially trained to come alongside you to help you work through your debt repayment plan, your spending plan, getting you set up on the MoneyWise app, teaching you some of these key biblical principles we share on the program each day and doing that in a virtual sense. So you would connect using webcams and it's a private engagement with these coaches. And this is part of their ministry.

They love what they do. So we normally are in a position where there's often a two-week or more wait to get connected with a coach. Sometimes it's been as long as 60 days, but we've recently onboarded a whole new team of coaches.

We're training them all the time. And so we've got some capacity now. So if you'd like to connect with a coach, there's no cost for the coaching. We will ask you if you can to pay for a small fee for a digital workbook.

But other than that, no cost. And we'd love to have you engage with these folks. They'd be delighted to come alongside you. Here's how you do it. Just head to our website, MoneyWiseLive.org. MoneyWiseLive.org.

Click connect with a coach and they'll get you in the queue. And we'll look forward to hearing your testimony on the back end. All right, Rob. Thanks. Let's connect with Claudette calling us today from Fort Lauderdale, Florida. Hi, Claudette. Thanks for calling my old stomping ground. How can we help you today? Hi there.

Thank you. I'm calling because of the umbrella policy. I'd like to know should you get one if you have a small business or you're a clinician? Yes, if you need to have one in a small business.

It's a great question, Claudette. And a couple of things. You should probably have a personal umbrella policy if your business isn't structured as an LLC or another type of corporation that would protect your personal assets. But as an LLC, you would typically want to have a commercial umbrella policy, which in the same way Claudette is going to extend the limits of some of your primary liability insurance policies like general liability insurance. And if you have commercial auto insurance, it'll extend that. It's a good idea if your business frequently interacts with customers, works on someone else's property, allows the public to visit during open hours. If you have folks coming in to see you for any of those reasons, that's where that commercial umbrella policy can kick in. And again, it's the same idea.

So I would certainly be talking to your insurance agent about that. And I think it will go a long way toward giving you some peace of mind, making sure you're being wise with God's money. Does that make sense, Claudette? Excellent. Thank you so much.

It really does. I appreciate your time. Okay, absolutely. Yes, ma'am.

Thanks very much. Yeah, you know, I hadn't thought about that. But even if you just own an ice cream shop or a florist shop, anyone who's coming in who might trip in the parking lot or something like that, they could sue you for a million dollars overnight, right? Well, that's right. Yeah, it's, you know, again, just added protection beyond what your typical general commercial policy would cover. All right, great information.

Tamarack, Florida. Hello, Ruth, what's your question for Rob? Yes, good afternoon, and thank you for the help.

It's a great program to have. I'm a little confused between gross 401k and gross IRA. Is that the same account?

And how much is it you need to open one of these? Yes, they act the same. It wouldn't be the same account. But a Roth 401k is going to be treated the same from a tax standpoint as a Roth IRA. Different contribution limits for them. But essentially, with the Roth 401k, when you put money in through salary deferral, so out of your paycheck going right into that Roth 401k, you're not going to get the tax deduction federally that you would with a traditional 401k. And then that money will grow tax free. And then, you know, when you separate from the company, you could roll it out to a Roth IRA, and you wouldn't have the required minimum distributions, and you take out all the gains completely tax free in retirement, as opposed to the traditional 401k and traditional IRA, which go hand in hand, those give you the deduction on the front end, when you make the contribution, they grow tax deferred.

And then when you take it out in retirement, after 59 and a half, it's treated as ordinary income. The way you set that up, the Roth 401k has to be available through your place of business through your work, it would be made available to you as a benefit, hopefully they offer some sort of matching, you would tell them you want to open an account, you'd tell them what percent of your income you want made as a salary deferral, and then you'd begin contributions and you there's really not a minimum in terms of what you need to start with. The Roth IRA very very similar, although you'd set that up on your own. With one of the brokerage firms, you could use Vanguard or Schwab or Fidelity, you could use one of the online brokers like Betterment or Wealthfront, you'd open the account and then you could begin making the contributions not as a salary deferral, but as a direct contribution that you would make up to the limits each year. Does that make sense?

So Ruth? Yes, because I told that Roth 401k was something I could open, just go to the bank and open one of those accounts I didn't know was to do your job. So if the job doesn't offer it, I cannot have it. No, but you could open a Roth IRA. And so you would, you know, you could go to your bank, as you said, I'd probably think about going to one of the larger brokerage firms like Charles Schwab or Fidelity to open the Roth IRA, but you could absolutely do that you could put in 6000. And if you're over age 50, you could put in 7000 in any, well, for this year, for sure, between now and when you file your 2021 taxes. And the benefit, Rob, of going to someone like Schwab or Fidelity versus your local bank would be that they would give you what better rates?

Why would I want to do that? Yeah, you know, better investment options, typically. So you'd have a whole cadre of really high quality, low cost exchange traded funds and mutual funds available. You know, whereas you might have a more limited investment universe in, you know, at your local bank. Yeah, but your local bank might, I'm just thinking out loud here, they might be giving you a toaster or a microwave for opening a new account. And online, they just don't do that. That's true.

Although I think they stopped the toasters, you know, back in 86. Are you suggesting I'm old? No, I didn't say that at all. No, I know. I know. But since I've worked with you as long as I have, I know what you're insinuating. I don't know how to spell insinuating, but I know they still give lollipops out though. I understand. I haven't been to a teller in a long time, but and biscuits for your dog in the door. Hey, okay. Did one of us get distracted? Okay.

Palm Beach Gardens, Florida. Hi, Kelly, how can we help? My name is Kelly. I have a question. My husband died two years ago, but he left me like $200,000 in the bank, and the house is paid for, and I don't have any credit card, nothing.

So I want to know what to do with the money. Oh, well, Kelly, I'm so sorry to hear about your husband's passing. Listen, we're going to take a short break. You hold on the line, we come back, we'll talk about it. We will indeed.

800-525-7000. So glad to have you with us today where your money and your life meet. Stick around. You're listening to MoneyWise Live with Rob West. We're talking with Kelly in Florida. She's 58 years old. Her husband passed away recently and left her with about $200,000.

Now the house is paid for, so the money is currently in a CD, and she's wondering just what to do with the money. Rob? Yeah, Kelly, thank you for holding. So what are your income sources now, and are they enough to cover your bills every month? No, I'm still working. I'm a nurse.

Okay, all right. And what is your age? I'm 58.

58, okay. So you plan to continue to work for some time, correct? I think when I'm 60, I can withdraw my husband's survivor benefits, no. I see, yes. And at that point, do you have a retirement account through your current place of work? No, no. No retirement, okay. So really, this $200,000 plus the Social Security survivor's benefits or your own benefits down the road would really be the primary or exclusive source of your provision, is that right? Yes. Okay, all right.

Yeah, so I think it makes a lot of sense. I mean, you're in a good spot in the sense that you don't have any debt. I love the fact the house is paid for. It sounds like you've kept your lifestyle quite modest, and you know, this is an opportunity for you to put this money to work. I'm glad it's, you know, right now in somewhere that's safe, FDIC insured and protected against loss.

I think, you know, this is an opportunity for you to engage with an investment professional, someone who could really take responsibility for managing this money, not taking any unnecessary risk. The goal is not to beat the market or, you know, beat any particular index. The goal is to achieve your God-given goals and objectives.

Where is God leading you? You know, if you are going to retire in the next couple of years, what does your budget look like? What money would you have available both from survivors, you know, benefits and ultimately your own social security, perhaps down the road that might be a bit larger if it continues to grow till full retirement age? And then what could this account managed properly do in terms of helping to supplement your income, or if you didn't need it, continue to grow very conservatively, not taking a lot of risk, but it would be there if you needed, you know, you had a major long-term care expense. You needed to pay for, you know, in-home care, nursing home care down the road, something like that. So what I would encourage you to do, Kelly, to go over all of this, evaluate your insurance, look at your budget, talk about your plans for survivors benefits and social security, as well as how this money should be managed. I'd interview probably two or three certified kingdom advisors there in South Florida, find the one that's the best fit for you, and ultimately you'd be looking for somebody not only to help you just look at your financial plan, but also to take responsibility for managing these funds. And you could find one of those professionals who has the certified kingdom advisor designation, meaning that not only are they experienced and have met high standards and character and integrity, but they've been specially trained to bring a biblical worldview of money to their advice and counsel. You could find that person at MoneyWiseLive.org, just click find a CKA. Kelly, God bless you and thank you very much for your call today.

Let's go out to Broadview, Illinois. Hi Sandra, what's on your mind? What's on my mind right now is a letter, I've gotten lots of these, one main financial. They always send and ask me, tell me that I'm pre-qualified for secured loans, up to $20,000. I don't, I don't, I know it's not, to me it's not a good idea.

Why do I get this? Yeah, well they're based on your good credit, they're out there just looking for business. You see, the way these folks make money is they look for people to lend money to, and if you'll take them up on that loan, then they're excited to be able to earn the interest off of that loan. You know, it's not anything other than just a business solicitation, so you know, and this happens regularly. There was a time where, now it was credit card offers, this is a little different, but there was a time, Steve, I don't know if I've ever told you this, where I kept all of the credit card offers I got in the mail for a year, and the stack came up above my waist. I mean, it was massive. Yeah, and you know, that's just the way it works right now.

A lot of these come by email now, or you'll get solicited online as you log into your various financial accounts, but they haven't given up on snail mail either, so I would just shred it and then dispose of it and move on, and you move forward and try to live your life debt-free, the best of your ability. Wow, that stack came up to your waist? Yeah.

Is that what you said? Wow, you must have a short inseam. We've never discussed your inseam on the program. You know, I'm 6'2", so. Right, it's a funny picture. We'll let people see that in their own mind's eye. Okay, all right. It is Friday, isn't it? Okay, somewhere in northeast Ohio.

Susie, welcome to the program, how can we help? I have a young adult son who is hoping to buy the home of an elderly relative. She is still living, but he may, depending on circumstances, need to buy this in six to twelve months. The trouble is, he's only been working a few months at his job, and he really has not, because he is young, hasn't had a chance to build up a good credit history. His job is, that does pay sufficiently, and he said his credit score is currently $695, but he's hoping to get that score higher, and also is the best place to start in regard to searching for a mortgage for banks at which he has his accounts.

He currently has no debt. Yeah, well the first thing, Susie, in terms of building that credit score, there's a couple of things he could do. Number one would be to become an authorized user on your credit card, if you were interested in him doing that. He doesn't even have to use it, and as long as you check and make sure that the credit information is reported to the authorized user's credit file, which it typically is, then as long as you're a consistent on-time payer, that good credit history would be reported to his report, which would, you know, add another account, some good history, and a positive, you know, repayment. Now, keep in mind, the only downside to that is, assuming he's not going to go charge a bunch of things, if you had a missed payment, that would also be reported, which could actually hurt him, so just be careful there. He could open a secured credit card at his bank, where he'd put a couple of hundred dollars on deposit. They'd issue a credit card. He could then put a recurring charge on that, a budgeted item, pay it off every month in full, and, you know, that would be reported to his credit report. The third thing is, there's something called a credit builder loan, which is essentially loans geared toward helping borrowers establish credit. The bank sets aside the loan amount, usually between $300,000 and $1000, and you receive the money after you've made all the monthly payments, usually with just a little bit of interest, but the whole intent behind it is to help someone build their credit, so those things could be done to kind of put him in a position to do this. Now, in terms of the mortgage, after he's gotten his credit score up just as high as he can over this, you know, seven-month period, or I think you said six to twelve months, through these means that I just mentioned, then he's going to want to shop that mortgage, get at least three offers. He could use one of them, being his local bank, but I'd look for at least two online, because you're going to often find the best terms and most competitive interest rates, and I'd send him to Bankrate.com when he's ready to find the two online lenders to compete for his business. They're constantly updating who has the best rates and terms in any given market. Does that help, though, Susie?

Yes, it does. Is there a credit score that he really wants to be aiming for before he starts seriously shopping for a mortgage? Yeah, I mean, he'll really have access to the most competitive rates and terms above 740, so that would be his goal. All right, Susie, thank you for your call today. We wish you and your son the best. We'll be right back with more MoneyWise Live right around the corner. You're listening to MoneyWise Live, where we do our best to help you understand and to establish God's plan for your life and your money. We're going to say hi to Janet in just a second, but first, Rob, I know you've got something.

I can see with the furrowed brow you have something on your mind. Well, maybe it's, Steve, that we're approaching the end of the month, and I want to make sure you know that the invitation is there to become an investor in MoneyWise Media. How do you do that? Well, we simply remind you that this is a listener-supported ministry, so what we do to bring you this program every day, our web team bringing all the great content at MoneyWiseLive.org, our app team bringing you the most innovative tools in biblical finance, our helping hands ministry, all of that is only possible due to your generous support, because there's no one family or organization that underwrites this. We're a non-profit 501c3, and we do what we do because of your generosity. So if you haven't thought about giving one time or even becoming a monthly partner, we would be certainly grateful, especially here at the end of the month as we try to meet budget every month and roll over to the next month.

So here's how you do it. Just go to MoneyWiseLive.org. Right there at the top, you'll see the button that says donate, and you can give quickly and safely.

Yeah, but those guys on the radio, they don't really live on a budget, do they? Oh yes, absolutely. Indeed we do, indeed we do, and again, thank you very much for your prayers and financial participation that allows us to meet that budget on a monthly basis, just like your own. All right, Tennessee, Janet, thanks for your patience. What's on your heart? Hi, thank you so much for taking my call.

Sure. I have inherited a home that I surprisingly inherited, I didn't even know I was inherited it, but its value is $340,000. It's paid off and everything. I don't really want the home, so my thought is I'd like to sell it to a couple younger members of the family if they're interested in it, for like $180,000, $190,000. My first question is, if I do that, can I take off that difference between the praise value of the home and what I sell it for, which is a lot less off on my taxes? No, you can't, and I would check with a tax preparer on how to handle this, because you would likely need to file a gift tax return. Here's the thing, Janet, when you sell a property to a family member, the IRS will typically take a closer look at that transaction than they would normally. And the reason is because of what you're saying, and you're doing it because you just want to bless this younger couple, but if it's below fair market value, the IRS looks at that as a gift. And basically any sale price that's less than the property's fair market value, with a decent amount of wiggle room that could go up as high as 25%, the IRS is going to see that as a gift. However, with that said, you know, anything that exceeds the $15,000 annual exclusion would go against the current lifetime exemption, which today is $11.7 million in terms of what you would be able to have available as a gift.

So that could change, obviously, over time. But right now, other than just filing that return and acknowledging that that gift was made, you probably wouldn't owe anything on that. But it is something to make sure you do properly because you certainly wouldn't want the IRS to come back down the road and say this was not handled the way it should have been.

And that's why when you're doing something like this, not only would you want a real estate attorney involved to make sure you do the contract and everything's done properly on the sale, you'd want to make sure everything was handled properly from a tax standpoint for you personally. And you wouldn't get deduction on that amount. It would be again seen as a gift. Does that make sense to you? Yes, it does.

Yes, it does. And then number two, my second question is, is if a family member does not want to buy and I put it on the market, I'm 67 years old. My question is, I know that I think it used to be that you had to reinvest that money that you get from real estate within a certain period of time. My question is, do I have to and how much is that time since I'm 67? In terms of capital gains tax?

I guess so. Well, yeah, what you're thinking of there is typically when you have a real estate investment property, so not your primary residence, you would have to pay capital gains on it when it's sold at a profit. And you can push that forward by reinvesting the proceeds into a like property, essentially deferring that capital gains. The issue here, though, which is going to work in your favor, and again, you'd want to get professional counsel to look over this, but what you're typically going to find is that there's a stepped up basis. So at death, when you inherited this property, there was a step up in the basis as to the current market value, which means, you know, you shouldn't have any capital gains unless you've seen some appreciation since you got it. So you could go ahead and sell it, find a real estate professional to sell it competitively and you could take that money and redeploy it and whatever you want, other investments, real estate, stocks and bonds, increase your giving, whatever the Lord leads you to. Janet, always nice to speak with a generous person and you certainly sound like that and we wish you the very best.

Thanks very much. Out to Arkansas quickly and Evelyn, we know you've been holding for a bit. We appreciate that. What's your question? Hi, um, you have a summary of my question, so I'm 87.

Uh-huh, you're 87. Are you still with us, Evelyn? Well, it's good to know we have a summary of her question because I think we may have just lost her. So Evelyn, if you're continuing to listen, it's my understanding that she has a life insurance policy worth $18,000. Rob, initially she was planning on that for burial expenses but those are now already paid for in some way. The beneficiary of this policy is her sister who's 20 years younger. She's wondering, should I cash that in now and put the cash in her checking account or should she wait until she passes away and then gets that money? How will this work with the income tax?

So what are your thoughts? Well, you know, I think the key here is that if she doesn't need this policy, which it sounds like she doesn't, it was for a specific purpose, which was the burial expenses, that's no longer needed. Her sister perhaps doesn't need the money and she's continuing to pay for this policy. I would just allow that policy to lapse, take the cash value out and if, you know, she could keep that, it's her policy. She's the one who's been paying in despite the fact that she had her sister listed as the beneficiary. Now, if she feels an obligation or a desire to give that to her sister, she could certainly do that as a gift and it would go back to what we were talking about with Janet in terms of she could do up to $15,000 a year.

It sounds like that would cover it and now if she kept the policy and it paid out as a death benefit, there would be no tax on a life insurance benefit but I'd probably cash that out and she did no longer have that expense each month and then she could do with the cash value what she wants. You know, okay, good enough. Evelyn, we hope you are still listening and I'm sorry and I apologize for the way we must have lost your phone line. These days, things like that do happen but God bless you.

Thanks. Hey, Rob, here's a quick email question. Dear Rob, this is from Mildred. She says, Dear Rob, you've often spoken about investing in gold and silver and I get that but what about things like precious gems or collectibles? Yeah, you know, investing in those is not my cup of tea, I guess you could say. Now, there's going to be some people out there that say, well, I love it and I've done well. I just go back to if it's purely for an investment, then we've got to look at risk and reward.

How much risk are we taking for what reward over what period of time and, you know, when I evaluate investing in precious metals or not precious metals but gems, as you said, or other collectibles, it's just typically with the markup in the purchase, the markup in the sale in terms of the dealer or whoever the buyer is, securing those and then just the long-term performance of the appreciation of the collectibles or the gems versus what you might be able to do with a, you know, a properly diversified stock and bond portfolio. I just, you know, the data would say you're not going to do as well. Now, maybe there's another benefit and that could be that, you know, you just enjoy it. It's more of a hobby.

Well, factor it in as a hobby then and not as an investment but purely from an investment standpoint, not my first choice. Okay, good. Thanks, Rob. Let's go quickly to Courtland, Ohio. Ed, you're our final caller of the day.

Let's see if we can squeeze it in, okay? Yeah, real quick, I have a retirement fund that it's built up. I've been retired for about two and a half years.

I've had thoughts of maybe buying like a hunting camp or investing in some real estate maybe and just wondering will I be taken too much of a hit on taxes if I do something like that? Well, Ed, there's something called a self-directed IRA. Are you familiar with that term?

No. Okay, I would look that up. Basically, a self-directed IRA which is a very specific type of IRA and you have to use a very specific custodian who holds these self-directed IRAs but essentially allows you to take money that's in an IRA which could be, you know, you could roll it in from another IRA or from a 401k and you can invest in real estate. So, essentially, you would hold the real estate in the self-directed IRA so you're not having to take a distribution from the IRA in order to make that purchase.

So, I would do a little homework, just google self-directed IRA, that would get you started and if that was something that you really felt like you wanted to do, I would absolutely encourage you to do it that way so you're not pulling it out, paying all this tax on it, you're keeping it in there and, you know, you're accomplishing both things at the same time. Thank you so much. All right. Great. We appreciate that. Thank you. Thank you very much. Well, Rob, time has flown today.

We're just about out of it. Quickly, for those who might want to check on the MoneyWise app we've talked so much about because we're so excited about it, what's the best way and the best place to go to to see that and maybe even download it? Yeah, you can do that in your app store, whether that's the Apple App Store or the Google Play Store or we have a web app as well. You can find it at app.moneywise.org. Steve, it's phenomenal. The team, three full-time developers, constantly upgrading it, constantly adding new features, the community, all the content, but the best digital envelope system on the market, it's all in there.

So download it today and check it out. We'd love for you to look at it. Rob, thank you very much. It's been a wonderful week. I give you my best and your family as well and we'll come back Monday and do it again, okay? Very good. Our production team today and all this week, Amy, Clara, Dan, and of course Jim Henry. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Drive safely. Join us again next week.